North Carolina Audit Reports

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Issue Date: January 21, 2011
Audit Report No.: 2011-AT-1004
File Size: 2MB

Title: Mecklenburg County, NC, Mismanaged Its Shelter Plus Care Program

At the request of the U.S. Department of Housing and Urban Development's (HUD) Greensboro, NC, Director of Community Planning and Development, we reviewed Mecklenburg County's (County) administration of its Shelter Plus Care program (program). Our objectives were to determine whether the County paid for only eligible program administrative expenses; housed its participants in decent, safe, and sanitary units; and properly documented its program participant files.

The County mismanaged its program. It paid program administration expenses without adequate supporting documentation; housed participants in units that were not decent, safe, and sanitary; and failed to ensure that participant files were properly documented in compliance with HUD's requirements. These deficiencies occurred because the County failed to develop and implement a system of internal controls, including controls needed to ensure that the contractor hired to administer the program complied with HUD's requirements. As a result, the County spent $441,100 for unsupported program costs, $11,047 for ineligible costs, and $14,028 in housing assistance payments for units that were in material noncompliance with housing quality standards.

OIG recommends that the Director of the Greensboro Office of Community Planning and Development require the County to develop and implement an adequate system of internal controls to ensure that it complies with all program requirements. The County must also repay $25,075 in ineligible expenses from non-Federal funds, and provide documentation showing that $441,100 in unsupported expenses was eligible or repay that amount from non-Federal funds.

Issue Date: January 14, 2011
Audit Report No.: 2011-AT-1003
File Size: 3MB

Title: The Housing Authority, City of Wilson, NC, Mismanaged Its Section 8 Program

HUD OIG audited the Housing Authority of the City of Wilson's (Authority) Section 8 Housing Choice Voucher program. We elected to perform the audit after finding indicators of Section 8 deficiencies during our review of the Authority's capacity to administer capital funds awarded under the American Recovery and Reinvestment Act of 2009 (Audit Report 2010-AT-1007). Our objectives were to determine whether the Authority complied with U.S. Department of Housing and Urban Development (HUD) requirements for administering its Housing Choice Voucher program, including its special Section 8 programs comprised of a Family Self Sufficiency program and a Homeownership program.

The Authority failed to comply with many of HUD's Section 8 program requirements because it had either failed to establish adequate controls or disregarded existing controls. It mismanaged its program funds, improperly selected tenants for assistance, improperly terminated tenants, made improper housing assistance payments, and had other areas of noncompliance. Our inspection of 23 units showed that none met minimum housing quality standards and 6 were in material noncompliance. The Authority also failed to ensure that quality control inspections were performed in accordance with HUD requirements. In addition, the Authority mismanaged its Family Self Sufficiency and homeownership programs. It did not fully comply with HUD's administrative requirements for either program and did not maintain accurate accountability of participant funds for its Family Self-Sufficiency program.

OIG recommends that the Director of the Greensboro Office of Public Housing require the Authority to follow its existing controls as well as develop and implement additional controls where needed to ensure that it complies with all Section 8 program requirements. The Authority must repay $109,778 in ineligible expenses from non-Federal funds and provide documentation showing that $14,568 in unsupported expenses was eligible or repay that amount from non-Federal funds.

Issue Date: July 27, 2010
Audit Report No.: 2010-AT-1007
File Size: 1.01MB

Title: Final Report - The Housing Authority, City of Wilson, NC, Lacked the Capacity To Effectively Administer Recovery Act Funds

We reviewed the Housing Authority of the City of Wilson (Authority) because it was granted $9.2 million for Public Housing Capital Fund projects (capital funds) under the American Recovery and Reinvestment Act of 2009 (Recovery Act).  In addition, we received a citizen's complaint alleging that the Authority used unethical procurement practices and did not plan to use Recovery Act funds effectively.  Our objectives were to evaluate the Authority's capacity to administer additional capital funds received under the Recovery Act and determine whether the Authority followed Federal procurement regulations.  We expanded our objectives to include an assessment of the eligibility of the Authority's planned green renovation of 68 senior housing units using a $7.6 million Public Housing Capital Fund Competitive (Recovery Act Funded) grant.

The Authority lacked sufficient capacity to administer the additional $9.2 million in capital funds it received under the Recovery Act.  It failed to comply with procurement and financial management requirements in its administration of other capital and operating funds and could not provide assurance that it properly awarded more than $2.4 million for contracts.  The Authority's plan to substantially rehabilitate 68 senior housing units into an energy-efficient, green community using a $7.6 million Recovery Act competitive capital fund grant was ineligible.  The cost of renovating this development as planned would result in the inefficient and wasteful use of Federal funds and the unnecessary displacement of elderly tenants.

