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Report Fraud, Waste and Abuse
July 20, 2009
  • Public and Indian Housing
2009-AT-1009
ig0941009.pdf

HUD OIG performed an audit of the Housing Authority of the City of Newnan’s activities with its related nonprofit organization, the Newnan Housing Development Corporation. The review was performed based on concerns that the Authority encumbered its assets, used its federal funds to support nonprofit development activities, and had a conflict-of-interest transaction. The purpose of the audit was to determine whether the Authority inappropriately used funds and assets restricted by its annual contributions contract with the U. S. Department of Housing and Urban Development (HUD) to support the operations of its nonprofit organization and incurred costs for insurance that involved a conflict of interest.

The Authority inappropriately encumbered $649,976 in HUD-restricted funds in violation of its contract with HUD and also violated an agreement it made with HUD concerning the sale and disposition of Authority property. The Authority inappropriately used $221,531 of its public housing program funds for nonfederal development activities in violation of its annual contributions contract with HUD. In addition, it inappropriately used HUD funds to make 31 monthly payments on a $150,000 loan on behalf of its nonprofit organization. HUD granted a waiver for conflict-of-interest provisions and permitted the Authority to purchase insurance from a company that employed a board member

OIG recommended that the Director of HUD’s Atlanta Office of Public Housing require the Authority to develop a plan to bring it into compliance with HUD’s requirements and if necessary, ensure that the lender formally releases the $673,859 of HUD-related funds as collateral; propose a legal solution regarding the ownership structure of the nonprofit organization and if a legal solution is not possible, repay its public housing program $221,531; implement adequate controls and procedures to ensure that it does not encumber or spend HUD assets on nonfederal activities without HUD approval; and develop and implement a strategic, comprehensive marketing plan for the nonprofit organization to ensure that it becomes financially sound.