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The U.S. Department of Housing and Urban Development’s Office of Inspector General audited the Saginaw Housing Commission’s Public Housing program. The audit was part of the activities in our fiscal year 2011 annual audit plan. We selected the Commission based upon our previous audit report on the Commission’s use of public housing funds, audit report number 2006-CH-1018, issued September 28, 2006, and an indication that the Commission was continuing to use Federal funds for unapproved purposes. Our objective was to determine whether the selected audit recommendations were implemented and whether the Commission used U.S. Department of Housing and Urban Development (HUD) funds for unapproved purposes.

The Commission did not fully implement prior audit recommendations and continued to use its program funds for ineligible purposes. HUD and the Commission did not enter into a repayment agreement for recommendations 1C and 2A from audit report number 2006-CH-1018 until January 24, 2011. The repayment agreement stated that the Commission agreed to make payments beginning February 1, 2011, and ending March 1, 2014. The Commission made its first payment on June 7, 2011. The Commission also continues to use program revenues for ineligible purposes.

The Commission did not effectively administer its HUD programs and violated HUD’s and its own requirements. Specifically, it did not ensure that Public Housing Program Capital Funds were drawn and expended for eligible purposes. The Commission inappropriately used more than $1.5 million in capital funds, was unable to support the use of nearly $395,000 in capital funds, maintained capital funds on hand in excess of $411,000, caused the U.S. Treasury to lose more than $71,000 in interest, inappropriately earned more than $13,000 in interest from its bank, and did not appropriately categorize nearly $822,000 in capital fund draws from HUD’s system.

The Commission did not ensure that its Public Housing Operating Fund program, Section 8 Housing Choice Voucher program, and Homeownership program funds were used for eligible purposes. It inappropriately used nearly $181,000 and was unable to support the use of more than $30,000 in operating program, voucher program, and Homeownership program funds.

The Commission did not ensure that the capital funds and operating program funds were used for eligible purposes. The Commission inappropriately used more than $127,000 in capital funds to demolish structures at its inappropriately obtained property and used nearly $108,000 in operating program funds to operate and maintain the property.

We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to (1) reimburse its program from non-Federal funds for the improper use of more than $2 million in program funds, (2) provide documentation or reimburse its program more than $836,000 from non-Federal funds for the unsupported payments cited in this audit report, and (3) implement adequate procedures and controls to address the findings cited in this audit report.