We audited the public housing program of the Housing Authority of the City of Spartanburg, SC, because of a citizen’s complaint. Our objective was to determine whether the Authority’s performance in the areas of financial operations, procurement, and inventory practices met HUD requirements.
The Authority used HUD program funds for ineligible or unsupported expenses, and failed to maintain an accurate accounting and financial control system. This condition occurred because the Authority’s management and board disregarded HUD’s requirements for the proper use of program funds and failed to create an effective accounting and internal control environment. As a result, the Authority deprived its Public Housing program, and possibly other HUD programs, of needed funds and may have defaulted on its consolidated annual contributions contract with HUD.
The Authority generally failed to follow HUD’s procurement regulations or its own procurement policy. It failed to maintain required documentation, paid for services without required contracts, and failed to perform cost analyses. This condition occurred because the Authority’s management and board failed to implement sufficient internal controls over the procurement process. As a result, the Authority could not assure HUD that it procured its goods and services at the lowest cost using full and open competition. For the procurements reviewed, the Authority had more than $1,100 in ineligible spending and was unable to support more than $2.2 million in spending.
We recommend that the Director, Office of Public Housing, Columbia, SC, require the Authority to repay its public housing program for funds diverted to other activities as identified in the Authority’s fiscal year 2013 audit and over $28,000 for other ineligible program expenses, provide support showing that it used almost $2.4 million for eligible program expenses, and determine whether the Authority is in substantial default of its consolidated annual contributions contract.
We also recommend that the Departmental Enforcement Center consider the need for administrative sanctions.