The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Highland Park Housing Commission's (Commission) Public Housing program (program). The audit was part of the activities in our annual audit plan. We selected the Commission based upon its fiscal year 2005 independent auditor's report that identified it as having a high-risk program. Our objectives were to determine whether the Commission effectively maintained its program units in accordance with HUD's requirements and appropriately used its program operating subsidies. This is the second of two audit reports on the Commission's program.

The Commission did not maintain 45 of 46 program units statistically selected for inspection in good repair, order, and condition. There were 705 deficiencies in the 45 units (average of 14.69 deficiencies per unit) including 43 hazards that HUD requires to be corrected within 24 hours. Based on our statistical sample, we estimate that HUD will pay more than $283,000 in program operating subsidies over the next year for the Commission's units that are not maintained in good repair, order, and condition.

The Commission lacked an effective maintenance process to ensure that program unit deficiencies were identified and repaired in a timely manner. It did not have an approved maintenance policy, failed to implement a preventive maintenance program, did not complete work orders in accordance with HUD's requirements and or/its maintenance policy, and failed to turn around program units in a timely manner. In addition, the Commission inappropriately received more than $29,000 in excess program operating subsidies for seven units that were vacant for more than 12 months. We estimate that the Commission will not receive nearly $116,000 in household payments over the next year due to program units being vacant for more than 30 days.

We recommend that the Director of HUD's Detroit Office of Public Housing require the Commission to reimburse its program from nonfederal funds for the improper use of funds, provide support or reimburse its program from nonfederal funds for the unsupported payments, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help to ensure that nearly $400,000 in program funds is spent according to HUD's requirements.