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We audited the Adams County Housing Authority because (1) a news article reported that the executive director received an excessive salary and practiced nepotism, (2) we received a complaint alleging nepotism and potential misuse of Federal funds, and (3) we had never audited the Authority.  Our audit objective was to determine whether the Authority administered its program according to applicable U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority did not administer its Housing Choice Voucher Program according to HUD requirements.  The allegations regarding misuse of Federal funds and nepotism had merit.  The allegation regarding the executive director’s salary did not.  The executive director’s HUD salary did not exceed HUD limits.  However, the Authority (1) violated HUD conflict-of-interest requirements, (2) did not have a plan for allocating indirect payroll expenses, (3) did not maintain documentation to show that it used its administrative fee for its intended purpose, (4) did not always ensure that its program units met housing quality standards, and (5) improperly inspected and performed rent reasonableness determinations on program units owned by an entity that it substantially controlled.  These conditions occurred because (1) the Authority was unaware of HUD’s requirements, (2) it lacked controls to ensure compliance with all HUD requirements, and (3) its inspector did not thoroughly inspect units.  As a result, the (1) Authority made ineligible payments totaling $279, (2) its use of administrative fees totaling $225,182 for indirect payroll expenses and $47,376 for office rent were unsupported, (3) it made assistance payments for units that did not meet housing quality standards, and (4) HUD could not rely on its inspections and rent reasonableness determinations.

We recommend that HUD require the Authority to (1) reimburse its program $279 from non-Federal funds, (2) provide documentation to show that indirect payroll expenses totaling $225,182 and office rent expenses totaling $47,376 were reasonable and necessary for the administration of the program or repay its program from non-Federal funds, (3) develop and implement controls to ensure that it properly uses administrative fees and has an independent entity perform housing quality standards inspections and rent reasonableness determinations on units owned by entities that it substantially controls, and (4) provide training to its inspector on conducting housing quality standards inspections.