California Audit Reports
Date
Issued: September 21, 2007
Audit
Report No.: 2007-LA-1016
File Size: 450.62KB
Title:
A Community of Friends, Los Angeles, CA, Did Not Always Administer
Its Cash Match in Compliance with HUD Requirements
We
audited A Community of Friends (Community) as a result of on-site
work performed as part of a separate audit of the Los Angeles Homeless
Services Authority's use of Supportive Housing Program funds. Our
audit objective was to determine whether the Community applied and
tracked its HUD Supportive Housing Program cash match in accordance
with applicable laws, regulations, and requirements. We found that
the Community did not always administer its Supportive Housing Program
cash match in compliance with HUD requirements. It failed to meet
its supportive services cash match requirements for 1 of 15 grants
we reviewed. The grant did not meet the 25 percent cash match requirement
and included ineligible expenses as cash match. A second grant,
while still active, is deficient in the amount of cash match provided
during the first four months of the grant term. We attribute these
deficiencies to the Community's inadequate understanding of cash
match requirements and the Authority's (the pass-through agency)
failure to monitor the Community's cash match operations. As a result,
neither HUD nor the Authority was assured that the Community maximized
the effectiveness of the Supportive Housing Program's intent. We
recommend that HUD require the Authority to repay the $71,318 balance
of the grant funds expended.
Date
Issued: July 27, 2007
Audit
Report No.: 2007-LA-1014
File Size: 1.23MB
Title:
The Housing Authority of the County of San Mateo, Belmont, California,
Did Not Use HUD Program Funds in Accordance with HUD Requirements
At
the request of the HUD San Francisco Office of Public Housing, we
reviewed the Housing Authority of the County of San Mateo's (Authority)
Housing Choice Voucher program to determine whether the Authority
used program funds in accordance with U.S. Department of Housing
and Urban Development (HUD) rules and regulations. We found the
Authority did not use HUD program funds in accordance with requirements.
The Authority used $573,485 in Housing Choice Voucher program funds
to overlease the Moving to Work Demonstration (Moving to Work) program.
Further, in an attempt to remedy the overleasing, the Authority
improperly implemented a Moving to Work preference in its Housing
Choice Voucher program that impacted 71 families on the Housing
Choice Voucher program waiting list. The Authority also loaned $1.4
million in Housing Choice Voucher program funds to pay for construction
costs of the El Camino Village low-rent public housing project.
We also found the Authority loaned $500,000 in Midway Village Comprehensive
Improvement Assistance Program grant funds to reimburse the Housing
Choice Voucher program for its El Camino Village project construction
cost overruns. The authority also transferred $115,602 in portability
administrative fees to its nonfederal account and overdrew its Housing
Choice Voucher program operating reserve.
We
recommend the Deputy Assistant Secretary for the Office of Public
Housing Investments require the Authority to reimburse the Housing
Choice Voucher program $573,485 from the Moving to Work program
or from nonfederal funds for the overleasing of the Moving to Work
program and more than $1.23 million used to house Moving to Work
program participants moved to the Housing Choice Voucher program.
We also recommend the director of HUD's San Francisco Office of
Public Housing require the Authority to reimburse the Housing Choice
Voucher program $1.4 million plus interest from nonfederal funds;
reimburse Midway Village $500,000 plus interest from nonfederal
funds; reimburse the Housing Choice Voucher program $115,602 plus
interest from nonfederal funds; and implement controls and establish
policies and procedures for the accounting and use of Housing Choice
Voucher program operating reserves.
Date
Issued: June 8, 2007
Audit
Report No.: 2007-LA-1013
File Size: 228.22KB
Title:
The Los Angeles Homeless Services Authority, Los Angeles, California,
Did Not Perform On-Site Fiscal Monitoring of Its Project Sponsors
We
audited the Los Angeles Homeless Services Authority (Authority),
located in downtown Los Angeles, California, in light of publicity,
which alleged mismanagement and misuse of HUD funding. Our audit
objectives were to determine whether the Authority adequately monitored
its project sponsors to ensure compliance with HUD regulations and
whether the project sponsors administered their Supportive Housing
Program grants in compliance with grant agreements and other HUD
program requirements. We found that the Authority neglected to perform
on-site fiscal monitoring of its project sponsors during the past
two years. It also failed to properly perform its 100 percent source
documentation desk review for at least two of its project sponsors
to ensure that cash match funding was eligible and supported. Of
the two project sponsors reviewed, one had applied ineligible expenses
as cash match, while the other was unable to support its cash match
due to a poor financial management system. We recommend that HUD
require the Authority to comply with HUD's requirements regarding
on-site fiscal monitoring of its project sponsors, reexamine its
desk review procedures to ensure that reviews are performed to adequately
monitor its project sponsors' cash match, reevaluate its current
risk analysis matrix to better identify the more problematic project
sponsors, and establish and implement written monitoring procedures.
Date
Issued: June 4, 2007
Audit
Report No.: 2007-LA-1012
File Size: 830.30KB
Title:
Central City Luthern Mission, San Bernardino, California, Did Not
Properly Administer Its Supportive Housing Program Grants
We
audited Central City Lutheran Mission (Mission) in response to a
recommendation from the Los Angeles Office of Community Planning
and Development. Our objectives were to determine whether the Mission's
Supportive Housing Program grant funding was spent in compliance
with the HUD requirements and its grant agreements. We found that
the Mission lacked the capacity to properly administer multiple
Supportive Housing Program grants. In addition, it spent $294,072
for unsupported and ineligible expenses and failed to fully support
that it provided required matching funds for $429,468 in grant funds.
It also prematurely sold two apartment buildings purchased with
$280,000 in grant funds without HUD's written approval. Finally,
while the Mission correctly verified the eligibility of its clients,
it failed to collect more than $13,183 in funds because the rents
were not calculated correctly. We recommended that HUD not provide
the Mission with any future funding until it has implemented adequate
systems and controls. In addition, we recommended that HUD require
the Mission to reimburse the grants and/or repay HUD from nonfederal
funds for the $699,438 in unsupported expenses and $304,102 in ineligible
expenses. We also recommended that HUD require the Mission to correct
and implement effective procedures and controls to ensure that all
income and expenses are properly considered so that rent calculations
are correct.
Date
Issued: May 7, 2007
Audit
Report No.: 2007-LA-1010
File Size: 422.67
Title:
The Housing Authority of the County of Contra Costa, Martinez, California,
Admitted an Overincome Family to the Section 8 Section 8 Tenant
Eligibility
In
accordance with our annual audit plan, we reviewed the County of
Contra Costa Housing Authority's (Authority) tenant eligibility
determinations for its Section 8 Housing Choice Voucher program.
Our objective was to determine whether the Authority ensured that
only eligible tenants were admitted to its Section 8 program and
allowed to assistance in compliance with U.S. Department of Housing
and Urban Development (HUD) rules and regulations.
The Authority generally determined eligibility for Section 8 housing
in accordance with HUD requirements. However, of 37 new vouchers
that were issued between January 1, 2005, and December 31, 2006,
we identified one family that was ineligible because its income
exceeded HUD's limit for Section 8 eligibility. In addition, the
Authority needs to improve procedures for determining whether prospective
tenants were previously evicted from assisted housing for drug-related
activity. Specifically, our review disclosed that the Authority
Obtained eviction histories for applicants but did not ensure
that the histories covered a full three years,
Did not have procedures to identify evictions by Section
8 landlords, and
Did not document the results of eviction checks.
We
recommend that the director of HUD's Office of Public Housing require
the Authority to (1) repay HUD the $2,559 in housing assistance
payments disbursed between February 1, 2006, and February 1, 2007,
for the over income tenant plus any additional amounts paid since
then, (2) implement a control procedure that will document the comparison
of an applicant family's annual income with the applicable income
limit and the determination of income eligibility, and (3) implement
new procedures to ensure that eviction reviews are documented and
cover the required three years and that there were no evictions
from Section 8 housing.
Date
Issued: April 10, 2007
Audit
Report No.: 2007-LA-1009
File Size: 74.38KB
Title:
The City of Chula Vista, California, Generally Administrered Its
HOME Investment Partnerships Program in Accordance with HUD Requirements
We
audited the City of Chula Vista's HOME Investment Partnerships Program
(HOME) in response to an auditability and risk analysis completed
by our office. Our audit objective was to determine whether the
City administered its HOME program in accordance with HUD requirements.
We concluded that the City generally administered its HOME program
in accordance with HUD requirements.
Date
Issued: April 3, 2007
Audit
Report No.: 2007-LA-1007
File Size: 897.55KB
Title:
The Housing Authority of the County of Los Angeles, Los Angeles,
California, Did Not Adequately Conduct Housing Quality Standards
Inspections
We
audited the Housing Authority of the County of Los Angeles' (Authority)
Section 8 housing quality standards inspections for its Section
8 Housing Choice Voucher program. The objective of the audit was
to determine if the Authority was providing decent, safe, and sanitary
housing for its tenants; and, to determine if the Authority's inspections
of its housing units were sufficient to detect violations and if
the Authority's housing stock meets housing quality standards. Using
a statistical sample of 68 program units, we determined 50 units
did not met HUD's housing quality standards, and that the Authority
did not complete timely housing quality standards inspections. We
recommend that HUD require the Authority to (1) implement adequate
procedures and controls to ensure that units meet HUD's housing
quality standards to prevent $11.5 million in program funds from
being spent on units that are in material noncompliance; (2) verify
and certify that the owners took appropriate corrective actions
for all applicable housing quality standards violations and abate
the rents or terminate the housing assistance payment contracts
if appropriate actions were not taken; and (3) develop adequate
controls to enforce implementation of policies and procedures to
ensure that program units are inspected at least annually to meet
HUD's housing quality standards before disbursing housing assistance
payments.
Date
Issued: March 16, 2007
Audit
Report No.: 2007-LA-1006
File Size: 1.91MB
Title:
The Housing Authority of the County of Santa Clara, San Jose, California,
Did Not Adequately Determine and Support Section 8 Rents
We
reviewed the Housing Authority of the County of Santa Clara's (Authority)
Section 8 rent reasonableness determinations for its Section 8 Housing
Choice Voucher program to determine whether they were consistent
with HUD rules and regulations. We found that the Authority did
not determine that rents charged to individuals receiving Section
8 housing assistance were reasonable. Further, it did not administer
the rent reasonableness determinations in accordance with HUD rules
and regulation or its HUD-approved administrative plan. We recommended
that HUD require the Authority to establish adequate controls and
procedures to ensure that it makes Section 8 housing assistance
payments based on reasonable rent determinations; establish and
implement policies and procedures to ensure that Authority specialists
have information needed to determine reasonable rents; and support
or reimburse HUD for questioned housing assistance payments in the
amount of $17,391. In addition, we recommended that HUD recapture
$1.36 million of the administrative fees earned during the audit
period, for not performing rent reasonableness in accordance with
HUD rules and regulations.
Date
Issued: February 14, 2007
Audit
Report No.: 2007-LA-1005
File Size: 840KB
Title: Oakland Housing Authority, Oakland, California, Did Not
Comply with Procurement and Contracting Requirements
We audited Oakland Housing Authority's (Authority) procurement
and contracting activities, in response to a citizen's complaint.
Our objective was to determine whether the Authority's procurement
and contracting practices were in compliance with federal requirements.
We found the Authority did not follow HUD's procurement requirements
and its own procurement policy when it awarded, renewed, amended,
and made payments on several legal services contracts. As a result,
the Authority made unsupported and excessive payments for these
services. We recommend that HUD require the Authority to:
provide support to show rates charged by its general counsel
were reasonable;
provide adequate support to show $1,125,951 in payments to
its general counsel were made in accordance with the terms of the
contracts, or repay unsupported amounts to its low-rent program;
provide support to show $470,354 in amendments to a Hope
VI development legal services contract were reasonable;
provide support to show $954,631 paid for eviction legal
services between June 1, 2002 and July 31, 2005 was reasonable,
or repay its low-rent program from nonfederal funds;
provide support to show the $289,949 paid for eviction legal
service between August 1, 2005 and June 2006 was reasonable and
was paid in accordance with contract terms, or repay unsupported
amounts to its low-rent program from nonfederal funds;
issue a new Request for Proposal for eviction legal services
to ensure it obtains competitive prices for the service;
revise its contract monitoring system to ensure it only pays
for goods and services in accordance with contract terms;
perform all future procurement actions in accordance with
applicable requirements; and
revise its Moving to Work Agreement so that it requires the
Authority to obtain HUD's approval before executing any professional
service contracts and amendments totaling more than $50,000 in part
or aggregate for a minimum of one year or until HUD is satisfied
the procurements and contracts meet federal requirements.
Date
Issued: December 15, 2006
Audit
Report No.: 2007-LA-1004
File Size: 862KB
Title:
The Housing Authority of Contra Costa Did Not Adequately Determine
and Support Section 8 Rents
We audited
the Housing Authority of the County of Contra Costa's (Authority)
administration of rent reasonableness determinations for units leased
under its Section 8 Housing Choice Voucher program in response to
a request from the Office of Public Housing. Our objective was to
determine whether the Authority ensured that rents were reasonable
and that its written procedures and internal controls were adequate
to ensure compliance with U.S. Department of Housing and Urban Development
(HUD) rules and regulations, and consequently, to ensure the use
of federal funds was supported and for eligible purposes. We found
the Authority did not adequately determine reasonable rent or document
support because written policies and controls were inadequate.
