PHA Didn't Comply with Conflict-of-Interest Requirements
HUD’s Office of Inspector General (OIG) audited the financial operations of the Pell City Housing Authority. The PHA administers 78 low-rent public housing units in Pell City, Ala. Its mission is to provide decent, safe, sanitary, and affordable housing and related services to the qualified citizens of Pell City. The Pell City Housing Authority is governed by a five-member board of commissioners appointed by the mayor and an executive director. The board of commissioners hires the executive director to manage the daily operations of the PHA. Pell City has four full-time employees, including its executive director. HUD awarded Pell City more than $1.12 million in operating funds for fiscal years 2013 to 2017 and more than $578,000 in capital funds for years 2012 to 2017. And the audit objective was to determine whether the Pell City Housing Authority complied with HUD regulations regarding the management of its financial operations.
Auditors found that the PHA failed to comply with conflict-of-interest requirements when it allowed its executive director to directly supervise her spouse, the PHA’s maintenance supervisor, and approve his timesheets and credit card purchases. This condition occurred because the PHA’s board of commissioners disregarded federal, state, and its own regulations regarding conflicts of interest. As a result, HUD lacked assurance that housing program funds were spent in accordance with program requirements.
Regulations at 2 CFR 200.303(a) require that effective internal controls over federal awards be established and maintained and that management evaluate delegation for the proper segregation of duties. Also, 24 CFR 982.161(a)(2) prohibits any employee of a PHA who formulates or influences policy decisions from entering into a contract or arrangement in which the employee has a direct financial interest during his or her tenure or for one year thereafter.
Accordingly, the board could have designated another position the responsibility for the approving the executive director’s husband’s timesheets and purchases. The PHA’s annual contribution contract with HUD also prohibited the conflict-of-interest relationship and provided guidance for obtaining a waiver of the requirements by HUD or the PHA’s board of commissioners. The State of Alabama Code further prohibits public employees from engaging in actions or inaction that would materially affect their financial interest or that of their family members. The executive director and the board chairman stated that HUD was aware of the marital relationship, and the board chairman asserted that the board had issued a waiver. However, the PHA couldn’t provide a waiver from HUD or its board of commissioners. In addition, HUD’s official files didn’t contain a written waiver of the conflict as required.
OIG recommended that the Director of HUD’s Birmingham, Ala., Office of Public and Indian Housing require the PHA to comply with conflict-of-interest requirements or obtain a waiver from HUD or its board of commissioners. The office also recommended that the PHA develop and implement a policy for the review and approval of timesheets and credit card purchases, which ensures a proper segregation of duties and is approved by its board of commissioners.
- HUD Audit 2018-AT-1009