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The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the DuPage Housing Authority’s (Authority) Section 8 Project-Based Voucher program (program). The audit was part of the activities in our fiscal year 2009 annual audit plan. We selected the Authority as part of our internal audit of HUD’s oversight of the program and based upon our analysis of risk factors relating to the housing authorities in Region V’s jurisdiction. Our objective was to determine whether the Authority effectively administered its program in accordance with HUD’s requirements and its administrative plan. This is the second of two audit reports on the Authority’s program.

The Authority inappropriately administered its program. It lacked the required eligibility documentation for its program projects to support more than $3.4 million in housing assistance payments. Further, it made improper housing assistance payments totaling more than $33,000 for eight months before the effective dates of two housing assistance payments contracts.

The Authority executed housing assistance payments contracts with inappropriate contract rents. The contract rents for 6 of the Authority’s 11 projects exceeded the maximum allowable amounts according to HUD’s requirements. Based on the inappropriate contract rents, the Authority overpaid nearly $270,000 in housing assistance. We estimate that over the next year, it will overpay more than $90,000 in housing assistance due to the improper contract rents.

The Authority did not properly select program households from waiting lists. It allowed its program projects to select the households and did not perform quality control reviews of the selection process. As a result, it inappropriately paid more than $188,000 in housing assistance for 14 households that did not meet project eligibility requirements and was unable to support more than $57,000 in housing assistance payments for 3 households. Further, it underpaid $200 in housing assistance for two households. We estimate that over the next year, the Authority will pay more than $100,000 in housing assistance for households that do not meet project eligibility requirements.

We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to (1) reimburse its program from non-Federal funds for the improper use of more than $600,000 in program funds, (2) provide documentation or reimburse its program from non-Federal funds nearly $4 million in program funds, and (3) implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help to ensure that nearly $200,000 in program funds is spent on program administration that meets HUD’s requirements over the next year. We also recommend that the Director of HUD’s Chicago Office of Fair Housing and Equal Opportunity review the Authority’s household selections to ensure that they comply with HUD’s requirements. If the Authority fails to comply with HUD’s requirements, then HUD’s Director should take appropriate action against the Authority and/or its applicable employee(s).