In some cases, the Authority compared assisted units to units that
were vastly dissimilar and, therefore, provided no support for the
contract rent.
The
Authority did not consider important factors that could affect the
rental price, such as amenities, services provided, age of units,
and square footage.
The forms used to document the rent reasonableness determinations
were often missing or incomplete and/or contained erroneous information.
The
Authority also improperly used federal funds to pay for housing
assistance overpayments caused by the Authority's delays in processing
landlords' rent increase requests and did not reimburse HUD for
those improper payments.
We recommend
that HUD require the Authority to (1) support or reimburse HUD $82,659
in unsupported housing assistance payments, (2) follow HUD-approved
policies and procedures when performing rent reasonableness determinations
and ensure that adequate quality control procedures are in place,
(3) reimburse HUD $77,997 in administrative fees, (4) repay HUD
$5,236 for subsidy overpayments resulting from processing delays,
(5) repay additional subsidies disbursed due to late processing
of rent increases from July 1, 2005, to the present, and (6) develop
procedures that ensure the timely processing of rent increase requests;
prevent the use of federal funds to pay for the Authority's errors
or omissions; and address repayment of funds to HUD for overpayments
resulting from the use of federal funds to pay for errors or omissions.
Date
Issued : December 12, 2006
Audit
Report No.: 2007-LA-1003
File Size:1.0MB
Title:
The City of Long Beach, Long Beach, California, Did Not Administer
Its Continuum of Care Supportive Housing Program in Compliance of
HUD Requirements
We audited
the City of Long Beach's (City) Continuum of Care Supportive Housing
Program in response to a recommendation from HUD. Our audit objectives
were to determine whether the City (1) monitored its project sponsors
adequately to ensure compliance with HUD regulations, (2) closed
out expired grants in compliance with HUD regulations, (3) provided
the proper amount of administrative fees to its project sponsors,
and (4) made timely reimbursements to its project sponsors.
We found
that the City did not administer its program in compliance with
HUD requirements and/or its own procedures. It failed to (1) monitor
its project sponsors, which resulted in project sponsors being unable
to support $315,320 in required cash match; (2) close out $636,916
in expired grants in accordance with HUD requirements; (3) provide
at least 50 percent of the administrative fees to the project sponsors
as Congress intended; and (4) make timely reimbursement payments
to its project sponsors. As a result, the City failed to ensure
that HUD funds were spent in the most effective and efficient manner
to maximize its program, unnecessarily overburdened project sponsors
with paying for operations from nonfederal funding, and put HUD
funds at risk of being misspent. Additionally, the City unnecessarily
delayed nearly $2 million in expired grant funds from being deobligated
and put to better use.
We
recommended that HUD require the City to comply with HUD's and its
own policies and procedures regarding on-site monitoring of its
project sponsors; provide support for $315,320 in cash match or
repay HUD for more than $1.1 million in expended grant funds; immediately
close out $636,916 in expired grants so these funds can be put to
better use; and reevaluate its payment process and establish and
implement procedures to reduce the time it takes to reimburse its
project sponsors.
Date Issued: October 20, 2006
Audit
Report No. 2007-LA-1001
File Size: 2.21MB
Title: The Associates Group Pioneer Pines Park, Bakersfield, Did
Not Follow the Provisions of the Regulatory Agreement
We audited The Associates Group Pioneer Pines Park, located in
Bakersfield, California, in response to a request from the HUD Departmental
Enforcement Center. Our audit objectives were to asses HUD's concerns
about potential equity skimming and to determine whether the project
was administered in compliance with the regulatory agreement and
HUD requirements. We found that Pioneer Pines failed to collect
$195,202 in rental payments from its mobile home dealers; paid $133,049
in unsupported wages; made payments of $375,327 for ineligible expenses;
commingled funds and repaid advances while in a non-surplus cash
position; failed to maintain its vacant spaces in good repair and
condition; and failed to make required mortgage payments. We recommend
that HUD require the owner to repay the uncollected rent and other
ineligible and unsupported expenses. We also recommend that HUD
pursue double damages remedies against the owner for the inappropriate
disbursements that were used in violation of the regulatory agreement.
We also recommended that HUD's Departmental Enforcement Center pursue
action under the Program Fraud Civil Remedies Act against the owner's
president, and impose other civil money penalties and administrative
sanctions against the president and owner.
Date
Issued: September 7, 2006
Audit
Report No.: 2006-LA-1019
File Size: 2.36MB
Title: The City of Modesto (City) Modesto, California, Did Not Always Administer
Its Community Development Block Grant in Compliance with Government
Regulations
We audited the City of Modesto's (City) Park, Recreation and Neighborhood
Services Division to determine whether the City administered its
Community Development Block Grant in accordance with the U.S. Department
of Housing and Urban Development (HUD) requirements. The audit covered
the period from July 1, 2000, through December 31, 2005. Our audit
found the City did not adequately administer its grant in accordance
with HUD and its own requirements.
We recommend that HUD require the City to:
Reduce the loan balances for loan recipients who were charged
$64,938 for unreasonable and unnecessary rehabilitation costs identified
during our audit.
Review all additional loans related to rehabilitation work carried
out after June 2005 to determine the reasonableness of costs charged
for the work, and reduce the recipient loan balances for any identified
overcharges.
Implement a procurement system that meets federal requirements.
Develop an adequate quality control system to ensure proper monitoring
of contractor charges, rehabilitation work and work progress.
Provide
evidence that it now complies with its own underwriting requirements
regarding verification of income and assistance eligibility for
loan applicants.
Date Issued: July 20, 2006
Audit
Report No.: 2006-LA-1016
File Size: 62.86KB
Title: Los Angeles Family Housing Corporation, North Hollywood,
California, Generally Administered Its Supportive Housing Program
Grants in Accordance with HUD Requirements
We audited the Los Angeles Family Housing Corporation (Corporation)
in response to a request from the HUD Los Angeles Office of Community
Planning and Development. Our audit objective was to determine whether
the Corporation administered its Supportive Housing Program grants
in accordance with HUD requirements and its grant agreements. We
found that the Corporation generally administered its Supportive
Housing Program grants in accordance with HUD requirements and grant
agreements.
Date Issued: July 20, 2006
Audit
Report No.: 2006-LA-1015
File Size: 745.25KB
Title: Institute for Urban Research and Development, El Monte,
California, Did Not Properly Administer Its Supportive Housing Program
Grants
We audited the Institute for Urban Research and Development (Institute),
located in El Monte, California, in response to a citizen's complaint.
The objective of the audit was to determine whether the complainant's
allegations had merit and whether the Institute administered its
Supportive Housing Program grants in accordance with pertinent requirements.
We found that the complainant's allegations had merit, and the Institute
did not adequately administer its Supportive Housing Program grants.
HUD originally awarded these grants to the Los Angeles Homeless
Services Authority and the City of Glendale (grantees), which were
subsequently passed through to the Institute. We reviewed grant
funds provided for four grants totaling nearly $1.5 million and
found that the Institute claimed to have spent $108,853 in grant
funds for allocated supportive housing and corporate office expenses
that were not documented. In addition, the Institute could not provide
support for $181,020 in required matching funds for three of the
grants. We recommend that HUD require the grantees (1) provide adequate
supporting documentation for the $108,853 in unsupported expenses
or repay it from nonfederal funds; and (2) provide adequate supporting
documentation that the $181,020 in required matching funds was provided,
or repay the $1,159,580 balance of grant funds expended.
Date Issued: July 17, 2006
Audit
Report No.: 2006-LA-1014
File Size: 708.10KB
Title: KB Home Mortgage Failed to Ensure Underwriting Certifications
for Federal Housing Administration Loans Were Accurate
We performed an audit of KB Home Mortgage Company (KB) after a
prior HUD Office of Inspector General (OIG) audit found indications
that KB underwriters inaccurately certified that they underwrote
certain Federal Housing Administration loans. The objective of the
audit was to follow up on this potential violation and determine
the extent to which it occurred. We found KB failed to ensure underwriter
certifications for Federal Housing Administration loans were accurate.
Based upon statistical sample testing, we found in an estimated
206 of 543 HUD loans targeted for review, KB's underwriters certified
that they personally underwrote the loans when they did not. As
a result, HUD has no assurance that these loans were properly underwritten
to ensure they were eligible for Federal Housing Administration
mortgage insurance; therefore, HUD was exposed to unnecessary insurance
risk for these loans. We recommend that HUD require KB, for any
current or future FHA loan operations for which KB may exercise
management control, to ensure that underwriter certifications for
HUD-insured loans are only executed by direct endorsement underwriters
after personally reviewing the appraisal, credit application, and
all associated documents and using due diligence in underwriting
the mortgage.
Date Issued: July 17, 2006
Audit
Report No.:2006-LA-1013
File Size: 4.06MB
Title: The Child Abuse Prevention Council of Sacramento, North
Highlands, California, Did Not Adequately Administer Its Healthy
Homes Initiative Grant
We audited the Child Abuse Prevention Council of Sacramento, located
in North Highlands, California, in response to a referral from the
U.S. Department of Housing and Urban Development's Office of Healthy
Homes and Lead Hazard Control. Our objectives were to determine
whether the Council administered its Supportive Housing Program
grant in accordance with HUD requirements and its grant agreement.
We found that the Council did not adequately administer its Healthy
Homes Initiative grant. As a result, $936,879 of the $1,027,477
in payment (reimbursement) requests submitted to HUD was for ineligible
($350,840) and unsupported ($586,039) costs. The Council also failed
to implement and maintain an adequate procurement process, develop
an adequate financial management system, or meet its grant performance
objectives. We recommend that HUD require the Council to repay it
from nonfederal sources for ineligible and unsupported expenses
(for which reimbursement was previously received from HUD), and
that HUD not pay the Council for outstanding reimbursement requests,
consisting of ineligible and unsupported expenses, unless it can
provide adequate supporting documentation. We also recommend that
HUD deobligate all remaining grant funds including ineligible costs,
any unsupported costs that cannot be documented, and the $472,523
unused portion of the $1.5 million grant. Finally, we recommend
that HUD not award the Council additional funding until it has implemented
adequate financial management and procurement systems and can provide
evidence that it has developed the organizational capacity to carry
out a HUD grant.
Date Issued: June 21, 2006
Audit
Report No.: 2006-LA-1012
File Size: 978.63KB
Title: The Housing Authority of the City of Los Angeles, Los Angeles,
California, Did Not Adequately Determine and Support Section 8 Tenant
Eligibility
We audited the Housing Authority of the City of Los Angeles' (Authority)
Section 8 tenant eligibility determinations for its Section 8 Housing
Choice Voucher program. The objective of the audit was to determine
whether the Authority established the eligibility of its Section
8 tenants in accordance with HUD requirements. We found that the
Authority did not establish and document its Section 8 tenants'
eligibility to receive housing choice vouchers in 76 of 133 cases
reviewed. We recommend that HUD require the Authority to (1) support
or reimburse HUD more than $1 million in unsupported Section 8 housing
assistance payments; (2) implement the necessary controls and/or
revisions to its administrative plan to ensure the determinations
are made properly in the future; and (3) conduct training with the
Section 8 personnel on the new controls and procedures.
Date Issued: May 18, 2006
Audit
Report No.: 2006-LA-1011
File Size: 400KB
Title: Sundial Care Center, Modesto, California, Used $659,746
in Project Funds for Ineligible and Undocumented Costs and Was Unable
to Account for Revenue Totaling $407,454
In response to a request from HUD's Office of Multifamily Housing
in San Francisco, we audited Sundial Care Center to determine whether
the owner used project funds in compliance with the regulatory agreement
and HUD's requirements. We determined the owner misused $659,746
in project funds for nonproject (ineligible) purposes, or lacked
supporting documentation and could not account for $407,454 in project
revenue receipts. The owner's noncompliance caused the default on
the insured mortgage and HUD's subsequent $3.6 million loss on the
sale of the mortgage note. We recommend HUD require the owner to
repay HUD's Federal Housing Administration insurance fund $1,067,200,
pursue double damages remedies against the owner, and take administrative
actions against the owner and its principals/officers.
Date Issued: March 3, 2006
Audit
Report No.: 2006-LA-1010
File Size: 5.17MB
Title:
The Owner and Agent of Holiday Apartments, LA Pro 30, and Two Worlds
II, Los Angeles, California, Mismanaged Project Finances and Operations
In response to a request from HUD's Departmental Enforcement Center,
we audited the four Holiday Apartments (101-A, 101-B, 101-C, and
102), LA Pro 30, and Two Worlds II to assess HUD's concerns over
inappropriate disbursements and determine whether the projects were
administered in compliance with HUD requirements.
We determined the owner and identity-of-interest management agent
used project funds to pay $2,670,118 in ineligible and unsupported
costs, including $1,562,193 for excessive and unreasonable charges
by an identity-of-interest maintenance contractor, $365,734 in excessive
charges for accounting services paid to identity-of-interest contractors,
$380,670 in payroll charges for the management agent's president,
$209,441 in unsupported rent charges and $140,880 in capital improvement
expenses for the management agent's office, and $11,200 in ineligible
ownership expenses. We anticipate similar additional questionable
costs continued after the end of our audit period that could cost
the projects another $457,444. In addition, our building inspections
identified more than 240 health and safety violations, which resulted
in $561,600 in housing assistance payments for units and buildings
that were not decent, safe, and sanitary. Finally, the owner and
identity-of-interest management agent did not effectively manage
the projects, which also included not accurately calculating, reporting,
and resolving $655,173 in project liabilities.
