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We audited the U.S. Department of Housing and Urban Development’s (HUD) Office of Public Housing field office in Phoenix, Arizona (Public Housing). The objective of the audit was to determine whether Public Housing’s procedures for monitoring the Nogales Housing Authority (Authority) were effective. The audit was started because Public Housing performed several monitoring reviews at the Authority; however, there were indications that some of the problems found had not been corrected. Further, Public Housing staff indicated that the Authority may have used HUD funds for ineligible pension fund expenses.

We found Public Housing did not always identify and/or properly address significant deficiencies at the Authority. This condition occurred because Public Housing’s monitoring and follow-up procedures were not thorough enough to (1) ensure that deficiencies at the Authority were identified and corrected and (2) determine whether the problems found were isolated incidents or systemic deficiencies. Also, Public Housing did not always apply the correct standards when performing its reviews. As a result, problems with the Authority’s Section 8 and public housing programs persisted for years without appropriate corrective actions. We reviewed 14 Section 8 tenant files at the Authority and identified unsupported or ineligible housing assistance payments totaling $98,170. Additionally, Public Housing failed to appropriately address the Authority’s use of HUD funds for questionable pension fund expenses totaling $171,601.

We recommend that the Director of the HUD Los Angeles Office of Public Housing require the Phoenix field office to implement procedures to improve its monitoring and follow-up processes. We also recommend that the Director require the Authority to support or reimburse $93,578 in unsupported housing assistance payments and $4,592 in ineligible housing assistance payments. Finally, we recommend that the Director review the Authority’s questionable pension plan costs totaling $171,601, and require the Authority to reimburse its program if appropriate.