At the request of two United States senators, we initiated an audit of the U.S. Department of Housing and Urban Development's (HUD) administration of the Housing Authority of New Orleans (Authority) to determine the effect of HUD's receivership on the Authority's performance in its contracting activities and financial functions. Specifically, we wanted to determine whether HUD's receivership ensured that the Authority properly (1) accounted for its fungibility funds, (2) monitored and paid its contractors, and (3) disbursed its accounts payable.

HUD's receiver did not ensure that the Authority

Correctly supported, expensed, or reported its expensed fungible funds in accordance with HUD requirements, resulting in at least $3.5 million in unsupported expenses and $2.3 million in ineligible
expenses that were unreported in its annual progress report and at least $1.4 million in additional unsupported expenses that were reported in the report;
Monitored and/or paid two of its contractors in accordance with contract terms and the Authority's procurement policy, resulting in $97,193 in ineligible costs and $1,153 in unsupported costs paid
on one of the contracts; and
Supported 10 of 20 accounts payable disbursements in accordance with the Authority's financial policy, resulting in at least $15,000 in unsupported costs for those 10 disbursements.
We recommend that HUD require the receiver to ensure that the Authority provides support or repays the ineligible and unsupported costs. We further recommend that the Authority provide an accurate annual progress report, including all eligible fungibility funds expensed in its 2006 annual report, and develop and implement the appropriate controls to ensure that the Finance Department (1) maintains adequate financial records for the accounts payable disbursements and (2) properly authorizes its accounts payable disbursements to safeguard the accounts payable funding.