We audited the Harris County Housing Authority, Houston, TX, at the request of the U.S. Department of Housing and Urban Development’s (HUD) Fort Worth Office Director of Public and Indian Housing. The request followed a series of news articles alleging mismanagement and extravagant spending at the Authority, the removal or replacement of various former managers and board of commissioners members, and concerns expressed by the new managers.
Our objective was to determine whether the Authority’s procurement, expenses, and financial records complied with HUD’s requirements.
The Authority’s management and board of commissioners failed to establish a control environment designed to provide reasonable assurance that it complied with Federal requirements. They failed to enact policies and procedures to ensure the integrity of financial operations and compliance with procurement requirements. Instead, they neglected their management and oversight responsibilities; wasted Authority funds, at times for personal gain; circumvented existing internal controls; and manipulated accounting records. These conditions occurred because the Authority’s management and board failed to exercise their fiduciary responsibilities and did not act in the best interest of the Authority. As a result, the Authority incurred questioned costs of more than $27 million. Further, due to their actions and inactions, the former executive director and the Authority’s board put the Authority in a precarious financial position and it did not have sufficient funds to repay a $3.8 million debt due to HUD.
In addition, there was a scope limitation on the audit because the Authority did not maintain accounting records that supported its sources and uses of funds or justified accounting entries in its books and records.
Our recommendations to HUD include determining whether the Authority is in significant default of its annual contributions contract, taking appropriate administrative actions against the Authority’s former executive director and former board of commissioners members who were responsible for the mismanagement, and requiring the Authority repay $4.5 million in ineligible costs, and support or repay more than $23 million.