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The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the Cincinnati Metropolitan Housing Authority’s (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2009 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region V’s jurisdiction. Our objective was to determine whether the Authority administered its program in accordance with HUD's requirements. This is the third of three audit reports on the Authority’s program.

The Authority’s Family Self-Sufficiency program was operated in compliance with HUD’s and its requirements. The Authority properly funded its participants’ escrow accounts, made escrow payments when appropriate, and maintained documentation to support its Family Self-Sufficiency program operations. However, the Authority’s administration regarding housing assistance payments for larger housing units than its policy permitted, its use of HUD’s Enterprise Income Verification system regarding households claiming to have zero income, and the timeliness of initial housing quality standards inspections need improvement.

The Authority provided program vouchers to 32 families for units that were larger than its subsidy standards allowed because it lacked controls to detect and prevent overhousing. As a result, it made excessive housing assistance payments of more than $100,000. By implementing adequate procedures and controls regarding its housing assistance payments, we estimate that more than $25,000 in payments will be accurately spent over the next year.

The Authority did not effectively use HUD’s Enterprise Income Verification system (system) or other third-party verification methods to determine that reported zero-income households had unreported income. It made excessive housing assistance payments of more than $32,000 for 20 of 31 households that had unreported income. Based on our statistical sample, we estimate that over the next year, the Authority will overpay more than $11,000 in housing assistance and utility allowances.

The Authority did not always comply with HUD’s requirements when conducting initial inspections after receiving a request for tenancy approval. Untimely inspections occurred due to the Authority’s inability to track the time between the receipt of the request and the initial inspection.

We informed the Authority’s executive director and the Director of HUD’s Cleveland Office of Public Housing of a minor deficiency through a memorandum, dated September 14, 2009.

We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $136,000 in program funds and implement adequate procedures and controls to address the findings cited in this audit report to prevent more than $36,000 in program funds from being spent on excessive housing assistance over the next year.