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089621 1 (1975-07-03)

handle is hein.gao/gaobacvre0001 and id is 1 raw text is: I, UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 RESOURCES AND ECONOMIC r DEVELOPMENT DIVISION July 3, 1975 The Honorable H. R. Crawford Assistant Secretary for Housing Management Department of Housing and Urban Development Dear Mr. Crawford: The General Accounting Office is reviewing HUD's use of independent public accountants (IPAs) to audit local housing authorities (LHAs). We believe that HUD needs to strengthen its procedures and practices for making special audit subsidy payments to LH1As. Specifically, HUD needs to (1) insure that LEAs properly allocate audit costs between develop- ment and management activities and that audit subsidies not be used to pay audit costs charged to development costs, and (2) revise its procedures so that special audit subsidy payments are based on actual rather than estimated costs. We examined audit subsidies totaling $82,498, which were provided to 30 LHAs who are undertaking housing development projects in eight HUD regions--Atlanta, Boston, Dallas, Chicago, Denver, Kansas City, New York, and San Francisco. We found that audit subsidy overpayments of $11,164 have been made to 16 of the 30 LHAs. In addition, an undetermined amount of overpayments may be made to 13 LHAs (including 5 of the 16) because they did not allocate a portion of the audit costs to housing development activities. If these costs are subsequently allocated to development costs, as required by HUD regulations, a double payment will occur. Our observations on these matters follow. BACKGROUND Prior to 1972, HUD audited LHAs without charge. In July 1972, a housing managEment circular directed each LH-A, with 5,000 housing units or less, to engage an IPA to audit its financial statements biennially. LHAs are to obtain proposals from at least three IPAs, select the best proposal, and submit it to the HUD regional inspector general for audit (RIGA) for concurrence. Upon completion of the audit, the IPA submits copies of his report to the RIGA for review and approval. After approval the LHA is authorized to pay the IPA. In those cases where an IPA audit covers development and management activities, each LKA is required to allocate the audit fee between the two activities. Development funds are to be used to pay for audit fees charged to development and management funds, including special audit subsidies, are to be used to pay audit .es charged to management activities.

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