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We audited the Little Rock Housing Authority’s Rental Assistance Demonstration Program (RAD program).  We initiated this assignment due to the U.S. Department of Housing and Urban Development’s (HUD) Little Rock Office of Public and Indian Housing (PIH) field office’s concern about the amount of funds that the Authority had spent on RAD program predevelopment costs.  HUD designated the Authority as “troubled” mainly due to its transition under its RAD program.  Our objective was to determine whether the Authority administered its RAD program in accordance with regulations and whether the program was viable. 

The Authority did not ensure that its RAD program fully met requirements.  Specifically, it did not (1) ensure timely completion of its conversions, (2) properly account for predevelopment costs as required, and (3) resolve a potential conflict of interest. This condition occurred because the Authority’s executive management did not exercise effective oversight of the program.  In addition, the Authority’s executive management and board members did not communicate effectively.  Further, the Authority did not have effective procedures to ensure that costs were properly supported and allocated.  As a result, revisions and postponements of its RAD program conversion plans adversely affected rehabilitation costs by requiring the same or similar tasks to be amended, updated, or reworked multiple times.  Further, the delays resulted in reduced occupancy in anticipation of rehabilitation of units and hindered the Authority’s ability to provide decent, safe, and sanitary housing to current and prospective tenants. 

We recommended that the Little Rock, AR, Acting PIH Director require the Authority to (1) development and implement an achievable plan to close its remaining projects and complete its RAD program conversions; (2) support or repay $1,925,814 in predevelopment costs to its program from nonfederal funds; (3) design and implement financial controls to ensure that predevelopment costs are properly accounted for and eligible, thereby putting $829,544 to better use; (4) develop and implement procedures to identify, report, and resolve conflict-of-interest and ethics concerns; and (5) design and implement adequate control systems to ensure that the executive management team provides oversight of its RAD program.