We audited the calculation process for Public Housing Operating Fund subsidies awarded to public housing agencies (PHA). We initiated this review based on an internal audit suggestion, which was included in our annual audit plan. The objective of the audit was to determine whether the U.S. Department of Housing and Urban Development (HUD) verified Operating Fund calculations to ensure that PHAs received the correct amounts and recaptured any excess subsidies provided.
HUD did not always adequately verify the calculation of Operating Fund subsidies to ensure that PHAs received the correct amount; however, it recaptured the funds once it determined that excess subsidies were provided to PHAs. Specifically, (1) unsupported utility expense levels were used in funding calculations, (2) units that exceeded the limit were ineligibly funded, (3) verification procedures for PHAs’ funding requests were not always adequately followed, and (4) HUD’s verification procedures were limited. These issues existed due to errors by PHA officials and HUD field office staff, an ineffective data reconciliation mechanism, a weakness in controls over record keeping, and a lack of emphasis on following verification procedures. As a result, more than $12 million in operating funds disbursed to PHAs was not adequately supported, and $116,218 was ineligible. HUD had taken actions to improve its controls over Operating Fund calculation to assist HUD field office staff in more accurately and efficiently calculating and determining the funding amount.
We recommend that HUD officials (1) determine whether any of the overpayment of $3.6 million was ineligible and recover the ineligible payments, (2) recapture from PHAs the $116,218 ineligibly disbursed for the units that exceeded the limit, (3) obtain documentation of the utility expense level amounts and verify the accuracy of the computation of $9 million of Operating Fund subsidies and recapture ineligible amounts, (4) enhance controls to ensure that verification procedures for Operating Fund calculations are followed by field office staff, (5) continue implementing the reconciliation software application to provide greater assurance that operating fund subsidies are accurately calculated based on correct data, and (6) strengthen controls over record keeping.
Recommendations
Public and Indian Housing
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Status2016-NY-0001-001-AOpenClosed$3,630,286.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Director of the Public Housing Financial Management Division determine whether any of the overpayment of $3,630,286 was ineligible and take appropriate actions to recoup the ineligible payments.
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Status2016-NY-0001-001-BOpenClosed$1,191,767.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
We recommend that the Director of the Public Housing Financial Management Division validate the $1,191,767 in underpayments and determine if any corrections should be made.
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Status2016-NY-0001-001-FOpenClosed$116,218.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Director of the Public Housing Financial Management Division recapture the overpayment of $116,218 disbursed for the units, which exceeded the PHAs’ Faircloth limit.