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Report Fraud, Waste and Abuse
September 30, 2009
  • Public and Indian Housing
2009-AT-1015
ig0941015.pdf

We audited the Puerto Rico Public Housing Administration’s (authority) Capital Fund Financing Program (Financing Program) as part of the Office of Inspector General’s (OIG) strategic plan goals to improve the U.S. Department of Housing and Urban Development’s (HUD) fiscal accountability. The objectives of the audit were to determine whether the authority obligated and expended the 2003 Financing Program funds in accordance with HUD requirements, the authority’s financial management system complied with program requirements, the authority completed the proposed modernization activities under its 2003 Financing Program, and the authority had the capacity to administer additional funds under the American Recovery and Reinvestment Act (Recovery Act) of 2009.

The authority did not manage the 2003 Financing Program in an economical, efficient, and effective manner. It did not complete all of the proposed rehabilitation activities and did not expend all of the borrowed private capital. As a result, it did not meet its rehabilitation goals. In addition, the authority disbursed more than $57.4 million in capital funds to pay for interest charges on unused borrowed capital that did not provide the intended benefits to the public housing program or its residents.

The authority also could not account for more than $18.7 million in program income and did not use $50.3 million in program income to defray program costs. In addition, it did not maintain accurate and current accounting records and provided HUD inaccurate information on its Financing Program activities. As a result, its internal controls were not sufficient to safeguard assets or ensure that funds were used in accordance with applicable requirements, and HUD lacked assurance regarding program accomplishments.

The authority inappropriately obligated $32.12 million in Recovery Act funds to supplant expenditures from other nonfederal funds in violation of its annual contributions contract with HUD. This deficiency occurred because the authority substituted the obligations related to nonfederal funds with Recovery Act funds. As a result, the authority will use Recovery Act funds to pay for expenditures that were the responsibility of nonfederal sources.

We recommend HUD require the authority to reimburse more than $57.4 million in unallocable and ineligible Financing Program expenses, account for more than $18.7 million in unrecorded program income, and develop and implement an action plan to use $50.3 million in program income to defray program costs. We also recommend that the authority establish better controls to ensure that the Financing Program has (1) a financial management system that complies with HUD requirements and (2) procedures to ensure that program goals are achieved in a timely and efficient manner and avoid unreasonable/unnecessary expenses. In addition, we recommend HUD require the authority to properly account for its 2003 Financing Program receipts and disbursements.

HUD should also require the authority to deobligate more than $31 million in Recovery Act funds that were contracted before the authorized obligation start date and implement adequate procedures and controls to ensure that Recovery Act funds are used effectively, efficiently, and in accordance with applicable requirements.