We audited the Housing Authority of the City of Los Angeles' (Authority) Section 8 Housing Choice Voucher program's financial transactions. Our audit objective was to determine whether the Authority properly used Section 8 Housing Choice Voucher program funds in accordance with HUD rules and regulations for the benefit of its program participants. During the audit, we expanded our scope to include a review of its other HUD programs to determine the extent of its inappropriate interprogram fund transfers. The Authority could not show that it used program funds in accordance with its consolidated annual contributions contracts, executed grant agreements, or HUD rules and regulations. Without the required HUD approval, the Authority's accounting records showed that it improperly advanced and expended more than $27 million in restricted funds to cover its operating losses for its other programs. The Authority contended that there was no misappropriation of funds, but rather just a problem with the way the accounting system presented its financial transactions; however, we were unable to validate its contention. We attribute the problem to the Authority's failure to exercise prudent oversight over the use of HUD funds to ensure that federal requirements and grant agreements and contracts were followed. We recommend that HUD require the Authority to reimburse $27.8 million in restricted funds to the proper programs and establish and implement adequate procedures and accounting controls to ensure that no interprogram advances of restricted funds are made in the future.