PHA, Glen Cove Didn’t Always Use Property Disposition Proceeds Appropriately

HUD’s Office of Inspector General (OIG) audited a PHA in Glen Cove, N.Y., regarding its administration of the disposition proceeds it received from selling properties. OIG targeted the PHA for review because HUD’s New York Office of Public and Indian Housing ranked it as the third highest risk performer among 67 public housing providers in New York and because the audited financial statements and property disposition records showed that the PHA may have loaned a portion of its property disposition proceeds to its nonprofit entity. The objective of the audit was to determine whether the PHA used property disposition proceeds in accordance with applicable requirements, including its HUD-approved disposition application.

Auditors found that the PHA didn’t always use proceeds generated from the sale of 19 properties in accordance with requirements. Specifically, it loaned more than $900,000 to its nonprofit entity for activities that didn’t benefit its residents and disbursed $169,975 in proceeds and $10,804 in other federal funds for costs that were not eligible or supported, such as Rental Assistance Demonstration conversion costs that require prior HUD approval.

Further, the PHA didn’t ensure that the disposition application and related documentation were maintained, and that it submitted required reports to HUD. OIG attributed these deficiencies to the PHA’s desire to increase revenue and weaknesses in its controls. As a result, HUD and the PHA didn’t have assurance that proceeds were used and available for use as intended to benefit the PHA’s residents, and HUD couldn’t fully monitor the PHA’s use of the proceeds.

OIG recommended that: (1) HUD require the PHA to obtain retroactive approval from HUD for the outstanding unauthorized loans and proceeds used for Rental Assistance Demonstration conversion costs or repay any amount for which it doesn’t obtain approval; (2) provide documentation to show that proceeds were used for approved activities or repay any amount not supported; (3) repay proceeds and other federal funds spent on ineligible activities; and (4) strengthen its controls to ensure that $1 million in remaining proceeds and any funds to be repaid are put to better use to benefit the PHA’s residents.

• HUD Audit 2018-NY-1002