We audited the U.S. Department of Housing and Urban Development’s (HUD) methodology and monitoring regarding the Office of Public Housing’s asset management fees and central office cost centers due to our concerns over potential misspending by public housing authorities and the lack of restrictions in the use of such funds. Our objective was to determine how HUD arrived at the asset management fee limits in its Public Housing Operating and Capital Fund programs and whether its methodology for setting these limits and its monitoring of these fees were reasonable.
HUD could not adequately support the reasonableness of the Operating Fund management, bookkeeping, and asset management fees and Capital Fund management fee limits. In addition, HUD lacked adequate justification for allowing housing authorities to charge an asset management fee, resulting in more than $81 million in operating funds being unnecessarily defederalized annually. HUD also did not adequately monitor housing authorities’ central office cost center fee charges. Among five housing authorities reviewed, four inappropriately overcharged or transferred $2.3 million in excessive operating program funds from their asset management projects to their central office cost centers. Two of the housing authorities were unable to support $6.7 million in management, bookkeeping, and asset management fees charged. Since central office cost center funds are considered non-Federal funds and no longer subject to HUD requirements, there is a greater potential for fraud, waste, and abuse. Consequently, two housing authorities used approximately $4.3 million in central office cost center fee revenue for questionable costs.
We recommend that HUD (1) revise its asset management fee policy to refederalize the Operating and Capital Fund programs’ fee revenue, (2) eliminate the asset management fee, (3) require the San Francisco Housing Authority to support or repay $6.1 million in fees, (4) require the City of Los Angeles and Southern Nevada Regional Housing Authorities to repay $751,860 in excessive fee charges, and (5) establish and implement policies and procedures for the assessment and monitoring of the fees.
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Recommendations
Public and Indian Housing
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Status2014-LA-0004-001-AOpenClosed
Revise HUD’s asset management fee policy to refederalize the Operating Fund program’s management and bookkeeping fees and the Capital Fund program’s management fees.
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Status2014-LA-0004-001-BOpenClosed$81,613,671.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
HUD should remove the provision that allows public housing authorities to charge asset management fees, which would ensure that at least $81.6 million in operating funds could be put to better use in meeting HUD program objectives.
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Status2014-LA-0004-001-COpenClosed
Establish and implement procedures to reassess the management and bookkeeping fees periodically to ensure that they are reasonable. HUD should retain the documentation justifying the calculation of the rates.
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Status2014-LA-0004-001-HOpenClosed
Develop, document, and implement written procedures to ensure that fees charged to the asset management projects and Capital Fund program and expenses from the central office cost center are used to support HUD’s mission.