Finding 576731 (2022-001)

2022-001 COCC U.S Department of Housing and Urban Development 14.850 Public and Indian Housing Condition: The Authority continues to run a deficit in the Central Office Cost Center (COCC) primarily because of legacy costs (Health Insurance and Pension costs) associated with former employees, as required by long term state contracts. COCC has expended Low Income Public Housing (LIPH) funds to support the COCC operations in violation of Federal Rules and Regulations. Through the year ended December 31, 2022, the Authority has accumulated in excess of $5,487,478, in COCC administrative operating costs above those normally covered by management fees, capital asset fees ad bookkeeping fees. Though it appears that overall the Authority does not have a Going Concern issue as a result of HUD s commitment in accordance with the Annual Contributions Contract (ACC) with housing authorities for the subsequent twelve (12) months, by continuing to operate the COCC with negative cash flow over an extended period of time, the COCC will continue to use LIPH funds in violation of HUD rules. It was noted that the amount owed to the LIPH program decreased in the current year. This is a repeat of finding 2021-001. Criteria: OMB-87 regarding eligible and ineligible costs. Cause: The Authority has not established controls to ensure proper accounting for cash balances pertaining to Asset Management Projects and continues to use a central checking system to disburse funds. There is also a lack of oversight and long-range planning in accordance with HUD s requirements. Effect: The Authority was not in compliance with the allowable costs criteria for the federal program. Questioned Costs: $0 Recommendation: We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that each program operates both in accordance with its budget and within its means, and for the Authority to provide a work-out plan for the COCC to substantially reduce its costs or to generate additional revenue. PHA Response and Corrective Action Plan: See corrective action plan.