We recommend that the Director of the Greensboro Office of Public Housing continue increased oversight and monitoring of the Authority and require it to develop, implement, and enforce written policies and procedures for its procurement and financial management functions.  The Authority must also provide acceptable support for unsupported costs or repay them.  We also recommend that the Deputy Assistant Secretary for Public Housing Investments rescind the Authority's $7.6 million Recovery Act competitive grant.

Issue Date: May 19, 2010
Audit Report No.: 2010-AT-1805
File Size: 260KB

Title: The Wilmington Housing Authority of Wilmington, NC, Misused Federal Funds in the Purchase of Two Properties

HUD OIG performed a review of selected transactions at the Wilmington Housing Authority (Authority) in conjunction with our review of a citizen's hotline complaint. Among other concerns, the complainant alleged that the Authority misused U.S. Department of Housing and Urban Development (HUD) funds in conjunction with its purchase of Eastbrook Apartments in September 2005. Our objective was to determine whether the Authority misused HUD funds in its purchase of either Eastbrook Apartments or a tract of vacant land known locally as the "Winfield Smith" property.

The Authority misused $209,938 in HUD Section 8 reserves to make mortgage payments on a non-HUD development, Eastbrook Apartments, and $57,976 in HUD replacement housing factor funds to purchase vacant land. This violation occurred because the Authority's former management disregarded a HUD directive warning it not to use the Section 8 reserves for mortgage payments and HUD's requirements regarding the use of replacement housing factor funds. As a result, these funds were not available to assist the Authority's low-income residents as HUD intended.

We recommend that the Director of HUD's Greensboro Office of Public Housing require the Authority to repay its Section 8 administrative fee reserves $209,938 and its capital fund account $57,976 from non-Federal funds. We also recommend that the Director require the Authority to provide HUD evidence that it has implemented effective controls to better ensure the proper use of HUD funds.

Issue Date: September 28, 2009
Audit Report No.: 2009-AT-1014
File Size: 457.23KB

Title: The Housing Authority of the City of Winston-Salem, North Carolina, Needs to Improve Financial Controls

The U.S. Department of Housing and Urban Development (HUD) awarded the Housing Authority of the City of Winston-Salem (Authority) $3.9 million in formula-based capital funds under the American Recovery and Reinvestment Act of 2009 (ARRA). HUD's Office of Inspector General evaluated the Authority's capacity to administer these funds. We found that the Authority generally has the capacity to administer these funds but needed to improve some financial controls. Although the Authority properly procured and completed its previous capital fund grants for several years, it failed to adequately document about $2 million in expenditures and incurred $81,869 of ineligible costs. We recommend that HUD increase oversight of the Authority's administration of ARRA funds and require it to implement appropriate financial policies, procedures, and controls. In addition, the Authority must provide support for more than $2 million in unsupported capital fund reimbursements or repay the funds and repay $81,869 in ineligible capital fund expense reimbursements.

Issue Date: August 17, 2009
Audit Report No.: 2009-AT-1010
File Size: 611.43KB

Title: The High Point Housing Authority, High Point, North Carolina, Needs to Improve Internal Controls over Its Section 8 Program

HUD OIG performed an audit of the High Point Housing Authority's (Authority) U.S. Department of Housing and Urban Development (HUD) Section 8 Housing Choice Voucher program pursuant to a citizen's complaint. Our objectives were to determine whether the Authority properly (1) enforced HUD's housing quality standards, (2) calculated Section 8 administrative fees, and (3) determined housing assistance subsidies and issued vouchers to qualified participants.

The Authority's administration of the Housing Choice Voucher program with respect to enforcement of housing quality standards, calculation of administrative fees, rent reasonableness determinations, and eligibility of landlords was inadequate due to missing or ineffective controls. For the sample of 15 units we inspected, 12 (80 percent) did not meet minimum housing quality standards. For 4 of these units, the Authority paid rental assistance although the units were in material noncompliance with housing quality standards for conditions that existed at the time of the last Authority inspection. In addition, the Authority received excessive administrative fees during fiscal year 2008 because it did not timely remove over income tenants from its program. Further, the Authority did not properly document rent reasonableness using recent comparable unit data prior to signing housing assistance payment contracts, and did not prescreen landlords as required by HUD. The Authority correctly calculated housing assistance subsidies and issued vouchers to qualified participants for the tenants in our sample.

