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The U.S. Department of Housing and Urban Development, Office of Inspector General audited the Cuyahoga Metropolitan Housing Authority’s (Authority) Section 8 Housing Choice Voucher program. The audit was part of the activities in our fiscal year 2011 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 applicable U.S. Department of Housing and Urban Development (HUD) requirements and the Authority’s program administrative plan to include determining whether (1) the Authority’s unit inspections were sufficient to detect housing quality standards violations and provide decent, safe, and sanitary housing to its residents; (2) it appropriately managed its Family Self-Sufficiency program according to HUD’s requirements and its action plan; and (3) it performed timely housing quality standards unit inspections. This is the first of two planned audit reports on the Authority’s program.

The Authority failed to operate HUD programs according to HUD’s and its requirements. The Authority’s program administration regarding housing unit conditions was inadequate. Of the 82 program units statistically selected for inspection, 76 did not meet minimum housing quality standards, and 50 had material violations that existed before the Authority’s previous inspections. Based on our statistical sample, we estimate that over the next year, HUD will pay nearly $9.6 million in housing assistance for units with material housing quality standards violations.

The Authority did not always comply with HUD’s requirements, its action plan, and its program procedures in administering its Family Self-Sufficiency program. It failed to maintain required documentation for 64 of its 71 program participants with an escrow balance and all 22 of its graduates with escrow disbursements. In addition, it failed to maintain accurate escrow balances for 69 of its 71 participants with escrow balances or issue accurate escrow disbursements to all 22 of its graduates.

The Authority did perform timely housing quality standards unit inspections. We reviewed 58,805 inspections for 14,344 tenants and determined from the low error rate (.04 percent or 21 inspections) that the Authority’s timeliness of inspections was sufficient.

We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to (1) reimburse its program from non-Federal funds for the improper use of more than $100,000 in program funds, (2) provide documentation or reimburse its program nearly $550,000 from non-Federal funds for the unsupported housing assistance payments, and (3) implement adequate procedures and controls to address the findings cited in this audit report to prevent nearly $9.6 million in program funds from being spent on excessive housing assistance payments over the next year.