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In accordance with our regional plan to review public housing programs and because of a complaint filed with the Office of the Inspector General (OIG) and issues identified by new management, we performed a review of the Rotan Housing Authority (Authority).  The complainant and Authority management alleged that the Authority maintained its records in a disorderly fashion, lacked supporting documentation for rental income, had large rental shortages, made questionable large unit turnaround payments to tenants, and made questionable payments for asbestos removal.  Our objectives were to determine whether the Authority operated its public housing in accordance with the U.S. Department of Housing and Urban Development’s (HUD) requirements and to determine whether the complainant’s allegations and issues identified by current Authority management were valid.  Specifically, we determined whether the Authority 1) properly maintained its financial books and records, 2) had support for and properly managed its rental income and tenant balances, 3) had support for its expenses, and 4) properly procured an asbestos removal contract and had support for the contract’s payments.  We also reviewed board oversight and compliance with the State of Texas law.

The complainant’s allegations and the other issues raised by current management were valid.  The Authority did not administer its public housing programs in accordance with regulations, and other requirements, including Texas State law.  Specifically, the Authority and its executive director 1) failed to maintain documentation to support its financial operations, 2) did not maintain support for some expenses, 3) improperly procured and lacked payment support for an asbestos removal contract, and 4) failed to effectively manage or administer its tenant rents.  Further, the board violated State law by not maintaining written minutes or recordings of its meetings and failed to provide adequate oversight.  These conditions occurred because the executive director ignored or failed to follow Federal regulations and the Authority’s consolidated annual contributions contract.  Additionally, the board failed to properly oversee the executive director and the Authority’s activities.  As a result, the Authority 1) could not show that it accurately reflected all transactions in its general ledger, had correct and supportable account balances, and properly managed $382,217 of HUD fiscal year 2012 funds; 2) lost revenue; failed to take action on delinquent tenants, which allowed them to accrue large outstanding balances; and could not show that it properly charged, collected, or deposited all rents; 3) incurred $46,097 in questioned costs; and 4) could not support a $43,300 asbestos contract or payment.  Since the Authority lacked meeting minutes, the Authority may also have taken invalid and unsupported actions. 

We recommend that the Director of HUD’s Fort Worth Office of Public Housing require the Authority to adopt policies and procedures covering its entire operations.  If the Authority properly implements the recommendation, it should ensure that its Public Housing funding of at least $382,217 for the next 12 months will be put to better use.  In addition, we recommend that Director of Public Housing require the Authority to support or repay questioned costs totaling $89,397.  We also recommend that the Associate General Counsel for Program Enforcement determine legal sufficiency, and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act and/or civil money penalties against the executive director.