We recommend that the Director of the Greensboro Office of Public Housing require the Authority to repay its voucher program from nonfederal funds for rental assistance paid landlords for units in material noncompliance with housing quality standards. We also recommend that the Authority perform a special inspection of a representative sample of its units to determine the extent of noncompliance and develop and implement controls for ensuring that its units meet standards. Further, the Authority must implement controls to ensure that its administrative fees are correct, rent reasonableness determinations are made timely using appropriate comparable data, and its landlords qualify.

Issue Date: March 31, 2009
Audit Report No.: 2009-AT-1004
File Size: 436.78KB

Title: The City of Durham, North Carolina, Did Not Adequately Administer Its Community Development Block Grant Program

We audited the Community Development Block Grant (CDBG) program administered by the City of Durham, North Carolina (City). The objective of the audit was to determine whether the City administered its program in accordance with U.S. Department of Housing and Urban Development (HUD) requirements. We selected the City for review based on HUD's risk assessment and previous monitoring reviews.

The City did not administer its CDBG program in accordance with all of HUD's requirements. Specifically, the City was deficient in (1) documenting national objectives, (2) monitoring, (3) procuring services, (4) reporting program income, and (5) preparing accurate consolidated annual performance and evaluation reports. These deficiencies occurred because the City lacked effective management controls over its CDBG program activities to ensure compliance with all applicable HUD requirements. As a result, it had no assurance that more than $1.3 million in CDBG funds met HUD requirements.

We recommend that the Director of the Greensboro Office of Community Planning and Development require the City to establish and implement effective written procedures for documenting compliance with HUD's requirements for (1) national objectives and monitoring, (2) procurement, (3) program income, and (4) preparing performance reports. We also recommend that HUD require the City to record unreported program income in HUD's Integrated Disbursements and Information System (system), expend the funds on eligible CDBG activities, and repay the interest earned on unreported program income. In addition, we recommend that HUD require the City to provide adequate supporting documentation to show that CDBG funds disbursed were awarded to the lowest responsive and responsible bidder, met one of the three national objectives, and were properly monitored.

Issue Date: September 24, 2008
Audit Report No.: 2008-AT-1015
File Size: 593.85KB

Title: The City of Durham, North Carolina, Did Not Comply with All Federal Procurement Requirements

We audited the City of Durham (City), North Carolina's HOME Investment Partnerships (HOME) program. Our audit objective was to determine whether the City complied with applicable federal procurement requirements with respect to its homeowner rehabilitation activity. This is the second of two audits of the City's program.

The City did not advertise for homeowner rehabilitation contractors as required. Also, it did not take necessary affirmative steps to ensure that minority firms, women's business enterprises, and labor surplus area firms were used when possible. This condition occurred because the City lacked adequate procedures to ensure compliance with all applicable federal procurement regulations. As a result, it could not support that the program activities were subject to full and open competition. In addition, it could not ensure that minority firms, women's business enterprises, and labor surplus area firms were given proper consideration.

We recommend that the U.S. Department of Housing and Urban Development (HUD) require the City to provide documentation to support that the HOME program homeowner rehabilitation activities, totaling $790,364 for fiscal years 2006 and 2007, were awarded to the most responsible firm with a proposal that was most advantageous to the program, considering price and other factors. We also recommend that HUD require the City to develop and implement procedures to ensure that future services for homeowner rehabilitation are procured in accordance with applicable federal procurement requirements.

Issue Date: August 7, 2008
Audit Report No.: 2008-AT-1011
File Size: 499.49KB

Title: The City of Durham, North Carolina Did Not Comply with HOME Investment Partnerships Requirements

We audited the City of Durham (City), North Carolina's HOME Investment Partnerships (HOME) program as part of our annual audit plan. Our audit objectives were to determine whether the City complied with U.S. Department of Housing and Urban Development (HUD) requirements for monitoring HOME subrecipients and recording and using HOME program income.

The City did not always perform required monitoring reviews or provide adequate evidence that monitoring reviews were performed. As a result, the City and HUD lacked assurance that HOME activities were conducted in accordance with the requirements or that the intended program benefits were realized. In addition, the City incorrectly used HOME entitlement funds when program income funds were available for use. The City also did not always make the required program income entries in HUD's Integrated Disbursement and Information System. As a result, the City's reporting to HUD was incorrect, and it unnecessarily drew down $158,223 to its local HOME Investment Trust Fund account.

We recommend that HUD require the City to establish and implement effective written policies and procedures for monitoring HOME activities and reporting and using program income. We also recommend that HUD require the City to repay interest earned on program income that was not reported in a timely manner and used for HOME activities. In addition, we recommend that HUD require the City to establish the eligibility of funds disbursed for tenant-based rental activities, recalculate tenant rents and refund any overcharged tenants, and reimburse HUD for any payments determined to be ineligible.

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