We recommend HUD require the owner to repay the respective projects
for the ineligible costs, and provide support over the reasonableness
of unsupported costs or repay the projects. In addition, HUD should
require the owner to correct unit deficiencies and obtain new management,
accounting, and maintenance services.
Date Issued: March 3, 2006
Audit
Report No.: 2006-LA-1009
File Size: 815.03KB
Title: Fontana Native American Indian Center, Fontana, California,
Did Not Adequately Administer Its Supportive Housing Program Grant
We audited the Fontana Native American Indian Center, located in
Fontana, California, in response to a HUD request. Our objectives
were to determine whether the Center administered its Supportive
Housing Program grant in accordance with HUD requirements and its
grant agreement. We found that the Center did not adequately administer
its grant program. The Center spent $194,541 in grant funds for
ineligible ($138,503), unsupported (55,776), and unnecessary ($262)
expenses. Additionally, the Center did not implement adequate financial
management and record-keeping systems. We recommend that HUD require
the Center to reimburse the grant and/or repay HUD from nonfederal
funds for the ineligible, unsupported, and unnecessary expenses.
We also recommend HUD require the Center to establish and implement
a financial management system and an adequate record-keeping system
that meet federal requirements, and not award the Center additional
funding until it has implemented adequate systems and controls.
Date Issued: March 1, 2006
Audit
Report No.: 2006-LA-1008
File Size: 809.23KB
Title: The Housing Authority of the City of Los Angeles, Los Angeles,
California, Did Not Adequately Administer and Maintain Its Section
8 Waiting List
We audited the Housing Authority of the City of Los Angeles (Authority),
California, in response to a request from its executive director
regarding his concern over the management of the waiting list. Our
objective was to determine whether the Authority complied with applicable
laws and regulations when placing registrants on the waiting list
and selecting applicants in the proper order to receive housing
vouchers. We found that the Authority did not adequately administer
and maintain a waiting list in accordance with program requirements
and, thus, may not have selected applicants in the proper order.
We recommend, before the waiting list is reopened, that HUD require
the Authority to (1) engage a dedicated team to analyze, purge,
and update its current waiting list to ensure that it has an accurate
and complete waiting list; (2) evaluate and implement any changes
that are needed to its current administrative plan; and (3) provide
training to pertinent employees on the revised waiting list procedures
and policies.
Date
Issued: December 7, 2005
Audit
Report No.: 2006-LA-1004
File Size: 389KB
Title:
Inglewood Housing Authority, Inglewood, California, Did Not Adequately
Administer Its Section 8 Housing Choice Voucher Program
We
audited Inglewood Housing Authority's (Authority) administration
of its Section 8 Housing Choice Voucher program. Our audit objectives
were to determine whether the Authority, located in Inglewood, California,
administered its program in compliance with pertinent HUD requirements
and its annual contribution contract and operated its program in
an effective and efficient manner.
We found that the Authority did not adequately administer its Section
8 Housing Choice Voucher program in a manner that complied with
program requirements, did not operate its program in an effective
and efficient manner, and did not request additional funds from
HUD when needed to alleviate some of its cash deficit problem. Specifically,
the Authority did not comply with program requirements relating
to portability procedures and responsibilities, tenant certification
and housing quality standards requirements, housing assistance payment
register maintenance, and salary allocation and procurement procedures.
We also determined that the Authority's organizational structure
and management responsibilities were not clearly defined and its
financial reporting function was ineffective and inefficient.
We recommend that HUD require the City of Inglewood's mayor and
board of commissioners to replace the current executive director
and housing manager, establish a separate housing authority commission,
and require the City of Inglewood to designate sufficient finance
department personnel dedicated to work solely on Authority-related
financial reporting activities. In addition, after these recommendations
are implemented, evaluate the status of the Authority's progress
on its latest corrective action plan after one year under the plan.
This
is the fourth and final report resulting from our audit of the Authority.
Date
Issued: December 7, 2005
Audit
Report No.: 2006-LA-1003
File Size: 248KB
Title:
The Owners of The Avenue, San Francisco, California, Misused More
Than $32,000 in Project Funds
In
response to a request from HUD's Office of Multifamily Housing in
San Francisco, we audited The Avenue to determine whether project
funds were administered in compliance with the regulatory agreement
and HUD requirements.
We determined the owner misused $32,851 in project funds for a food
service contract of excessive cost, and ineligible Feng Shui consulting
expense. We attributed the misuse of project funds to the owner's
disregard for HUD requirements. The owner put a low priority on
ensuring the project obtained only services necessary for the project's
operations at a reasonable cost. We recommend HUD require the owner
to repay The Avenue $32,851 from nonproject funds.
Date Issued: November 8, 2005
Audit
Report No.: 2006-LA-1002
File Size: 300.63KB
Title: The Housing Authority of the City of Los Angeles, Los Angeles,
California, Did Not Adequately Determine and Support Section 8 Rents
At the request of the Executive Director of the Housing Authority
of the City of Los Angeles, we conducted a review of its Section
8 rent reasonableness determinations for the housing choice voucher
program. The Executive Director, in his request, expressed concerns
regarding prior administration of the program.
We determined the Housing Authority did not adequately document
rent reasonableness determinations to ensure Section 8 rents were
reasonable before entering into housing assistance payment contracts.
We attributed these conditions to the Housing Authority not following
established HUD-approved policies and procedures. We recommended
the Housing Authority support or reimburse HUD $186,881 in unsupported
Section 8 housing assistance payments. In addition, we recommended
the Housing Authority follow the established policies and procedures
for rent reasonableness determinations.
Date Issued: September 7, 2005
Audit
Report No.: 2005-LA-1009
File Size: 225.70KB
Title: Inglewood Housing Authority, Inglewood, California, Housing
Choice Voucher Program, Did Not Ensure Tenant Reexaminations and
Housing Quality Standards Inspections Were Completed Properly and
in a Timely Manner
We audited the Inglewood Housing Authority's (Authority), administration
of tenant eligibility, housing quality standards and its housing
assistance payment register. Our objectives were to determine whether
the Authority, located in Inglewood, California, (1) accurately
determined tenant eligibility in the Section 8 Housing Choice Voucher
program in accordance with HUD requirements; (2) made Section 8
payments only for units that were decent, safe and sanitary; and
(3) maintained an accurate register.
We found that the Authority did not always ensure the initial tenant
certifications were completed with all the necessary documents.
We reviewed 72 tenant files and found 43 were missing a total of
96 required documents. In addition, the Authority's unit inspections
did not sufficiently detect housing quality standards violations.
We inspected 35 units and found that 25 contained a total of 119
violations. Lastly, the Authority did not maintain an accurate register.
Our review of the Authority's October 2004 register identified inaccuracies
due to problems with 20 tenants because the tenants were either
deceased, had erroneous and/or false Social Security numbers, or
were no longer receiving assistance.
We recommend that HUD require the Authority to repay HUD from nonfederal
funds $261,411 in unsupported housing assistance payments for those
tenants determined to be ineligible, and repay the appropriate HUD
program $27,411 for ineligible expenses paid for units that were
not decent, safe and sanitary.
This is one of four reports resulting from our audit of the Authority.
Date Issued: August 26, 2005
Audit
Report No.: 2005-LA-1008
File Size: 1.14MB
Title: Inglewood Housing Authority, Inglewood, California, Did
Not Comply with the Housing Choice Voucher Program Portability Procedures
and Responsibilities
We audited the portability procedures and responsibilities at Inglewood
Housing Authority (Authority), Inglewood, California. Our objective
was to determine whether the Authority complied with the Housing
Choice Voucher program's portability procedures and responsibilities
and other HUD requirements.
We found that the Authority did not comply with portability procedures
and responsibilities. We reviewed the 143 portable tenant files,
in which the initial public housing agency, Housing Authority of
the City of Los Angeles, refused to pay the housing assistance payments
because the Authority did not submit the initial bill within the
required timeframe causing the Authority to absorb these tenants
and exceed their authorized budget by $1.9 million. We also found
that the Authority did not submit the appropriate documentation
to ensure duplicate payments were not made on behalf of the ported
tenants.
We recommend that HUD's Financial Management Center not reimburse
the Authority's Section 8 program for the $1,991,283 in excess of
its budget authority as was requested in its fiscal year 2004 yearend
settlement statement. We also recommend that HUD's Los Angeles Office
of Public and Indian Housing ensures that the Authority submits
its billings and documentation on time.
This is one of four reports resulting from our audit of the Authority.
Date Issued: August 12, 2005
Audit
Report No. 2005-LA-1007
File Size:609.86KB
Title: KB Home Mortgage Company, Los Angeles, California, Improperly
Submitted 13 Late Requests for Single Family Mortage Insurance
We audited KB Home Mortgage Company's (KB) submission for late
endorsement under the U.S. Department of Housing and Urban Development's
(HUD) Single Family Direct Endorsement program. We selected KB because
of its high number of late single-family loan submissions for Federal
Housing Administration insurance. Our objective was to determine
whether KB complied with HUD's payment history requirements. From
August 2002 to April 2004, KB improperly submitted 13 loans to HUD,
totaling $1.9 million, for insurance endorsement when the borrowers
had delinquent payments within six months before the submission
date. In addition, data entered into KB's automated system was often
erroneous. This occurred because KB did not have adequate controls
in place. We recommend that HUD take appropriate administrative
action up to and including recovery of losses on $79,260 in paid
claims and indemnification of loans with a total mortgage value
of $537,578 against future losses on the five loans that were not
current when submitted for endorsement. We also recommend that HUD
take appropriate administrative action against KB for violating
the requirements in effect at the time it submitted the remaining
eight loans without proper six month payment histories.
Date
Issued: July 11, 2005
Audit
Report No.: 2005-LA-1005
File Size: 709KB
Title:
Inglewood Housing Authority, Inglewood, California, Did Not Follow
Proper Salary Allocation and Procurement Procedures for the Housing
Choice Voucher Program
We
audited the salary allocation and procurement procedures at the
Inglewood Housing Authority (Authority), Inglewood, California.
Our objectives were to determine whether the Authority accurately
tracked and allocated its salary expenses and whether the Authority's
procurement policies and procedures complied with HUD requirements.
We found that the Authority did not track its employees' time by
program activity or implement a cost allocation plan to allocate
its salary expenses totaling $1,836,282 for fiscal years 2001 through
2003. This occurred because the Authority personnel lacked adequate
knowledge of HUD's financial reporting requirements. The Authority
also could not support the basis for its purchase of two software
packages totaling $31,279. This occurred because the Authority did
not implement adequate procedures. We recommend that HUD require
the Authority to develop and implement procedures to track its staff
time spent on HUD programs, develop a cost allocation plan, and
determine the portion of the $1,836,282 in salary expenses applicable
to each HUD program and make the appropriate accounting adjustments.
We also recommend that HUD require the Authority to develop and
implement adequate procurement policies and procedures. This is
one of four reports resulting from our audit of the Authority.
Date Issued: May 20, 2005
Audit
Report No.:2005-LA-1004
File Size: 301.1KB
Title: The Housing Authority of the County of Marin, San Rafael,
CA, Inappropriately Administered $2.8 Million in Section 8 Project-Based
Vouchers
We audited the Housing Authority of the County of Marin's (Authority)
Section 8 project-based voucher program to determine whether the
Authority (1) performed rent reasonableness determinations and (2)
executed housing assistance payments without HUD-required contracts.
The audit covered the period of August 1, 2002 through July 31,
2004. Our audit found the Housing Authority of the County of Marin:
* Did not perform rent reasonableness determinations to ensure
Section 8 tenants' rent was reasonable before entering into housing
assistance payment contracts.
* Used tenant-based contracts and unenforceable memorandums of
understanding to issue housing assistance payments under its Section
8 project-based program instead of the appropriate project-based
voucher contracts.
* Received $318,139 in Section 8 administrative fees while inappropriately
administering its Section 8 program.
We attributed these conditions to the Authority not having policies
and procedures in effect to properly administer the project-based
program or safeguard Section 8 resources. The Authority's actions
could have given participating tenants false impressions concerning
how they were allowed to use these vouchers. The Authority unnecessarily
jeopardized funds needed to provide Section 8 program recipients
affordable housing.
We recommend that the Director, Office of Public and Indian Housing,
require the Authority to: 1) Develop and implement Section 8 procedures
in accordance with HUD regulations, and 2) Reimburse HUD $318,139
from its administrative reserves for inappropriately administering
the Section 8 program.
Date
Issued: January 21, 2005
Audit
Report No.: 2005-LA-1805
File Size: 294KB
Title:
Housing Authority of the City of Los Angeles Resident Management
Corporations/Resident Advisory Councils - Procurement and Procurement-Related
Activities
We
completed an audit of the Housing Authority of the City of Los Angeles'
procurement actions and contract management as they relate to activities
of its Resident Management Corporations/Resident Advisory Councils.
This review was completed some time ago; however, legal complications
related to these activities have precluded issuance of a report
relating to any of the matters until now. We found significant problems
with the Authority's procurement and management of contracts it
entered into with its Resident Management Corporations and with
a consultant who was involved with these Corporations. We identified
over $1.7 million of ineligible and questioned costs related to
contracts with the Resident Management Corporations and the consultant.
