We audited the Somerville Housing Authority’s public housing and Public Housing Capital Fund programs as part of our fiscal year 2016 regional audit plan.  We initiated our review because the U.S. Department of Housing and Urban Development’s (HUD) Boston Office of Public and Indian Housing had not monitored the programs in the past 5 years and we had not audited the Authority in the past 10 years.  Our audit objectives were to determine whether (1) management and other fees charged by the Authority’s central office cost center to its asset management projects were reasonable and adequately supported and (2) public housing and Public Housing Capital Fund procurements were executed in accordance with Federal regulations.

Authority officials properly procured public housing and Public Housing Capital Fund program contracts reviewed, but did not always support costs allocated to the Authority’s asset management projects.  While controls were established and implemented to ensure that costs charged were supported and contracts were properly procured, the allocation for some maintenance employee salaries and fee accountant services were not adequately supported.  This deficiency occurred because Authority officials and their fee accountant prepared budgets using primarily unit percentage as the basis for the allocation rather than actual front-line or fee-for-service costs allocated to the asset management projects.  As a result, the cost allocation for maintenance employee salaries of $660,498 and fee accountant services of $70,708 were not adequately supported.

We recommend that HUD require Authority officials to support that $731,206 in maintenance employee salaries and fee accountant service costs to the asset management projects were properly allocated or repay any unsupported amount from non-Federal funds.  Additionally, we recommend that Authority officials review their allocation procedures and make the necessary adjustments to ensure that front-line or fee-for-service costs are appropriately allocated to the asset management projects based on the actual time or service provided.