HUD audited the Housing Choice Voucher program of the Housing Authority of the City of Paterson, N.J. It decided to do so based on a risk assessment of housing authorities administered by HUD's Newark, N.J., field office that considered funding, HUD’s 2012 risk score, and prior Office of Inspector General (OIG) audits.

Auditors found that the authority lacked adequate controls to ensure that its program was administered in accordance with regulations. Specifically, some units didn’t comply with housing quality standards, and documentation was lacking that assisted rental units were inspected annually. As a result, housing assistance of almost $3.8 million was paid for units without evidence that they complied with housing quality standards.

In addition, auditors also found that documentation was inadequate to support that: rental subsidy amounts were accurately calculated; all tenants were eligible for subsidy; and applicants were properly selected from the waiting list. Consequently, $184,867 in questionable housing assistance was disbursed, and HUD lacks assurance that tenants were properly selected from the waiting list.

Further, auditors determined that financial controls weren’t adequate to ensure that port-in receivables were collected, that duplicate housing assistance payments weren’t made, and that uncashed checks disbursed to landlords and tenants were adequately monitored. As a result, authority officials failed to collect all receivables on behalf of port-in tenants and lacked assurance that housing assistance payments weren’t made for vacant units, and that outstanding checks to landlords and tenants were cashed within a reasonable time frame.

Finally, auditors found that authority officials didn’t properly execute a contract or adequately monitor the status of the contractor’s performance against the contact provisions. Consequently, the contractor was paid in excess of the small procurement threshold.

The auditors recommended that HUD instruct the authority officials to provide documentation to support that assisted units complied with housing quality standards, and strengthen controls over the unit inspection, tenant certification, port-in receivables collection, and procurement processes.

• HUD Audit Report No. 2014-NY-1001, Jan. 15, 2014