We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of Public and Indian Housing program interfund transactions. Our objective was to determine whether HUD (1) had adequate procedures to identify, monitor, and evaluate public housing agencies (PHA) with interfunds, and (2) took appropriate actions to curtail improper practices when borrowing from restricted HUD programs was found.

HUD officials adequately identified interfund balances, communicated this information to field offices, and adequately evaluated annual contributions contracts and regulatory restrictions on interfunds.  However, they did not always take timely and effective action to enforce program fund restrictions by notifying PHAs to reimburse interfunds in a timely manner, maintain proper accounting controls and avoid recurring interfunds.  We attribute this condition to HUD’s lack of adequate procedures and sanctions to control the misuse of restricted program funds.  As a result, there were recurring interfund balances at 161 PHAs involving the use of restricted Section 8 funds for non-program purposes.  The most serious of these deficiencies were at two PHAs, where more than $2.2 million in Section 8 program interfund transaction balances continue to exist.

We recommend that HUD officials develop and implement standard procedures to ensure the timely and effective control of PHAs use and reimbursement of interfunds, and ensure the reimbursement of $2.2 million to the appropriate programs by two PHAs.