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We audited the Truth or Consequences Housing Authority of Truth or Consequences, NM, in response to an anonymous complaint alleging that the Authority inappropriately transferred ownership of some of its properties to the New Mexico Housing and Community Development Corporation and used its assets to support the Corporation’s activities. Our audit objective was to determine whether the Authority had adequate controls to ensure that it complied with its annual contributions contract and other U.S. Department of Housing and Urban Development (HUD) requirements.

We did not find an indication that the Authority improperly transferred ownership of properties to the Corporation. However, the Authority could not support $267,633 in maintenance labor and $327,478 in administrative salary expense cost allocation percentages. As a result, it could not ensure that the maintenance labor and administrative salaries charged to its low-rent public housing were appropriate. This condition occurred because the Authority’s financial controls were not adequate to ensure that it properly allocated costs.

We recommend that HUD require the Authority to (1) develop and implement supported cost allocation methods for its maintenance labor and administrative salaries and update them annually or charge the appropriate programs based on actual costs, and (2) discontinue using its low-rent public housing fund as a general fund to pay costs associated with its business activities until it has established appropriate controls.