As part of our strategic plan objective to assist the U. S. Department of Housing and Urban Development's (HUD) efforts to reduce rental assistance overpayments, we audited the Dallas Housing Authority's (Authority) financial management of its Housing Choice Voucher program (voucher program). Our objective was to determine whether the Authority had the necessary financial controls in place to operate its voucher program in an efficient, effective, and economical manner.

Contrary to requirements, Authority management failed to implement internal controls over the financial management of its voucher program and did not exercise sound management practices. Although this has been an ongoing weakness, Authority management did not take substantive measures to ensure that basic controls were established. As a result, the Authority's financial data were unreliable, its fund balances were incorrect, and it could not assure HUD that it spent program funds in accordance with its annual contributions contract or federal regulations. Further, the Authority certified to HUD that it expended about $32.4 million less in program funds than it received in 2005 and 2006.

We recommended that the Director of the Fort Worth Office of Public and Indian Housing require the Authority to support or repay more than $32.4 million, void and properly reclassify $648,530 in outstanding checks, and implement effective internal controls over the financial operations of its voucher program. In addition, we recommend that the Assistant Secretary for Public and Indian Housing take appropriate administrative sanctions, up to and including issuing a notice of default in accordance with section 15 of the annual contributions contract for the Rental Certificate and Rental Voucher Programs to ensure that the Authority complies with requirements.