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We audited the Rockford Housing Authority’s (Authority) American Recovery and Reinvestment Act of 2009 (Recovery Act) Public Housing Capital Fund Stimulus Formula and Competitive grants. The audit was part of the activities in our fiscal year 2011 annual audit plan. We selected the Authority based on a citizen complaint. Our objective was to determine whether the Authority administered its grants in accordance with Recovery Act and U.S. Department of Housing and Urban Development (HUD) requirements and its administrative plan.

The Authority did not administer its Capital Fund grants in accordance with Recovery Act and HUD’s requirements and its administrative plan. Specifically, it did not ensure that (1) its contractors complied with “buy American” and Section 3 requirements (see Appendix C) and (2) construction work was complete before payments were issued. This condition occurred because the Authority lacked adequate procedures and controls to ensure compliance with Federal requirements and its administrative plan. As a result, it was unaware that one of its contractors purchased nearly $18,000 in materials manufactured outside the United States, and HUD and the Authority lacked assurance that the contractors followed HUD’s Section 3 requirements and work was complete before payments were issued. However, based on our review, the Authority correctly reported its Recovery Act progress and disbursed its grant funds in a timely manner in accordance with HUD’s requirements.

The complainant’s allegations regarding fraud, waste, abuse, and serious mismanagement regarding Recovery Act funds were not substantiated by the results of this audit.

We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to (1) provide documentation to ensure that Capital Fund grants were not used to reimburse the nearly $18,000 in materials purchased contrary to the Buy American Act, (2) review the products purchased by its remaining contractors to ensure that they were manufactured in the United States, and (3) implement adequate procedures and controls to ensure that Recovery Act activities meet “buy American” and Section 3 requirements and that construction work is complete before payments are made.