The report recommends the Authority refund ineligible costs and
take actions to strengthen its procurement and contract management
processes.
Date
Issued: January 3, 2005
Audit
Memorandum No.: 2005-LA-1804
File Size: 402KB
Title:
Canoga Care Center, Canoga Park, CA, Project No. 122-22028
We
have completed a review of the Canoga Care Center project, located
in Canoga Park, California. We initiated the review as part of an
overall Office of Inspector General inquiry into the default of
Section 232 insured projects, and due to concerns raised by the
Los Angeles Multifamily Hub. Our objectives were to determine whether
the project was operated in accordance with the regulatory agreements
and to identify the reasons for the mortgage loan default. Although
our initial focus and approach was a review of project operations
to identify the cause of the default, we concluded that the loan
was jeopardized prior to any operations under HUD's Section 232
insurance program. We found that GMAC Commercial Mortgage did not
properly originate the loan, and the improper loan origination substantially
contributed to the mortgage default. We therefore recommend that
GMAC Commercial Mortgage be held accountable for the improper $6.7
million insured loan origination and the $3.3 million loss incurred
by HUD when the insured note was sold. We also recommend civil and/or
administrative actions against individual lender, owner and operator
officials involved in the improper loan origination.
Date Issued: November 18, 2004
Audit
Report No.: 2005-LA-1001
File Size: 1.47MB
Title: The Housing Authority of the County of San Joaquin, Stockton,
CA
We completed an audit of the Housing Authority of the County of
San Joaquin, located in Stockton, CA. The objectives of the audit
were to determine whether the Housing Authority of the County of
San Joaquin followed Federal requirements and regulations in: 1)
Using public housing program funds, and 2) Procuring goods and services.
Additionally, we determined whether allegations against the former
Chief Executive Officer were valid. The audit covered the period
between January 26 and July 31, 2004. Our audit found the Housing
Authority of the County of San Joaquin:
- Improperly awarded $3,322,032 in contracts for goods and services
- Misspent $5,545,972 in Low-Rent Housing program funds to pay
for non-Low-Rent Housing program expenses.
We attributed these problems to the Housing Authority of the County
of San Joaquin's decentralized procurement process, poor management
decisions, and the lack of adequate controls to safeguard Low-Rent
Housing program funds. As a result, the Housing Authority of the
County of San Joaquin placed itself and HUD funds at risk.
We recommend the Director, Office of Public Housing, require the
Housing Authority of the County of San Joaquin take corrective actions
to: 1) Centralize its procurement of goods and services in accordance
with Federal requirements and regulations, and 2) Reimburse the
Low-Rent Housing program for funds misspent on non-Low-Rent Housing
program expenses.
Date Issued: November 5, 2004
Audit
Memorandum No.: 2005-LA-1802
File Size: 41.5KB
Title: Housing Authority of the City of Los Angeles, Nonprofit
Organizations,
Los Angeles, California
We completed an external audit survey of the Housing Authority
of the City of Los Angeles' (Authority) activities with its 13 related
nonprofit organizations. The survey focused on the use of assets
provided by the Department of Housing and Urban Development (HUD).
Based upon the limited external audit survey work, the majority
of the Authority's activities with its 13 nonprofit subsidiaries
appear to be in accordance with statutory and regulatory requirements.
Our survey did identify a deviation from program requirements and
an area of apparent risk: (1) transfer of $30,196,274 in Section
8 Administrative Fee Reserves to the nonprofit entity Los Angeles
LOMOD West, Inc., and (2) inability to provide sufficient general
ledger data. However, both of these problems have been adequately
addressed by corrective actions taken by HUD and the Authority.
Los Angeles LOMOD West, Inc. has transferred the $30,196,274 back
to the Authority's reserve account, and the Authority's outdated
accounting system is being replaced with a new Oracle based accounting
system.
Date Issued: November 4, 2004
Audit
Report Memorandum: 2005-LA-1801
File Size: 408.5KB
Title: The Carmichael Rehabilitation Center Federal Housing Administration
Project Number 136-43061 Carmichael, California
The owner of the Carmichael Rehabilitation Center did not follow
the project's Regulatory Agreement and other HUD requirements in
managing the project's operations. This included the owner incorporating
the project into its petition for bankruptcy and defaulting on the
project's mortgage. In addition, the owner inappropriately disbursed
$3,769,290 of the project's cash between January 1997 and September
2002. The latter included ineligible distributions to the owner
totaling $2,965,619, and the use of project funds to pay ineligible
ownership costs of $803,671. The inappropriate distributions continued
while the project was subject to the owner's bankruptcy, in default,
and HUD held the note. Although the project's financial audit reports
identified a portion of the inappropriate distributions, the owner
submitted misleading information to HUD to make it appear the problems
had been corrected. This occurred because the owner lacked internal
controls to ensure it complied with HUD's requirements. These actions
increased the risk to HUD's mortgage insurance fund by reducing
the cash available for the project's normal operations. In addition,
the default directly resulted in HUD incurring a loss of $323,925
on the disposition of the Carmichael facility.
We recommend HUD take appropriate administrative action against
the owner, pursue recovery from the owner of the $323,925 loss incurred
on the sale of the mortgage note, and pursue recovery of the ineligible
distributions amount of $3,769,290.
Date Issued: September 27, 2004
Audit
Report No.: 2004-LA-1008
File Size: 2.05MB
Title: United States Veterans Initiative, Inc., Supportive Housing
Program Grantee, Inglewood, California
We completed an audit of the U.S. Veterans Initiative, Inc., a
Supportive Housing Program grantee based in Inglewood, California.
The objectives of the report were to determine whether the concerns
raised by the HUD's Honolulu Community Planning and Development
Office had merit, and to determine whether the U.S. Veterans Initiative,
Inc. administered its Supportive Housing Program grants in compliance
with the pertinent HUD program requirements and applicable regulations.
Our audit disclosed that U.S. Veterans: (1) did not meet cash matching
funds requirements for $7.2 million in Supportive Housing Program
funds expended; (2) spent at least $633,348 in Supportive Housing
Program funds for ineligible and unsupported expenses; and (3) did
not administer its Supportive Housing Program grants in accordance
with requirements.
We recommended that HUD require U.S. Veterans Initiative, and/or
its continuums Los Angeles Homeless Services Authority and City
of Long Beach to: (1) repay HUD from non-federal funds for the Supportive
Housing Program grant expenditures that did not have the required
matching funds, unless it can provide supporting documentation;
(2) comply with federal requirements in carrying out its Supportive
Housing Program grant activities; (3) reimburse the Supportive Housing
Program grants and/or repay HUD from non-federal funds for the ineligible
and unsupported expenses; (4) revise U.S. Veterans Initiative's
financial management system; (5) competitively procure the services
in the Business Services Agreement; (6) develop and/or update indirect
cost rates; and (7) submit financial closeout reports for expired
grants.
Date Issued: July 9, 2004
Audit
Report No.: 2004-LA-1005
File Size: 2.39MB
Title: Guild Mortgage Company DBA Residential Mortgage Bankers,
Non-Supervised Direct Endorser, Downey, California
We have completed an audit of the branch office of Guild Mortgage
Company (GMC) doing business as (dba) Residential Mortgage Bankers
(RMB) in Downey, California. Guild Mortgage Company is a non-supervised
direct endorsement lender headquartered in San Diego, California.
The overall audit objective was to determine whether Guild Mortgage
Company approved FHA insured loans in accordance with the HUD/FHA
requirements, which require adherence to prudent lending practices.
Additionally, we wanted to determine whether there were additional
indications of irregularities or abuses of the loan origination
process. Our audit disclosed GMC allowed the branch to:
- Engage in predatory lending practices.
- Be a prohibitive net branch.
- Manipulate the FHA loan process.
This was caused by GMC's lack of oversight, ineffective controls,
and improper decisions. As a result, there were excessive defaults
and foreclosures, increased risk to the FHA insurance fund, and
actual losses of over $811,000.
We recommended GMC:
- Be referred to the Mortgagee Review Board for engaging in predatory
lending practices. This includes considering seeking civil money
penalties for failure to comply with the provisions of RESPA.
- Refund unallowable loan discount points and premium rate pricing
to the borrower if the loan is current. If the loan is delinquent,
a refund must be applied to the delinquency. If a claim was paid,
refund should go to HUD Single Family Claims.
- Sign indemnification agreements for 938 loans totaling $159,865,833.
- Discontinue all similar net branch operations immediately.
- Indemnify HUD in the amount of $811,843 for losses incurred.
- In addition, GMC should establish policies and procedures to
ensure these issues are addressed.
Date Issued: May 19, 2004
Audit
Report No.: 2004-LA-1003
File Size: 665.5KB
Title: Homewide Lending Corporation, Non-Supervised Mortgagee
City of Industry, California
We completed an audit of Homewide Lending Corporation (Homewide),
a non-supervised mortgagee based in City of Industry, California.
Our objectives were to determine whether Homewide originated Federal
Housing Administration (FHA) insured mortgages in accordance with
prudent lending practices and HUD requirements, and implemented
its Quality Control Plan as required. Our audit disclosed that Homewide
used false employment and income documentation to originate FHA
loans. Specifically, 21 of 30 loans we reviewed, totaling $3.5 million,
contained false documents and information, including: (1) false
or altered Internal Revenue Service (IRS) W-2 forms, pay stubs,
and verification of employment forms; (2) false down payment and
gift fund documentation; and (3) false statement of occupancy on
the loan applications. Our review also identified other loan origination
deficiencies with the 21 loans including: (1) overstated income;
(2) inaccurate or excessive qualifying ratios; and (3) unsupported
down payment and/or gift funds; and (4) understated liabilities.
The problem occurred because of Homewide's complicity in the documentation
falsification and a serious lack of due care by mortgagee personnel
involved in the loan origination process. In addition, we found
that Homewide did not fully implement its Quality Control Plan as
required. While Homewide had establish a written Quality Control
Plan that met HUD requirements, it failed to conduct the required
quality control reviews, and to ensure that immediate corrective
action was taken on deficiencies identified in the reviews. As a
result, loans were approved based on false information and caused
unnecessary risk to the FHA insurance fund. We recommended that
HUD (1) remove Homewide from participation in HUD's Single Family
Mortgage Insurance Program (2) require Homewide to indemnify HUD/FHA
for the $3.5 million in FHA loans and (3) consider seeking civil
monetary penalties against Homewide for the loans originated using
false documents and (4) take the needed action to ensure the required
Quality Control Plans are conducted, and that corrective action
is taken for all reported deficiencies. This electronic audit report
has been posted to our website and may be viewed directly via this
link. This PDF version will allow you to print the report to your
local printer.
Date
Issued: May 12, 2004
Audit
Memorandum No.: 2004-CH-1802
File Size: 60KB
Title:
HAPI Management Incorporated-Beverly Hills, California
HUD's
Office of Inspector General completed a review of the books and
records of HAPI Management Incorporated. We performed the review
to determine whether HAPI used Project funds in compliance with
the Regulatory Agreements and HUD's requirements. HAPI Management
Incorporated inappropriately used $409,388 from three Projects.
HAPI Management Incorporated inappropriately used $409,388 of Ashland
Manor, King Towers, and South Park Projects' funds between January
1, 1998 and December 31, 2002. The inappropriate expenses included
$130,367 for disbursements to HAPI Management Incorporated and $279,021
for unsupported expenses. We provided Apartment Investment and Management
Company and HUD's staff a schedule of the inappropriate expenses.
The Projects were in a non-surplus cash position and/or not in compliance
with all outstanding notices of requirements for proper maintenance
when the funds were used. As a result, fewer funds were available
for the Projects' normal operations and the Projects were in poor
physical condition causing the residents to live in substandard
conditions that were hazardous to their health and safety. Additionally,
HAPI Management Incorporated did not disclose to HUD that Ashland
Manor and King Towers Projects' funds were used to repay advances
to HAPI and an owner distribution. The former Assistant Secretary
of the General Partner for Ashland Manor Limited Partnership and
the former Vice President/Director of Property Management for HAPI
certified in Ashland Manor Project's Fiscal Year 1999 Audited Financial
Statement that no unauthorized distributions of Project revenue
were made. Additionally, the former Executive Vice President of
the General Partner for King Towers Limited Partnership and the
former Vice President/Director of Property Management for HAPI certified
in King Towers Project's Fiscal Year 1999 Audited Financial Statement
that no unauthorized distributions of Project revenue were made.
The repayment of advances to HAPI and the owner distribution while
the Projects were in a non-surplus cash position and/or not in compliance
with all outstanding notices of requirements for proper maintenance
is an unauthorized distribution. This lack of disclosure violates
the Program Fraud Civil Remedies Act of 1986, which subjects owners
and management agents to monetary penalties. We recommend that HUD's
Director of Multifamily Housing Hub, Columbus Field Office, ensure
HAPI Management Incorporated and/or Ashland Manor Apartments, King
Towers, and South Park Apartments Limited Partnerships: (1) reimburses
a Reserve Capital Account $130,367 for Ashland Manor and King Towers
Projects for the ineligible payments cited in this finding from
non-Project funds; and (2) provides documentation for the $279,021
of unsupported payments cited in this memorandum. If documentation
cannot be provided, then HAPI Management Incorporated and/or Ashland
Manor Apartments, King Towers, and South Park Apartments Limited
Partnerships should reimburse a Reserve Capital Account for the
appropriate amount that cannot be supported from non-Project funds.
