We audited the U.S. Department of Housing and Urban Development’s (HUD) methodology and monitoring regarding the Office of Public Housing’s asset management fees and central office cost centers due to our concerns over potential misspending by public housing authorities and the lack of restrictions in the use of such funds. Our objective was to determine how HUD arrived at the asset management fee limits in its Public Housing Operating and Capital Fund programs and whether its methodology for setting these limits and its monitoring of these fees were reasonable.
HUD could not adequately support the reasonableness of the Operating Fund management, bookkeeping, and asset management fees and Capital Fund management fee limits. In addition, HUD lacked adequate justification for allowing housing authorities to charge an asset management fee, resulting in more than $81 million in operating funds being unnecessarily defederalized annually. HUD also did not adequately monitor housing authorities’ central office cost center fee charges. Among five housing authorities reviewed, four inappropriately overcharged or transferred $2.3 million in excessive operating program funds from their asset management projects to their central office cost centers. Two of the housing authorities were unable to support $6.7 million in management, bookkeeping, and asset management fees charged. Since central office cost center funds are considered non-Federal funds and no longer subject to HUD requirements, there is a greater potential for fraud, waste, and abuse. Consequently, two housing authorities used approximately $4.3 million in central office cost center fee revenue for questionable costs.
We recommend that HUD (1) revise its asset management fee policy to refederalize the Operating and Capital Fund programs’ fee revenue, (2) eliminate the asset management fee, (3) require the San Francisco Housing Authority to support or repay $6.1 million in fees, (4) require the City of Los Angeles and Southern Nevada Regional Housing Authorities to repay $751,860 in excessive fee charges, and (5) establish and implement policies and procedures for the assessment and monitoring of the fees.