We audited the Glen Cove Housing Authority’s administration of the disposition proceeds it received from selling properties. We selected the Authority for review because the U.S. Department of Housing and Urban Development’s (HUD) New York Office of Public and Indian Housing ranked it as the third highest risk performer among 67 public housing providers in New York and because the audited financial statements and property disposition records showed that the Authority may have loaned a portion of its property disposition proceeds to its nonprofit entity. The objective of the audit was to determine whether the Authority used property disposition proceeds in accordance with applicable requirements, including its HUD-approved disposition application.
The Authority did not always use proceeds generated from the sale of 19 properties in accordance with requirements. Specifically, it loaned more than $900,000 to its nonprofit entity for activities that did not benefit its residents and disbursed $169,975 in proceeds and $10,804 in other Federal funds for costs that were not eligible or supported, such as Rental Assistance Demonstration conversion costs that require prior HUD approval. Further, it did not ensure that the disposition application and related documentation were maintained, and that it submitted required reports to HUD. We attributed these deficiencies to the Authority’s desire to increase revenue and weaknesses in its controls. As a result, HUD and the Authority did not have assurance that proceeds were used and available for use as intended to benefit the Authority’s residents, and HUD could not fully monitor the Authority’s use of the proceeds.
We recommend that HUD require the Authority to (1) obtain retroactive approval from HUD for the outstanding unauthorized loans and proceeds used for Rental Assistance Demonstration conversion costs or repay any amount for which it does not obtain approval, (2) provide documentation to show that proceeds were used for approved activities or repay any amount not supported, (3) repay proceeds and other Federal funds spent on ineligible activities, and (4) strengthen its controls to ensure that $1 million in remaining proceeds and any funds to be repaid are put to better use to benefit the Authority’s residents.