We audited the U.S. Department of Housing and Urban Development’s (HUD) process for awarding asset repositioning fees (ARF) to public housing agencies (PHA) with approved demolition and dispostion projects.  We initiated this review based upon issues disclosed during our review of Public Housing Capital Fund program grants to PHAs with approved demolition and dispostion projects.  The audit objective was to determine whether HUD had established adequate controls to ensure that ARFs were correctly calculated. 

HUD did not establish adequate controls to ensure that ARF were correctly calculated.  Specifically, ARFs awarded to 10 of the 14 PHAs with units approved for demolition or disposition were not always accurately calculated.  We attribute this condition to unfamiliarity with ARF regulations on the part of both HUD field office staff and PHA officials, the lack of sufficient data, and a primarily manual process used by field office staff to verify PHA ARF funding requests.  As a result, the 10 PHAs were awarded with more than $7.7 million in inaccurate ARF funding for calendar years 2008 through 2013.  However, HUD had taken various actions to improve the ARF calculation process, most recently developing a more automated process, which should assist PHA officials and HUD field office staff in more accurately and efficiently calculating and awarding ARF funding. 

We recommend that HUD (1) recapture $6.2 million in ineligible ARF funds provided to 7 PHAs during the years 2008 through 2013, (2) reimburse $1.5 million in ARFs to 5 PHAs that were underfunded, (3) ensure that the 2014 ARF funding to the 10 PHAs reviewed is adjusted for any necessary corrections, (4) provide training to PHA officials and HUD field office staff on the ARF calculation process, and (5) evaluate and adjust the ARF Tool to ensure that it will provide greater assurance that the errors found in this review will be prevented or detected.