Audit finds problems with Housing Authority

State auditors cite situations involving mismanaged federal funds

GRANT COUNTY — The State Auditor's Office has found fault with the way the Housing Authority of Grant County managed federal funds in 2003.

The findings were part of the SAO's financial statements and federal single audit that was released last month. Housing Authority Executive Director John Polling said the audit has been helpful.

"It's really helpful to identify situations before they cause a problem," Polling said of the audit report.

Polling said the Housing Authority is part of several limited partnership and owns 34 different properties in Grant County. In all, the Housing Authority manages 810 units of housing and also issues 237 section 8 vouchers each year.

Polling said of the audit that the Housing Authority has $6 million in revenue governed by two different agencies and a state agency, and said they occasionally slip up.

"I think this is the first time in my memory that we've had an issue with the federal single audit," Polling said.

The SAO last found fault with the Housing Authority in a 2001 accountability audit, but SAO spokesperson Mindy Chambers said those issues have been resolved.

The SAO issued findings in four areas in this 2003 audit, including a finding that the Housing Authority did not obtain a federal single audit as required.

According to the SAO, because the Housing Authority expended at least $300,000 in federal money in 2003 they are required to obtain and submit a federal single audit. That audit is required to be done in conjunction of the entities financial statements.

Polling acknowledged in the first finding that the Housing Authority missed the deadline. He said the Housing Authority had some staff changes in the middle of the deadline for the federal single audit.

According to a Housing Authority response to the SAO, the Housing Authority has obtained an in-house accountant and also hired additional assistance from an independent accounting firm.

In a second finding, the SAO said the Housing Authority did not "adequately monitor its third party management company which oversees the USDA Rural Assistance payment program."

Polling acknowledged the finding and said that the Housing Authority needed to increase its level of monitoring, and said that it has developed a new monitoring plan.

The Rural Assistance payment program is a program used to reduce tenant contribution paid by low income families occupying eligible housing. The Housing Authority can receive payments from the rural assistance program based on documented low-income tenants. Management and operation of three of the Housing Authority's projects is being done by a third-party management company.

During a review of the program, the SAO reported that the Housing Authority did not adequately monitor the management company, questioned whether reports between the Housing Authority and the management company were accurate, and said a review of the company could be done more frequently. The SAO also found a lack of knowledge by Housing Authority personnel on how the processes of the third-party management company .

The finding occurs fairly often throughout the state, Chambers said.

The SAO recommended the Housing Authority adequately monitor its third-party management company, which the authority said has been done. The Housing Authority acknowledges that its level of monitoring had been inadequate and Polling said they have developed a new monitoring plan.

"The authority had developed a monitoring plan that we feel confident is adequate to ensure compliance with the Rural Assistance Payment Program, and have implemented safeguards to prevent misappropriation of public assets," the Housing Authority response states.

A third finding, Polling said the Housing Authority didn't really agree with. In that finding the SAO said the Housing Authority did not receive proper authorization for the use of project monies "in compliance with its USDA Rural Housing Service loan guidelines."

The Housing Authority has a loan for two of its housing projects, which also includes reserve funds. Those reserve funds can be used for housing project improvements, but the Housing Authority must obtain approval for using those funds.

In its response, the Housing Authority disagrees with the finding and said the money withdrawn was not USDA money and had been other funds deposited in that fund in error.

Polling said that after a renovation project was complete, the USDA said they had authority over it and the Housing Authority had to ask permission for the grants

The SAO has recommended in the finding that the Housing Authority replenish its reserve accounts and provide documentation for use of those accounts to USDA Rural Development. Chambers said the finding is significant, but acknowledged that the Housing Authority disagrees with it.

A fourth finding states the Housing Authority "did not have support for salaries and improperly charged vacation and sick leave expenses to its Capital Fund Program Grant."

The Housing and Urban Development grant is used to pay for development and financing of public housing developments. The Housing Authority is required to document payroll costs charged to the grant.

The SAO is questioning costs of $32,556 that included the time of nine employees who charged at least some time to the grant. That money included vacation and sick leave charge to the grant.

In its response, the Housing Authority said its financial director is working with HUD to develop an "approved cost allocation plan for salary and benefit expenses charged to capital fund projects."

This is also a common finding, Chambers said, adding that many entities dealing with federal money often have difficulties dealing with all the federal regulations involved.

"It's fairly common for agencies not to get that right," Chambers said.