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We audited the Housing Authority of the City of Evansville’s Rental Assistance Demonstration Program (RAD) conversion based on the activities included in our 2018 annual audit plan and our analysis of the housing agencies participating in RAD in Region 5’s jurisdiction (States of Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin).  Our audit objective was to determine whether the Authority complied with the U.S. Department of Housing and Urban Development’s (HUD) and its own requirements for the units converted under the program.

The Authority did not follow HUD’s and its own requirements for the units converted under RAD.  Specifically, it (1) did not ensure that units complied with HUD’s housing quality standards before it entered into a housing assistance payments contract, (2) failed to obtain the services of a HUD-approved independent third party to perform housing quality standards inspections for units owned by entities it substantially controlled, and (3) did not apply the correct contract rents for the converted units.  As a result, the Authority could not support the eligibility of more than $1 million in housing assistance payments to the entities and more than $10,000 in program funds paid to a contractor for housing quality standards inspection services.  Further, the application of incorrect rents led to the underpayment of housing assistance payments to the entities, so these funds were not available for the administration of the Authority’s Project-Based Voucher program.

We recommend that the Director of HUD’s Indianapolis Office of Public Housing require the Authority to (1) support that units met HUD’s housing quality standards or reimburse its program more than $1 million for the initial inspections of converted units that did not ensure compliance with the standards, (2) seek retroactive approval or reimburse its program more than $10,000 in program funds paid to contractors for unsupported housing quality standards inspection services completed by contractors that were not approved by HUD, and (3) implement adequate procedures and controls to address the findings cited in this audit report.

Recommendation Status Date Issued Summary
2018-CH-1003-001-A Cerrado Agosto 02, 2018 Support that the converted units met HUD’s housing quality standards or reimburse its program $1,206,046 from non-Federal funds ($1,053,618 in housing assistance payments $152,428 in administrative fees).
2018-CH-1003-001-B Cerrado Agosto 02, 2018 Seek retroactive approval or reimburse its program $10,124 for program funds paid to the contractor not approved by HUD for the housing quality standards inspections for units owned by entities substantially controlled by the Authority.
2018-CH-1003-001-C Cerrado Agosto 02, 2018 Implement adequate procedures and controls to ensure that the Authority complies with HUD’s conflict-of-interest requirements, including but not limited to ensuring that (1) its staff is appropriately trained and familiar with HUD’s requirements for units owned by entities it substantially controls and (2) future contracts to perform housing quality standards inspections for program units owned by entities substantially controlled by the Authority are with a HUD-approved independent third party.
2018-CH-1003-001-D Cerrado Agosto 02, 2018 Implement adequate procedures and controls, including but not limited to providing guidance to its program staff on how to apply the correct contract rents and developing an effective quality control process.