Richmond, Calif., PHA Mismanaged Its Financial Operations

HUD’s Office of Inspector General (OIG) audited the Richmond Housing Authority due to a complaint alleging that the PHA submitted falsified documentation to HUD and allowed the City of Richmond to use the PHA’s HUD funds and the PHA’s assets, and that the city charged the PHA for rent and services at an unreasonable price. OIG’s audit objective was to validate complaint allegations regarding whether the PHA spent HUD funds and used its assets in accordance with HUD requirements.

The OIG found that the complaint allegations had merit. The PHA mismanaged its financial operations and didn’t spend HUD funds and use its assets in accordance with HUD requirements. The OIG attributed these deficiencies to the PHA’s disregard for HUD requirements and its agreement with HUD, the lack of independence in the relationship between the PHA and the city, and a weak internal control environment. As a result, it found the PHA misspent $2.2 million in HUD funds, had $944,910 in unsupported costs, and incurred other questionable transactions that unnecessarily limited its resources and effectiveness with its public housing program.

The OIG recommended that the Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act for submitting misleading documentation to HUD. The OIG recommended that the Director of the Departmental Enforcement Center take the appropriate administrative actions against PHA officials for submitting misleading documentation to HUD. The OIG also recommended that the Director of the San Francisco Office of Public Housing require the PHA to: (1) repay more than $2 million for the ineligible use of HUD funds, $53,347 for duplicate charges, and $60,000 for a city-initiated management audit; (2) support $80,890 of the executive director’s salary spent on PHA activities and $180,000 spent on office rent; (3) determine the proper use of the PHA’s former maintenance building property; and (4) develop and implement financial policies and procedures for the current operating environment.

Finally, OIG recommended that the Director of the San Francisco Office of Public Housing work with HUD headquarters on corrective actions to improve the PHA’s control and accountability regarding its finances and operations, including but not limited to HUD receivership and separating the PHA’s finances from those of the city.

• HUD Audit 2016-LA-1006, June 2016