We audited the Philadelphia Housing Authority’s (Authority) use of its Public Housing Capital Fund formula grant that it received under the American Recovery and Reinvestment Act of 2009 (Recovery Act). We selected the Authority for audit based on a citizen’s complaint alleging misuse of these funds and because it received $126.5 million in Recovery Act capital funds. We focused strictly on $31.5 million of the funds that the Authority designated for the rehabilitation of 340 of its portfolio of approximately 7,300 scattered-site units. The audit objective was to determine whether the Authority’s payments to rehabilitate its scattered-site housing under the Recovery Act were supported and complied with HUD regulations and other applicable requirements.
The Authority’s payments to rehabilitate its scattered-site housing under the Recovery Act were not supported and did not comply with other applicable requirements. Specifically, the Authority could not support payments of almost $1 million in Recovery Act funds to rehabilitate 10 scattered-site units, virtually the entire amount we reviewed, raising questions about the propriety of an additional $26.4 million it spent during our audit period to rehabilitate the units we did not review. Also, the Authority’s tenants were subjected to health- and safety-related hazards, and the Authority failed to use its Recovery Act funds properly when it failed to ensure that the units it rehabilitated complied with local codes and other contract requirements. The Authority also made unsupported, unreasonable, and unnecessary payments to outside attorneys in an effort to obstruct the progress of the audit.
We recommend that HUD require the Authority to provide adequate documentation to support almost $1 million in unsupported costs identified by the audit or reimburse the applicable programs from non-Federal funds for any costs that it cannot support. We also recommend that HUD require the Authority to provide documentation to support the remaining $26.4 million in payments to rehabilitate its scattered sites using Recovery Act funds, if the Authority cannot support the $1 million. Alternatively, it should reimburse the applicable programs from non-Federal funds for any costs that it cannot support. Additionally, we recommend that HUD require the Authority to implement adequate procedures and controls to ensure that its payments for scattered-site rehabilitation comply with relevant laws and regulations and develop and implement controls to ensure that invoices for scattered-site rehabilitation are adequately verified and payments are made in accordance with the terms of the related contracts. We further recommend that HUD direct the Authority to implement appropriate measures to ensure compliance with applicable laws, ordinances, codes, rules, and regulations. Lastly, we recommend that HUD require the Authority to task its Office of Inspector General (OIG) to periodically audit a sample of current and future payments for scattered-site rehabilitation to ensure that responsible personnel enforce contract requirements and payments are adequately supported, necessary, and reasonable.