We also recommend that HUD's Director of Departmental Enforcement
Center and/or HUD's Associate General Counsel for Program Enforcement:
pursues administrative sanctions against HAPI Management Incorporated
and Ashland Manor, King Towers, and South Park Apartments Limited
Partnerships for the inappropriate and unsupported payments cited
in this memorandum; imposes civil money penalties against HAPI Management
Incorporated and Ashland Manor, King Towers, and South Park Apartments
Limited Partnerships for the inappropriate and unsupported payments
cited in this memorandum that violated the Projects' Regulatory
Agreements; and pursues action under the Program Fraud Civil Remedies
Act against the formers Assistant Secretary of the General Partner
for Ashland Manor Limited Partnership, Vice President/Director of
Property Management for HAPI Management, and Executive Vice President
of the General Partner for King Towers Limited Partnership for falsely
certifying in Ashland Manor and King Towers' 1999 Audited Financial
Statements that no unauthorized distributions of Project revenue
were made.
Date Issued: March 30, 2004
Audit
Memorandum No.: 2004-LA-1002
File Size: 263.3KB
Title: Housing Authority of the City of Los Angeles Management
of Legal Matters
We previously completed a review of the Housing Authority of the
City of Los Angeles' (HACLA) procurement activities, including ongoing
monitoring and management of resultant contracts, as they relate
to its Resident Management Corporations/Resident Advisory Councils
(RMCs). The review was initiated in response to several citizen
complaints alleging irregularities with HACLA's RMCs and related
contracting activities. Legal complications have precluded the issuance
of a final audit report setting out the results of this review.
However, as part of this review, we also identified problems related
to HACLA's management of its legal affairs, including failure to
advise HUD of significant legal matters. Specifically, HACLA incurred
outside legal service fees and also entered into a $1.8 million
litigation settlement agreement to resolve an employee lawsuit without
obtaining required prior HUD notification and approval. HACLA also
incurred unnecessary and ineligible attorney fees of $119,440 on
behalf of a consultant and $47,227 in unnecessary attorney fees
to monitor information requests and activities of the OIG during
our review.
We recommended that HUD ensure HACLA uses non-federal funds to
reimburse its low-rent program for the ineligible legal fees and
require HACLA to establish appropriate policies and procedures to
ensure that in the future, legal activities are carried out in accordance
with HUD requirements.
Date Issued: September 12, 2003
Audit
Memorandum No.: 2003-LA-1802
File Size: 118.4KB
Title: 1736 Family Crisis Center, Supportive Housing Program
Los Angeles, California
We completed a limited review of Family Crisis Center's (FCC) Supportive
Housing Program (SHP) operations. The purpose of our review was
to determine whether FCC complied with Federal requirements and
grant agreements. We determined FCC did not have adequate controls
in place to ensure it would meet these requirements. Specifically,
FCC did not (1) adequately account for grant funds; (2) sufficiently
establish procedures to ensure only eligible and applicable expenditures
were charged to SHP grants; and (3) promptly establish a cost allocation
plan to properly allocate indirect cost pools. During our review,
with the exception of the implementation of a cost allocation plan,
we noted that FCC had already established and implemented accounting
systems and procedures to correct these control weaknesses.
We are recommending that HUD: (1) determine the eligibility of
about $91,000 in direct operating costs, and (2) follow-up on FCC's
implementation of its indirect cost allocation plan to ensure it
is being implemented as planned.
Date Issued: September 12, 2003
Audit
Memorandum No.: 2003-LA-1002
File Size: 484.5KB
Title: The Housing Authority of the County of San Mateo, Belmont,
California
We completed an audit of the Housing Authority of the County of
San Mateo's (HACSM) conventional low rent housing and Section 8
subsidy programs, generally covering the period of July 2000 through
December 2002, which was expanded as necessary. We initiated the
audit to address concerns expressed by the Director of Public Housing
at the U.S. Department of Housing and Urban Development (HUD) office
in San Francisco.
The objective of our review was to determine if HACSM could improve
its effectiveness of operations and compliance with federal requirements.
Issues concerning HACSM's Section 8 administration, disbursement
allocations, maintenance and inspections, and personnel practices
were addressed separately in a March 2003 internal memorandum to
HUD's Office of Public Housing. This report communicates the results
of our review over HACSM's procurement and contracting practices.
We identified serious problems relating to HACSM's procurement
and contracting practices. This included the continued use of a
vendor/contractor for rehabilitation without following appropriate
procurement, bidding, and contracting practices as required by the
Codes of Federal Regulations and HUD Handbooks. HACSM also contracted
with the County of San Mateo, a related party, without following
procurement practices or maintaining records to substantiate expenses
as required. In addition, HACSM failed to follow appropriate purchase
order procedures. As a result, HACSM incurred $233,530 in excessive
and unreasonable costs and $90,000 in questionable unsupported expenditures
charged to federally funded programs.
Date Issued: September 30, 2002
Audit
Memorandum No.: 2002-SF-1004
File Size: 836KB
Title: Congressionally Requested Audit of the Intermediary Technical
Assistance Grants awarded to the Low Income Housing Fund, Oakland,
CA Grant numbers FFIT98003LF and FFIT98004LF
In response to a Congressional request, we audited the Low Income
Housing Fund's (LIHF) Intermediary Technical Assistance Grants (ITAG)
with particular emphasis on identifying ineligible lobbying activities.
The audit identified the grantee did not comply with reporting and
monitoring requirements under the applicable Notice of Funds Availability
(NOFA), Office of Management and Budget's (OMB) Circulars, Codes
of Federal Regulations (CFR), and the grant agreements. Our report
contains four recommendations to address the issues identified in
the report and strengthen the management controls of the grantee.
Date Issued: September 30, 2002
Audit
Memorandum No.: 2002-SF-1808
File Size: 192KB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grants awarded to the Los Angeles Center for Affordable
Tenant Housing, Los Angeles, California Grant Numbers FFOT98003CA
and FFOT00006CA
In response to a Congressional request, we audited the Los Angeles
Center for Affordable Tenant Housing (LACATH) Outreach and Training
Assistance Grants (OTAGs) with particular emphasis on identifying
ineligible lobbying activities. Although LACATH staff participated
in conference calls and attended conferences, both of which included
topics that could be construed as lobbying, there was no objective
way to identify or separate costs associated with the possible lobbying
activities from other eligible OTAG business conducted during the
conference calls or at the conferences. Most of the other grant
costs appear to have been incurred in compliance with the applicable
regulations and requirements. However, LACATH did fail to properly
allocate employee salary costs in accordance with Office of Management
and Budget (OMB) requirements. The report includes one recommendation
to resolve the salary allocation problem.
Date Issued: September 30, 2002
Audit
Memorandum No.: 2002-SF-1807
File Size: 1,41KB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grant awarded to the Legal Aid Society of San Diego,
Inc., San Diego, California Grant Number FFOT00006CA
In response to a Congressional request, we audited the Legal Aid
Society of San Diego (LASSD) Outreach and Training Assistance Grant
(OTAG) with particular emphasis on identifying ineligible lobbying
activities. Although LASSD staff participated in conference calls
and attended conferences, both of which included topics that could
be construed as lobbying, there was no objective way to identify
or separate costs associated with the possible lobbying activities
from other eligible OTAG business conducted during the conference
calls or at the conferences. All other grant costs appear to have
been incurred in compliance with the applicable regulations and
requirements. The report does not include any recommended corrective
actions.
Date Issued: September 26, 2002
Audit
Memorandum No.: 2002-SF-1005
File Size: 1,018KB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grant awarded to the Housing Rights Committee of San
Francisco/Tides Center, San Francisco, CA Grant Numbers FFOT98004CA
and FFOT00005CA
In response to a Congressional request, we audited the Housing
Rights Committee of San Francisco (HRCSF) and Tides Center's Outreach
and Training Assistance Grants (OTAG) with particular emphasis on
identifying ineligible lobbying activities. Although HRCSF staff
participated in conference calls and attended conferences, both
of which included topics that could be construed as lobbying, there
was no objective way to identify or separate costs associated with
the possible lobbying activities from other eligible OTAG business
conducted during the conference calls or at the conferences. HRCSF
and Tides Center lack adequate management controls and they failed
to properly document and allocate employee salary and other costs
in accordance with Office of Management and Budget (OMB) requirements,
resulting in $4,114 in unsupported costs. In addition the grantees
did not comply with administrative and accounting requirements under
the applicable Notices of Funds Availability (NOFA), Office of Management
and Budget's (OMB) Circulars, Codes of Federal Regulations (CFR),
and the grant agreements.
Our report contains five recommendations to address the issues
identified in the report and strengthen the management controls
of the grantees.
Date Issued: September 26, 2002
Audit
Memorandum No.: 2002-SF-1806
File Size: 203KB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grants awarded to the California Coalition for Rural
Housing, Sacramento, California, Grant Numbers FFOT98002CA and FFOT00004CA
As directed by Congress, we have completed an audit of the California
Coalition for Rural Housing's (CCRH) Outreach and Training Assistance
Grants, numbered FFOT98002CA and FFOT00004CA. The primary purpose
of the audit was to determine whether grant funds were expended
in accordance with the requirements of Section 514 of the Multifamily
Assisted Housing Reform and Affordability Act of 1997 and other
applicable regulations and requirements. Consistent with the Congressional
directive, we reviewed the eligibility of costs with particular
emphasis on identifying ineligible lobbying activities. Although
CCRH staff participated in National Alliance of HUD Tenants (NAHT)
conferences and teleconferences, both of which included lobbying
related topics or activities, there was no information to show the
grantee participated in or charged the grant for any material costs
associated with possible lobbying related activity. Other grant
costs appear to have been incurred in compliance with the applicable
regulations and requirements. However, CCRH did not submit complete
quarterly progress reports to the U.S. Department of Housing and
Urban Development (HUD) in compliance with program requirements.
Date
Issued: September 26, 2002
Audit Memorandum No.: 2002-SF-1805
File Size: 485KB
Title:
Congressionally Requested Audit of the Intermediary Technical Assistance
Grant awarded to the Amador-Tuolumne Community Action Agency, Sonora,
California Grant Number FFIT98001AT and FFIT98002AT
As directed by Congress, we have completed an audit of the Amador-Tuolumne
Community Action Agency (A-TCAA) Intermediary Technical Assistance
Grants (ITAG), Numbers FFIT98001AT and FFIT98002AT. This was pursuant
to a Congressional directive to audit all grants authorized under
Section 514 of the Multifamily Assisted Housing Reform and Affordability
Act of 1997 (MAHRA). The primary purpose of the audit was to determine
whether grant funds were expended in accordance with the requirements
of MAHRA and other applicable regulations and requirements. Consistent
with the Congressional directive, we reviewed the eligibility of
costs with particular emphasis on identifying ineligible lobbying
activities. Although sub-recipients used ITAG funds to send tenants
and staff to the National Association of HUD Tenants (NAHT) conferences,
which consisted of two days of training and a third day of lobbying
activities, most sub-recipients excluded the last day's costs or
showed they did not participate in lobbying on the third day. Only
one met with Congressional staff while including the last day's
costs in its reimbursement request. However, there is no evidence
this resulted in additional grant costs that would not have occurred
if activity were limited to the two days of training.
All other grant costs appear to have been incurred in compliance
with the applicable regulations and requirements.
Date Issued: September 25, 2002
Audit
Report No.: 2002-SF-1003
File Size: 1,885KB
Title: Los Angeles Community Development Bank - Economic Development
Initiative Grant/Section 108 Loan Guarantee Program City of Los
Angeles, County of Los Angeles Los Angeles, California
Pursuant to a Congressional request, we performed an audit of
the Los Angeles Community Development Bank's (LACDB) Economic Development
Initiative (EDI) Grant/Section 108 Loan Guarantee Program. Our audit
was to determine whether allegations of mismanagement of LACDB's
operations contained in a citizen's complaint prompting the Congressional
request, as well as allegations of improper use of funds contained
in another citizen's complaint, had merit. Specifically, we assessed
LACDB's compliance with Department of Housing and Urban Development
(HUD) and EDI Agreements' requirements and reviewed LACDB's policies,
procedures, and practices for administering and using EDI Grant
and Section 108 Loan Guarantee Program funds.
We found the allegations were partially correct. LACDB had not
fully complied with HUD regulations and EDI Agreements' requirements.
Specifically, LACDB:
* Assisted 101 businesses that had not met the national objective
standard of 51% of creating or retaining jobs for low- and moderate-income
persons. Similarly, LACDB had not met the EDI Agreements' requirement
of creating jobs predominantly for Empowerment Zone (EZ) target
area residents;
* Provided City-funded loans or investments to businesses located
outside the EZ target area in excess of the 25 percent funding limit;
and
* Invested over $26 million of City-funded venture capital businesses
that provided minimal benefit to EZ target area residents.
Date Issued: September 17, 2002
Audit
Memorandum No.: 2002-SF-1002
File Size: 3,204KB
Title: Audit Memorandum - Oakland Housing Authority - Limited
Review Rehabilitation of the 49th Street Housing Authority Development
Oakland, California
Because of a citizen complaint, the OIG completed a limited review
of the operations at the Oakland Housing Authority (OHA) where OIG
examined the process used to rehabilitate the 49th Street housing
development. The objective of this limited review was to determine
whether the rehabilitation performed on the housing development
at 49th Street was done in accordance with applicable Federal requirements.
