For a Public Housing Authority that we audit, the board of directors authorized a compensation payment to the executive director of the Authority to make up for a period of time the Authority did not have a pension plan in the 1980’s when the executive director was employed (this affected another employee from that time period also and they received a payment, at a much smaller amount). There was a calculation that was performed and this calculated payment was paid to the executive director as compensation, subject to federal, state and local withholdings and the all of the applicable payroll taxes and reported on his W-2.

The gross amount paid to him approximated $113,000 in gross pay to the executive director and was deducted within the Authority’s New Construction Program. HUD was not contacted to get approval for the compensation amount paid.

Do you have any advice as to how we should approach this payment to the ED. Would this be considered a finding that should be disclosed within the audit report? Any helpful advice you could provide would be helpful since we have never encountered a transaction/situation like this in any prior HUD audits.