The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Peoria Housing Authority's (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2007 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region V's jurisdiction. Our objective was to determine whether the Authority administered its program in accordance with HUD's requirements. This is the second of two audit reports on the Authority's program.

The Authority's program administration regarding housing assistance payment calculations, the Family Self-Sufficiency Program, and zero-income households was inadequate. The Authority overpaid more than $52,000 and underpaid nearly $1,000 in housing assistance and utility allowances due to calculation errors. Based on our statistical sample, we estimate that over the next year, the Authority will net overpay more than $242,000 in housing assistance and utility allowance payments based on calculation errors.

The Authority failed to administer its Family Self-Sufficiency Program according to the United States Code, HUD's requirements, and its family self-sufficiency action plan. As a result, it received more than $72,000 in Housing Choice Voucher - Family Self-Sufficiency/Homeownership Coordinator (Coordinator) grant funds but did not ensure that its Family Self-Sufficiency Program was managed effectively and efficiently, overfunded and underfunded its participants' escrow accounts by nearly $18,000, and inappropriately paid more than $14,000 in final escrow payments.

Further, the Authority failed to comply with its program administrative plan regarding zero-income household reviews. It did not effectively use HUD's Enterprise Income Verification system or other third-party verification methods to determine whether households reporting zero income had unreported income. As a result, it unnecessarily paid housing assistance totaling nearly $75,000 for households that were required to meet their rental obligations.

We informed the Authority's executive director and the Director of HUD's Chicago Office of Public Housing of minor deficiencies through a memorandum, dated March 31, 2008.

We recommend that the Director of HUD's Chicago Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of nearly $185,000 in program funds, provide documentation or reimburse its Coordinator program more than $72,000, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that more than $296,000 in program funds is spent on program administration that meets HUD's requirements over the next year.