OIG found the OHA had expanded the scope of a $467,500 roof replacement
contract into a comprehensive modernization project costing nearly
$3 million without following Federal requirements. As a result,
the work cost more than necessary, and a sample of change orders
identified $105,201 of questionable costs. Further, OIG found problems
with the quality of the work.
OIG recommended HUD require the OHA to return the monies to the
modernization program from nonfederal funds for the ineligible and
unnecessary/unreasonable costs of $105,201. OIG also recommended
that OHA: (1) perform a comprehensive physical examination of the
project and require the contractor to repair all construction defects
identified, or repair the defects at its own expense with nonfederal
funds; (2) use a competitive procurement process any time there
is a substantial change in the scope of a modernization project
as required by HUD and Federal procurement regulations; and (3)
institute improved procedures over the change order process. This
would include requiring contractors to submit supporting cost estimates,
OHA performing proper cost analyses, documentation on the negotiation
or prices, and effective scrutiny by supervisors.
Date Issued: September 4, 2002
Audit
Report No.: 2002-SF-1001
File Size: 1,304KB
Title: Casa de Vallejo - Multifamily Senior Housing Project,
Casa de Vallejo, CA
Due to concerns voiced by the Multifamily Housing program office,
we performed an audit of Casa de Vallejo, a multifamily senior housing
project. We found the rental income was being used to subsidize
the food and maid service programs. Also, project funds were being
used to pay non-project expenses such as unsecured loans, loans
to persons outside the project, personal expenses, donations and
contributions, excessive management fees, and expenses of projects
not related to Casa de Vallejo. In addition, the management agent
was borrowing from the Tenants' Security Deposits account to supplement
rental income. The required Monthly Report For Establishing Net
Income was not properly completed so HUD could not properly monitor
the project. As a result of our findings, we determined more than
$110,000 in ineligible costs was paid using project funds. We also
questioned over $8,000 due to lack of supporting documentation.
As a result of our audit, the management agent generally agreed
with our findings and has already reimbursed the project almost
$14,000.
Date Issued: July 31, 2002
Audit
Memorandum No.: 2002-SF-1804
File Size: 232KB
Title: HOME Investment Partnerships Program, City of Stockton,
CA, San Joaquin County, CA Asociacion Campensina Lazaro Cardenas
Inc. (ACLC), Stocktonians Taking Action to Neutralize Drugs (STAND)
As part of a national internal audit survey of the HOME Investment
Partnerships Program (HOME), we reviewed the operations of the two
subject Participating Jurisdictions (PJs) and the two subject Community
Housing Development Organizations (CHDOs). This audit memorandum
provides recommendations pertaining to these external audit entities.
A separate internal audit memorandum provides recommendations addressing
departmental and programmatic issues.
The majority of HOME program operations and activities at both
PJs and both CHDOs appear to be in accordance with statutory and
regulatory requirements. However, our survey did identify some areas
of apparent risk and several deviations from program requirements
including: (1) weaknesses in PJ monitoring of CHDOs, (2) administrative
weaknesses at both the PJ and subrecipient or CHDO level, and (3)
actual or apparent conflicts of interest.
Issue Date: April 24, 2002
Audit
Memorandum No.: 2002-SF-1803
File Size: 62KB
Title: City of Pomona Community Development Block Grant Pomona,
CA
We performed a limited review of the use of HUD Community Development
Block Grant (CDBG) funds by the Latino Chamber of Commerce (LCC),
a subgrantee of the City of Pomona. Specifically, we evaluated a
complaint alleging the LCC had used its CDBG subgrantee allocation
from the City of Pomona for ineligible activities. The complaint
alleged Pomona City Council members sat on the board of directors
for the LCC (subgrantee), and these individuals received campaign
contributions from the LCC's CDBG funds allocated from the City
of Pomona. Although we did not find evidence to support the complaint
allegation, we did note concerns with the City of Pomona's oversight
of its subgrantees as well as problems with the LCC's management
controls and documentation supporting program activities. We recommended
that the City of Pomona strengthen its subgrantee monitoring process;
ensure that the LCC filed appropriate IRS form 1099s for contract
employees; and, prior to providing additional funding to the LCC,
verify that it has developed and implemented appropriate administrative
and management policies necessary for grant administration.
Date Issued: March 25, 2002
Audit
Memorandum No.: 2002-SF-1801
File Size: 2,529KB
Title: Mayor's Office of Housing and Nonprofit Developers Use of
Various HUD Funds to Replace Geneva Towers San Francisco, California
OIG completed a review of the use of HUD funds for the development
of three housing projects in the Visitacion Valley neighborhood
of the City of San Francisco. HUD funds included CDBG and HOME program
funds administered by the Office of Community Planning and Development,
and Section 202 and Property Disposition Upfront Grant funds administered
by the Office of Multifamily Housing. We conducted the review at
the San Francisco Mayor's Office of Housing (MOH) and the offices
of two nonprofit organizations, Mercy Charities Housing California
(Mercy) and Housing Conservation and Development Corporation (HCDC).
Generally, we found no significant deficiencies, problems, or weaknesses
in the systems and procedures used by MOH and Mercy to administer
HUD funds. However, HCDC did not establish written procedures for
procurement of service contracts and the MOH did not adequately
monitor HCDC's process for selecting a general contractor or development
consultants. According to MOH officials, HCDC is not currently receiving
any HUD funds from the City for development of multifamily housing
projects.
Date Issued: March 25, 2002
Audit
Memorandum No.: 2002-SF-1802
File Size: 1,389KB
Title: Limited Review-Lorenz Hotel, Project No. 136-38029 Property
Disposition Program Redding, California
In response to a request from the U.S. Department of Housing and
Urban Development's (HUD's) Sacramento Multifamily Program Center,
OIG completed a limited review of commercial rent activities at
the Lorenz Hotel located in the city of Redding, California.
The Lorenz Hotel is a 77-unit low-income housing project once owned
by the Shasta Housing Development Corporation (SHDC), a California
non-profit community entity. HUD and SHDC executed an agreement
for Housing Assistance Payments (HAP) where HUD provides long-term
Section 8 rental assistance to low-income people. In addition to
the lobby used by the residents, there is commercial rental space
on the ground floor that houses small businesses. OIG found SHDC
disregarded requirements contained in the property's sale contract
and grant deed by improperly retaining $53,484 in commercial rent.
This reduced the project's ability to readily meet its financial
obligations and provide for future monetary needs. OIG recommended
SHDC, now known as Community Revitalization and Development Corporation,
return $53,484 to the project.
Date Issued: September 28, 2001
Audit
Memorandum No.: 2001-SF-1806
File Size: 158KB
Title: Limited Review - Golden Home Mortgage and Its Direct Endorsement
Sponsors, Section 203(b) and 203(k) Mortgage Loan Insurance Programs,
Concord, California
Neither Golden Home Mortgage nor its sponsors, SCME Mortgage Bankers
and Western Sunrise Mortgage DBA Crossland Mortgage, prevented nonprofit
mortgagors from exceeding the Department of Housing and Urban Development's
(HUD's) 10 percent profit limitation on properties purchased from
HUD at a 30 percent discount. The nonprofits had purchased the properties
from HUD through a program that gave them 30 percent off the list
price and made FHA's 203(k) loans available for the properties'
purchase and rehabilitation. HUD's stated purpose for giving the
discounts was that the nonprofits pass the discount on to low and
moderate-income homebuyers. The homebuyers, however, paid an average
of $10,500 more for their homes than HUD intended.
Date Issued: September 25, 2001
Audit
Memorandum No.: 2001-SF-1805
File Size: 708KB
Title: Los Coyotes Band of Mission Indians, Warner Springs, California
We conducted a limited review of Los Coyotes Band of Mission Indians'
(Tribe) Indian Community Development Block Grant (ICDBG) and Indian
Housing Block Grant (IHBG) funded housing activities. The review
was initiated in response to a citizen complaint alleging overall
grant fund mismanagement; ineligible housing recipients; inadequate
pre-construction planning; and false information in the Tribe's
grant applications. Although the majority of the complainant's allegations
were determined not to be valid, we did note various matters that
warrant action.
The Tribe did not effectively manage its procurement and contract
administration process. We noted problems in almost every area of
the procurement process. Additionally, we noted payments totaling
$20,230 for services which were not necessary or not provided. The
Tribe also had serious problems with its overall grant administration.
Specifically, the Tribe's record keeping was almost non-existent.
There were numerous missing documents related to the procurement
process such as proposals, bids, price quotes, cost estimates, and
executed contracts making it impossible to accurately determine
what occurred during the contracting process. Financial records
were also in disarray. There were missing invoices, receipts, bank
statements, and cancelled checks and up to date financial data was
not available. Additionally, we could not locate documents supporting
the process used to rank and select housing recipients.
Date Issued: May 9, 2001
Audit
Memorandum No.: 2001-SF-1804
File Size: 2,376KB
Title: County of Orange, Mercy House Coalition, Supportive Housing
Program Grant (CA16B802-006), Santa Ana, California
As part of a nationwide review of HUD's Continuum of Care Program,
we audited the subject grant awarded to the County of Orange, Housing
and Community Development Department (Orange County) for the 1998
Supportive Housing Program (SHP) operated by the Mercy House Coalition
(Coalition). The Coalition carried out all grant activities as a
sub-grantee of Orange County. The purpose of our audit was to determine
whether Orange County and the Coalition operated the Continuum of
Care SHP in accordance with the approved application as well as
HUD and other federal requirements.
Both Orange County and the Coalition have been dedicated and responsive
to the needs of the homeless population in Orange County and have
worked hard to adhere to SHP requirements, as they understood them.
However, we concluded that Orange County and the Coalition did not
operate some aspects of the SHP in accordance with the approved
application and other federal requirements. Specifically, we identified
instances where the Coalition admitted ineligible participants and
participants whose eligibility was not adequately documented, did
not accomplish some program goals or did not maintain adequate evidence
of goal accomplishment, and failed to comply with HUD requirements
pertaining to client tracking, habitability inspections, and rent
reasonableness determinations. Also, both Orange County and the
Coalition charged unsupported and ineligible salary costs to the
grant.
We believe these problems occurred because Orange County and the
Coalition did not understand the applicable Federal or contractual
requirements. As a result, Orange County and the Coalition have
spent at least $294,987 of HUD funds on costs that did not benefit
or may not have benefited the intended program participants.
Date Issued: March 30, 2001
Audit
Report No.: 2001-SF-1001
File Size: 561KB
Title: San Francisco Housing Authority, Force Account Modernization
Activities, Comprehensive Grant Program
We reviewed selected aspects of the San Francisco Housing Authority's
(SFHA's) force account modernization activities under the Comprehensive
Grant Program (CGP), generally covering the period January 1997
to June 30, 1999. We initiated the audit to address concerns expressed
by the Director of Public Housing at the U.S. Department of Housing
and Urban Development (HUD) office in San Francisco.
The objective of our review was to determine if the SFHA could
improve its effectiveness of operations and compliance with federal
requirements. Specifically, we determined whether the SFHA force
account activities (1) operated effectively within HUD requirements
and (2) included proper records for CGP assets and expenditures.
We identified serious problems relating to both the force account
operations and the record maintenance, requiring HUD's immediate
attention to set the proper tone and perspective for improvements.
The Housing Authority Was Not Operating The Force Account Programs
Effectively
The SFHA modernization activities were not cost effective. In
addition, insufficient construction records were maintained to accurately
identify and assess all modernization work performed, and there
were indications of poor workmanship. Also, the program did not
sufficiently emphasize high priority modernization, and some of
the low priority work performed cannot be adequately maintained
by the SFHA. These problems primarily occurred due to inadequate
management. As a result, the level of potential modernization available
under the grant funds has been reduced. The SFHA's neglect of high
priority work resulted in emergency conditions requiring additional
HUD funding. Finally, poor record maintenance made it impossible
for inspectors to fully assess all the modernization performed.
We identified $18,186,844 of possibly excessive force account costs
on the Clementina, Potrero Annex, and Sunnydale developments. However,
due to deficient SFHA records, all modernization costs could not
be estimated accurately. Nevertheless, we were able to establish
$184,161 of excessive costs at the Clementina housing development,
where the SFHA recorded costs that exceeded HUD Office of the Inspector
General (OIG) estimates of what it should have cost for a contractor
to perform the work.
The Housing Authority Was Not Maintaining Adequate Records Over
Assets and Expenditures
The SFHA did not adequately record and track its assets and expenditures.
The general ledger recording was inadequate to fully assess CGP
force account expenditures. Expenditures were charged or moved to
incorrect project accounts making the general ledger unreliable.
The SFHA also did not consistently follow required procedures over
the generation of its purchase orders relating to force account
work. In addition, the inventory system over CGP purchased equipment
was insufficient to accurately track all items. Finally, the SFHA
was charging ineligible payroll to the CGP grant, while not maintaining
adequate documentation to substantiate additional payroll attributed
to the grants. These problems occurred because the SFHA did not
develop sufficient procedures and controls, or was not following
existing procedures. As a result, there was inadequate information
to assure that all assets were accounted for and all expenditures
were being legitimately used for CGP activities. In addition, $98,102
of ineligible and $73,210 of inadequately supported maintenance
expenses were charged to the CGP, with additional amounts possible
in other periods.
