We initiated this audit as part of the audit plan to determine whether the State of Connecticut Department of Social Services (agency) properly administered its Housing Choice Voucher program (Voucher program) in compliance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) regulations. Our objectives were to determine whether the agency (1) adequately (95 percent or more) leased up its Voucher program, (2) properly accounted for and reported program fraud repayments and related program income, and (3) could adequately support administrative costs charged to the Voucher program.

The agency did not adequately utilize its Section 8 vouchers. As a result, approximately 770 households in calendar year 2007 were not served. In addition, the agency did not ensure that its contractor had adequate controls over fraud recoveries and related interest income. Specifically, the agency did not ensure that the contractor properly accounted for, reported, and returned fraud recoveries and related interest income in accordance with HUD's requirements. As a result, more than $1 million needs to be returned to the agency to be used for program purposes. Lastly, the agency could not support the allocation of more than $1.6 million in salary and benefits to the Voucher program and charged $14,440 to the Voucher program for costs related to the state-funded housing program.

We recommend that the Public Housing Program Center Coordinator require the agency to implement adequate procedures and controls to ensure that it is adequately leased up to at least the 95 percent threshold required by HUD and provide additional housing assistance to eligible households; recover more than $1 million from the contractor and account for, report, and use the funds in accordance with HUD requirements; provide support to show that more than $1.6 million in direct and indirect salaries was properly chargeable to the Voucher program or repay any ineligible costs.