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The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the Housing Authority of the City of Terre Haute’s (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2010 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region V’s jurisdiction and our audits of the Authority’s nonprofit development activities, Public Housing Capital Fund program, and Turnkey III Homeownership program. Our objective was to determine whether the Authority administered its program in accordance with applicable HUD requirements and the Authority’s program administrative plan. This is the first of two planned audit reports on the Authority’s program.

The Authority’s program administration regarding housing unit conditions was inadequate. Of the 55 housing units statistically selected for inspection, 31 did not meet HUD’s housing quality standards, and 22 had 133 violations that existed at the time of the Authority’s previous inspections. The 22 units had between 1 and 32 preexisting violations per unit. Based on our statistical sample, we estimate that over the next year, HUD will pay more than $341,000 in housing assistance for units with material housing quality standards violations. The Authority generally complied with Federal regulations when abating units that failed inspections.

We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its program from non-Federal funds for the improper use of more than $11,000 in program funds and implement adequate procedures and controls to address the finding cited in this audit report to prevent more than $341,000 from being spent on units with material housing quality standards violations over the next year.