Date Issued: March 23, 2001
Audit
Memorandum No.: 2001-SF-1803
File Size: 59KB
Title: Los Angeles Homeless Services Authority, El Monte Youth
Development Center, Supportive Housing Program Grant (CA16B97-0021),
Los Angeles, California
As part of a nationwide review of HUD's Continuum of Care Program,
we audited the 1997 Supportive Housing Program (SHP) grant awarded
to the Los Angeles Homeless Services Authority (LAHSA) as operated
by the sub-grantee El Monte Youth Development Center (El Monte).
We concluded that LAHSA and El Monte did not carry out grant activities
consistent with the application and applicable regulations. Specifically,
El Monte admitted ineligible participants and participants whose
eligibility was not adequately documented; did not accomplish program
goals or maintain evidence of measurable results; did not maintain
financial records that support specific grant expenditures; did
not follow Federal procurement procedures in awarding contracts
for services; charged ineligible costs to the grant; and failed
to remit interest income earned on federal funds to the US Treasury
Department as required. LAHSA was unaware of the problems at El
Monte because they failed to perform timely sub-grantee monitoring
reviews. We recommend HUD require LAHSA to: 1A. Conduct programmatic
and financial monitoring of all sub-grantees and document follow-up
actions resulting from the site visits; 1B. Ensure El Monte obtains
and verifies the necessary information to determine participant
eligibility; 1C. Assist El Monte in developing and implementing
necessary procedures and systems to collect relevant data and accurately
report on its performance; 1D. Perform in-depth reviews of all grants
awarded to El Monte on a grant-by-grant basis to ensure supporting
documentation is maintained and all costs are eligible and documented;
1E. Require El Monte to revise their accounting systems to properly
account for individual grant expenses on a grant-by-grant basis
prior to receiving additional funding; 1F. Reimburse HUD for the
$80,639 of ineligible costs incurred by El Monte; and 1G. Require
El Monte to provide documentation supporting the eligibility and
allocability of $576,206 in unsupported costs, and reclassify or
reimburse HUD for any costs, which cannot be documented as eligible
costs specifically applicable to the TLC Program grant.
Date Issued: February 8, 2001
Audit
Memorandum No.: 2001-SF-141-1802
File Size: 1047KB
Title: Audit of HUD Earthquake Loan Program HELP Funds, Fountain
Park Cooperative, Inc., Project No. 122-92004, Woodland Hills, CA
At the time of our audit, the Los Angeles Multifamily HUB also
conducted a management review and physical inspections of FPC's
dwelling units to determine whether repairs were either actually
made or completed satisfactorily. Since the HUB was already addressing
the issue concerning the repairs, we excluded this portion in our
audit scope. Instead, we reviewed other areas relating to FPC's
receipt and expenditure of HELP and other earthquake-related funding
sources to determine FPC's compliance with the Financial Assistance
Contract (FAC). Contrary to the provisions of the FAC, FPC did not
use $55,524 that shareholders also received from other sources to
pay for the same repair items also funded by HUD.
We discussed the results of our review with FPC officials during
the audit and at a January 31, 2001 exit conference. On January
8, 2001, we provided a copy of our draft report to FPC for their
review and comment and received their response on January 24, 2001.
FPC generally disagreed with the finding and the recommendations.
We considered FPC's comments and made revisions where appropriate.
The response and our evaluation are discussed in the finding and
the full text of their response is included as Appendix B.
Date Issued: February 7, 2001
Audit
Memorandum No.: 2001-SF-141-1801
File Size: 80KB
Title: Limited Review - Sacramento Housing and Redevelopment
Agency
We reviewed the propriety of payments made by the Sacramento Housing
and Redevelopment Agency to the Sacramento County Office of District
Attorney for nuisance abatement activities in targeted areas. These
activities were funded under U.S. Department of Housing and Urban
Development's (HUD's) community development block grant (CDBG) program.
We initiated this review based on a HUD hotline complaint questioning
certain aspects of the agency's operations. We concluded the $225,000
the agency paid to the Office of District Attorney exceeded actual
costs and were not properly supported.
Date Issued: September 29, 2000
Audit
Report No.: 00-PH-222-1005
File Size: 1,381KB
Title: Michaelson, Connor & Boul, Management and Marketing Contractor,
Huntington Beach, California
We completed an audit of Michaelson, Connor & Boul, a Management
and Marketing (M&M) contractor. The purpose of the audit was to
determine whether the M&M contractor managed and marketed FHA's
single family properties according to contract requirements.
Consistent with FHA and contract objectives, we found MCB's monthly
property sales have steadily increased, and the number of properties
in its inventory has steadily declined since MCB assumed management
and marketing responsibilities for the Philadelphia HOC Area-2 property
inventory. However, despite these accomplishments we did identify
a number of areas where improvements need to be made by the contractor.
Date Issued: September 22, 2000
Audit
Report No.: 00-SF-222-1002
File Size: 1,652KB
Title: Golden Feather Realty Services, Inc. Single Family Property
Disposition Program Management and Marketing Services Contract (C-OPC-21322),
Irvine, CA
As part of OIG's nationwide review of HUD's Management and Marketing
(M&M) Services Contracts, we audited Golden Feather Realty Services,
Inc.'s disposition of single family HUD-owned properties. The purpose
of our audit was to determine whether GFR managed and marketed single
family HUD-owned properties in accordance with its M&M contract,
and other HUD requirements.
We determined that GFR generally managed and marketed single family
HUD-owned properties in accordance with its M&M contract and other
HUD requirements. We particularly noted GFR significantly reduced
the number of HUD-owned properties in the Southern California inventory
from almost 13,000 as of April 1999, to about 7,000 as of March
2000. However, as discussed in the two findings contained in this
report, GFR needs to fully comply with certain aspects of its property
disposition activities.
Golden Feather Realty (GFR) did not always adequately protect,
preserve, and maintain HUD-owned properties. Our site inspections
of 30 selected properties within the Los Angeles and San Bernardino,
California areas disclosed that GFR did not always:
- correct health and safety hazards and remove defective paint
surfaces;
- protect properties from the elements to prevent further deterioration;
- repair damages caused by routine vandalism;
- secure properties against unauthorized entry; and
- remove debris and maintain the lawns in order to maintain the
physical
- appearance of the properties.
As a result, these conditions reflected a negative image of HUD's
REO program, but more importantly, it hampered HUD's efforts to
fully accomplish its mission of strengthening neighborhoods and
communities. HUD was also less assured that sales of HUD-owned properties
provided the maximum return to the mortgage insurance fund. GFR's
lack of written procedures did not ensure adverse conditions found
during property inspections were accurately and consistently reported.
The lack of follow-up action did not assure needed repair items
identified were resolved timely and adequately.
Golden Feather Realty incurred delays in processing sales of HUD-owned
properties in 24 of 45 HUD-owned properties reviewed. These delays
occurred during (1) performing initial inspections, (2) obtaining
appraisals, (3) approving disposition programs, and (4) reviewing
sales contracts.
Consequently, the delays caused these properties to remain in
HUD's real estate owned property inventory longer than necessary.
As a result of the delays, it could also increase property holding
costs and exposure to deterioration or damage due to vandalism.
Lack of knowledge and management emphasis of contract requirements,
as well as staff misinterpretation of HUD regulations, caused GFR
to incur the delays.
We discussed the findings with GFR officials during the audit and
at a September 11, 2000 exit conference. We provided GFR with a
draft copy of Finding 1 on July 19, and draft copy of Finding 2
on August 3, 2000 for their comments. We received GFR's response
to Finding 1 on August 7, and Finding 2 on August 16, 2000. GFR
generally disagreed with both findings. We considered GFR's comments
and revised the findings where appropriate. The responses and our
evaluation are discussed in the Findings and the full text of their
responses are included as Appendix B.
We recommend HUD's Santa Ana Homeownership Center (SAHOC) require
GFR to fully comply with its M&M contract to ensure that HUD-owned
properties are always adequately protected, preserved and maintained,
as well as marketed and sold in a timely manner. We included specific
recommendations at the end of each finding to correct the noted
deficiencies.
Date Issued: August 23, 2000
Audit
Report No.: 00-FW-222-1006
File Size: 1,543KB
Title: Fortune Escrow, Inc. Closing Agent Contract
We performed an audit of Fortune Escrow, Inc. (Fortune), a closing
agent for HUD, as part of a nationwide effort to review closing
agents. Our audit objective was to determine whether management
controls were adequate to ensure the prevention of fraud, waste,
and abuse. To meet this objective, we performed audit steps to determine
whether Fortune complied with the contract terms and conditions
of a closing agent. Overall, Fortune substantially complied with
its HUD contract. However, Fortune did charge HUD for ineligible
wire transfer fees.
Date Issued: March 31, 2000
Audit
Memorandum 00-SF-201-1001
File Size: 358KB
Title: SF Housing Authority Low-Income and Section 8 Housing
Programs
We conducted an audit of the San Francisco Housing Authority's
low-income and Section 8 housing programs. We determined the Authority
complied with the rules and regulations governing the Public Housing
Management Assessment Program and properly calculated its housing
subsidy under the Performance Funding System. However, we also identified
serious problems in the areas of contracting, administrative hiring
and compensation, and Section 8 receivables. This report contains
four findings and applicable recommendations to improve the effectiveness
of the Authority's housing programs.
Our recommendation to take administrative action against the Authority's
executive director and board of commissioners is similar to a recommendation
contained in report number 00-CH-201-1002 issued March 31, 2000
by OIG's Chicago Office covering its audit of the Cuyahoga Metropolitan
Housing Authority. That report recommends administrative action
to be taken against the former chief operating officer, who is the
current executive director at the San Francisco Housing Authority.
The Troubled Agency Recovery Center is currently responsible for
monitoring the Authority's low-income housing program (a carry-over
from when the Authority was considered troubled). The responsibility
for the Section 8 program resides with the Office of Public Housing
at HUD's California state office. Since the responsibilities at
the Authority are split between entities, we addressed our report
to the Assistant Secretary who is over both entities to ensure proper
coordination.
Date Issued: February 10, 2000
Audit
Memorandum 00-SF-123-0801
File Size: 49KB
Title: Limited Review - REO Division Operations
We conducted a limited review to evaluate the internal control
procedures in place for disposing of HUD-acquired single family
properties at: (1) the former HUD Los Angeles (LAAO) Real Estate
Owned (REO) Division during the time that a scheme involving the
sale of REO properties at well below the appraised value was perpetrated
by a HUD housing specialist; (2) the Santa Ana Homeownership Center
(HOC) REO Division and, (3) the Management & Marketing (M & M) contractor,
Golden Feather. The purpose of the review was to determine the adequacy
of the internal control procedures at LAAO that allowed the scheme
to occur and whether adequate internal control procedures are in
place at the Santa Ana HOC and Golden Feather to minimize the likelihood
that the scheme could reoccur.
We found that the HUD Housing Specialist was able to perpetrate
the scheme involving the sale of REO properties at well below the
appraised values because the LAAO had deviated from the internal
control procedures established in the pertinent HUD handbook requiring
the CPO to approve all sales contracts and price reductions. In
addition, we believe that the CPO may not have performed adequate
supervisory oversight of the housing specialists to ensure that
they disposed of REO properties in accordance with program requirements.
We evaluated the internal control procedures at Golden Feather,
and found that those procedures are adequate to minimize the possibility
that the scheme could reoccur. However, to sufficiently minimize
the risk that the scheme could reoccur, we believe, that improvements
are needed in the Santa Ana HOC's monitoring of Golden Feather in
order to ensure compliance with the established procedures and to
best safeguard HUD's interests.
Date Issued: August 19, 1999
Audit
Memorandum 99-SF-241-1003
File Size: 124KB
Title: CDBG and HOME Investment Partnerships (HOME) Programs,
Lynwood, California
The objective of our audit was to determine the validity of allegations
concerning: (1) the lack of jobs created or retained by a subgrantee,
Lynwood Entrepreneur Development Academy (LEDA), (2) the lack of
documentation to support future benefits to its residents from training
that was provided to businesses located outside of its city limits
by a subgrantee, Lynwood Business Institute (LBI), and (3) a conflict
of interest between a Grantee elected official and a director of
LEDA and LBI. We also assessed the Grantee's timely use of HOME
funds to determine the reason for the large unexpended balance.
The Grantee could not demonstrate its compliance with CDBG requirements
to support the number of jobs created and retained for low - and
moderate-income persons by a subgrantee and document the future
benefits accruing to its residents from training businesses located
outside of its city limits. It also did not use its HOME funds timely
since it only spent $1.2 million (40%) of the $3 million in HOME
funds approved by HUD for Fiscal Years 1993 through 1998. We attribute
these problems to the absence of adequate management controls and
insufficient staff training.
Date Issued: January 8, 1999
Audit
Memorandum 99-SF-213-1802
File Size: 86KB
Title: Limited Review of Mortgagor Operations Astoria Gardens
Tenant Association (AGTA) Sylmar, CA
As requested by the Los Angeles Area Office (LAAO) Director, Multifamily
Housing Division, we performed a limited review of Astoria Gardens
Tenants Association's (Mortgagor) operations. The purpose of our
review was to determine whether concerns brought to HUD LAAO's attention
pertaining to alleged misconduct by AGTA's board members and improper
expenditure of grant funds could be substantiated.
