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We audited the Mobile Housing Board’s financial operations.  We selected the Housing Board based on concerns from the U.S. Department of Housing and Urban Development’s (HUD) Alabama State Office of Public Housing, following a Real Estate Assessment Center (REAC) financial assessment of the Housing Board for fiscal years 2009 to 2013.  The REAC assessment showed that the Housing Board’s financial condition had deteriorated over those 5 years.  The objective of our audit was to determine if the Housing Board complied with HUD’s financial management requirements for its Low Income Public Housing and Capital Fund programs.

The Housing Board did not comply with HUD regulations for its financial operations.  Specifically, it did not inform HUD of the instrumentality status of its nonprofit, which prevented HUD from identifying an apparent conflict of interest that led to the potential payment of more than $1.2 million to a related party.  Additionally, it did not comply with its Public Housing Capital Fund agreement by failing to use its capital funds to rehabilitate 1,194 of its low-income public housing units and allowing 824 units to remain vacant from 1 to 16 years, including two developments that were 100 and 73 percent vacant.  These conditions occurred because the Housing Board’s lack of critical oversight prevented it from using funds to renovate its vacant units in a timely manner.  

We recommend that the Director of the Birmingham Office of Public Housing require the Housing Board to (1) provide support showing that a conflict of interest did not exist or reimburse $1,241,958 from non-Federal funds; (2) update its books, records, and policies and procedures to identify Mobile Development Enterprises as an instrumentality per applicable HUD regulations, to prevent a future, actual or apparent conflict of interest; and (3) work with HUD to ensure that it meets the conditions of its RAD approval to ensure that the Housing Board’s units are renovated and available to eligible families.  We recommend that the Director of the Departmental Enforcement Center, in coordination with the Director of the Birmingham HUD Office of Public Housing, take appropriate enforcement action against the Housing Board’s management staff for failing to disclose the instrumentality relationship between the Housing Board and the Mobile Development Enterprises, if a conflict of interest exists.