We determined that allegations of misconduct by AGTA board members
were unsubstantiated; however, allegations concerning improper expenditure
and imprudent use of grant funds were valid. We found that AGTA
improperly retained bank refunds of $64,062 relating to a good faith
deposit and related fees that AGTA never actually paid. We also
found that AGTA spent funds for ineligible lobbying activities and
used $55,342 for expenses that may not have been reasonable and
necessary.
Date Issued: October 23, 1998
Audit
Memorandum 99-SF-212-1801
File Size: 68KB
Title: Unfavorable Laundry Lease Agreements at HUD-Insured Multifamily
Projects Davis/Sacramento, CA
At the request of HUD attorney Shirley Hochhausen, we recently
conducted a review of laundry lease agreements at selected HUD-insured
multifamily projects in the Davis, CA area. During the review we
found instances in which projects are being deprived of revenue
due to unfavorable leases with the project owner general partners.
The purpose of this memorandum is to alert your office so that appropriate
action may be taken.
We reviewed the laundry lease agreements at 16 projects in the
Davis/Sacramento area and found 4 projects with unfavorable laundry
room lease arrangements with project owner general partners. As
a result, the projects received income that was substantially less
than the average laundry income earned at projects which either
owned the laundry equipment or had lease arrangements with non-identity-of-interest
vendors. We estimate that the annual income lost to these projects
ranged individually from $1,850 to $7,050. Further, these identity-of-interest
arrangements were not disclosed in the projects' financial statements
as required.
Date Issued: July 22, 1998
Audit
Report No. 98-SF-201-1003
File Size: 181KB
Title: San Francisco HA Drug Elimination Program, San Francisco,
CA
As part of the Inspector General's nationwide review of HUD's
drug elimination program, we conducted an audit of that program
at the San Francisco Housing Authority. The report's six findings
discuss excessive and unsupported costs; poor procurement practices;
inadequate program monitoring, evaluation and reporting; and changes
to implementation plans prior to HUD approval. Within 60 days, please
furnish us a status report on the corrective action taken, the proposed
corrective action and the date to be completed, or why action is
not considered necessary for each recommendation in the report.
Also, please furnish us with copies of any correspondence issued
because of the audit.
Issue Date: March 31, 1998
Audit
Report Number: 98-SF-212-1002
File Size: 96KB
Title: Redwood Villa, Mountain View, CA
The audit confirmed that the owners improperly spent over one
million dollars for non-project uses even though the project was
not in a surplus cash position as required by the regulatory agreement.
Also in violation of HUD requirements, financial activities of the
owner and another (non-HUD) project were commingled in the accounting
records of the project.
Issue Date: March 24, 1998
Audit
Report No. 98-SF-212-1001
File Size: 152KB
Title: Villa San Carlos Garden Apts., Santa Cruz, CA
We concluded that the project was not managed in accordance with
HUD's requirements. There was unnecessary and unsupported use of
assets. In addition, management practices were inadequate for procurement
of services and materials, and for handling employee time and attendance
records.
Issue Date: August 1, 1997
Audit
Memorandum 97-SF-201-1803
File Size: 21KB
Title: San Francisco HA, Developer Selection for the Hayes Valley
HOPE VI Development, San Francisco, CA
We found that the developer was not selected competitively, resulting
in the lost opportunity to consider proposals from other potential
developers and imparting the appearance of possible favoritism.
Nevertheless, we are not recommending corrective action. Reprocuring
a developer for Hayes Valley would not be practical or prudent.
Also, the housing authority's present selection process appears
to be open and competitive.
Issue Date: July 29, 1997
Audit
Case Number 97-SF-203-1005
File Size: 75KB
Title: San Diego Housing Commission (SDHC), San Diego, CA
We determined that some Section 8 contract rents approved by SDHC
since at least 1994 were excessive. SDHC not only approved initial
contract rents that were too high but also gave annual adjustments
to previously established rents without determining that those adjustments
were warranted. This occurred because SDHC did not consistently
compare rents it approved for Section 8 units to those rents that
project owners charged for comparable unassisted units.
Issue Date: June 3, 1997
Audit
Case Number 97-SF-229-1004
File Size: 95KB
Title: Oakbrook Village, Merced, CA
Our audit confirmed that certain FHA-insured houses in the two
subdivisions have developed structural damages, some rather significant,
because of inadequate preparation of the soil and deficient construction
of the foundation slabs. The damages allowed underground moisture
to penetrate into the houses, creating conditions for molds to grow.
The damaged houses and the molds pose safety and health hazards
to the occupants.
Issue Date: May 12, 1997
Audit
Case Number 97-SF-212-1003
File Size: 102KB
Title: Huron Plaza and Sunridge Apts, Huron and Fresno, CA
We found that owner/agent misuse of project assets contributed
to Huron Plaza's physical problems and Sunridge's continued loan
delinquency and subsequent default. Huron assets of $407,136 and
Sunridge assets of $98,468 were used in violation of the regulatory
agreements. The violations included diverted laundry income and
direct distributions to owners; payment of excessive, unsupported,
or non-project charges by service contractors and others; and excessive
management fees. These acts contributed to the insufficiency of
funds to maintain Huron and to keep Sunridge's mortgage current.
This occurred because the general partners disregarded the regulatory
agreements. Further, one of the project's general partners, who
was also general partner of the management agent, neglected his
responsibilities.
We also noted other deficiencies with the projects' management,
including non-compliance with Section 8 requirements; inadequate
separation of accounting, disbursement, and procurement functions;
and absence of a required fidelity bond. As a result, HUD paid excessive
subsidies, and there was exposure to unnecessary financial risks.
These problems occurred because the agent neglected its responsibilities
and disregarded both HUD requirements and good business practices.
Issue Date: April 14, 1997
Audit
Report No. 97-SF-219-1002
File Size: 73KB
Title: Granada Gardens, Granada Hills, CA
Contrary to HUD requirements and the Financial Assistance Contract,
the project's owner (owner) improperly used $322,432 in leftover
HELP funds that were earmarked for the project's earthquake related
financial deficit arising from vacancy losses.
Contrary to HUD requirements, the project's owner did not prepay
a portion of the HELP loan with the $11,037 received as a property
tax refund.
Issue Date: December 24, 1996
Audit
Case Number 97-SF-212-1001
File Size: 51KB
Title: Shade Tree Apartments, Sacramento, CA
We found that project cash was improperly used to make payments
on a second deed of trust and to reimburse the management agent
for unsupported and excessive costs. Also, the owner improperly
retained some project cash. The misused monies contributed to the
project's financial weakness and deferred maintenance.
Issue Date: September 24, 1996
Audit
Related Memorandum 96-SF-229-1809
File Size: 20KB
Title: Interim Report, Construction Deficiencies in FHA Single
Family Homes, Merced, CA
Our review shows that the contractor did not always comply with
either the Uniform Building Codes or HUD Minimum Property Standards.
We compared soils report recommendation requirements with conclusions
reached by geotechnical engineers hired to determine the cause of
settlement experienced by homes in the subdivisions. The reports
concluded that settlement problems were caused by contractors either
ignoring certain soils report recommendations or not complying with
the UBC.
Issue Date: July 9, 1996
Audit-Related
Memorandum 96-SF-241-1807
File Size: 49KB
Title: City of Pomona, Pomona, CA
Some of the concerns we reviewed were valid; however, others were
not. The allegations of conflict of interest violations against
the City Mayor and the President/board member of a subgrantee were
not valid. Our review, however, determined there was the appearance
of a conflict of interest between a Council member's relationship
with Pomona Valley Center for Community Development (PVCCD), a subgrantee,
and that person's position on the City Council.
We did not find conclusive evidence to support a determination
that Council members steered funds to new subgrantees where they
may have had a personal interest. We believe that the Grantee's
CDBG funding procedures were adequate to provide for a fair and
competitive process. Although our review of 20 proposals disclosed
rating inconsistencies, we did not find indications of deliberate
efforts by Grantee officials to direct the award of CDBG funds to
specific subgrantees.
With respect to the concern that historically funded organizations
received less or no funding, Grantee's records showed that the Community
Life Commission (CLC), which reviewed and recommended funding to
the City Council, recommended 22 proposals in the 1994-95 funding
year. Of the 22 proposals, eight were organizations that received
more funding in previous years than during the 1994-95 funding year.
The Grantee's records showed that these organizations received less
funding during the 1994-95 funding year due to a lack of available
funds and not because Council members steered funds to new subgrantees.
We also did not find that organizations serving Hispanics were
given preferential treatment or that they received the alleged 80
to 85 percent of the funds awarded. The City allocated only 24.8
percent to private organizations, including those serving Hispanics
and other minority constituents. The Grantee's public agencies received
46.9 percent of awarded funds. These funds were generally used on
citywide activities designed to benefit low income residents - rather
than allocated based on the ethnic composition of Pomona's population.
The remaining funds were used for program administration and a loan
repayment.
Although rating inconsistencies occurred indicating that five proposals
may have been overrated and three underrated, we did not find compelling
evidence that CLC members who rated those proposals manipulated
the selection and funding process so as to serve the personal interest
of the Council members who appointed them.
The allegation that three subgrantees were new and had no track
record administering the activities for which they were funded was
valid but not necessarily improper. Although we found that these
subgrantees may have been overrated and, therefore, could have been
excluded from consideration, we did not find any compelling evidence
that they were given preferential treatment.
The allegations concerning violations of the Grantee's program
were valid, but those conditions were not violations of HUD requirements.
The concern was that two subgrantees had failed to include required
documents with their proposals, thus, they were ineligible for CDBG
funding consideration. The Grantee's procedures, however, allowed
the Grantee the prerogative of waiving some of its RFP requirements.
Therefore, if the Grantee chose to accept proposals without receiving
all the required documents, the applicant's failure to submit documents
would not prevent its proposal from being considered for CDBG funding.
Issue Date: April 5, 1996
Audit
Related Memorandum 96-SF-201-1806
File Size: 26KB
Title: San Francisco HA, San Francisco, CA
We recently gathered information on tenant screening and eviction
practices of public housing agencies, particularly in regards to
keeping criminals out of public housing. This work included visits
to the San Francisco housing authority. Although this did not include
a complete review of the housing authority's practices, we identified
several ways it could keep criminals out of its housing projects.
We recommend you share these ideas with the housing authority and
consider whether other authorities might benefit from them, particularly
in light of President Clinton's recently issued policy on crime
in public housing.
Issue Date: March 29, 1996
Audit
Report Number 96-SF-212-1004
File Size: 104KB
Title: Harvest Oaks and Auburn Palms, Lincoln and Auburn, CA
The audit found that the general partner made, or caused to be
made, misrepresentations to the Department by inflating project
income and tenant occupancy for Harvest Oaks in an apparent attempt
to convince HUD to approve a second similar project. Received distributions
of at least $187,270 of Auburn Palms assets and income greater than
the maximum permitted by the regulatory agreement violated other
requirements of the regulatory agreements governing project operations
such as not maintaining adequate accounting records and not submitting
financial data to HUD.
Issue Date: March 8, 1996
Audit
Related Memorandum 96-SF-212-1804
File Size: 17KB
Title: Peach Tree Terrace Apts, Yuba City, CA
We found that loan repayments exceeding surplus cash were made
to the general partners.
Issue Date: January 18, 1996
Audit
Related Memorandum 96-SF-214-1803
File Size: 7KB
Title: DKD Property Mgmt, Inc., San Jose, CA
The audit found that the management company gave the identity-of-interest
developer of two insured, multifamily projects -- while the mortgage
loans were in default -- $217,190 for development cost refunds from
a sanitation district. The developer paid $239,095 to the U.S. Government
to settle. $231,922 are to be returned to the projects' operating
and reserve accounts. The agreement also restricts allowable distributions
from the projects for two years. Thus, HUD needs to obtain evidence
that the monies are returned to the appropriate project accounts
and monitor future distributions for compliance with the agreement.
Issue Date: December 19, 1995
Audit
Case Number 96-SF-212-1001
File Size: 16KB
Title: Walnut Ranch Apts, Dixon, CA
We reviewed financial activities of the multifamily project known
as Walnut Ranch Apartments (project number 121-35735) located in
Dixon, California. We found that project funds were improperly used
for many years to repay loans from third parties and the general
partner. Also, the project was deprived of revenue by an unfavorable
lease with the partner. These actions were mitigated by the partner's
advances to the project until 1990. Since then, however, we estimate
that project funds were improperly reduced by $94,519.
Issue Date: November 21, 1995
Audit
Related Memorandum 96-SF-212-1802
File Size: 9KB
Title: Sharps and Flats Apts., Davis, CA
Our initial work identified risk of possible asset misuse in the
areas of (1) development costs, (2) owner advances, (3) litigation,
and (4) tenant security deposits account. Subsequent work, however,
identified no material violations of the regulatory agreements or
found that HUD asset management had approved the owner's actions.
Issue Date: October 11, 1995
Audit
Related Memorandum 96-SF-214-1801
File Size: 20KB
Title: International Realty, Los Angeles, CA
IRI records for Finley Square disclosed that IRI: (1) obtained
project funds for itself by falsifying invoices to inflate a vendor's
actual charges; (2) improperly used project funds to pay a project
coordinator to prepare an evidence package to support allegations
against a former management agent; and (3) had no support, or inadequate
support, for some amounts paid to outside vendors and to itself.
As a result, project funds were unnecessarily depleted and neither
the owners of Finley Square nor HUD can be assured that the project's
funds were spent for necessary expenses. We attribute the deficiencies
to a disregard for HUD requirements.