Title: Supportive Housing Program Grants, Colorado Coalition for the Homeless, Denver, Colorado

We completed a review of the Colorado Coalition for the Homeless' (referred to as the �Colorado Coalition� and/or �Grantee�) administration of their Supportive Housing Program Grants. The audit was initiated based on a complaint regarding the Grantee's administration of their HUD Grant funds. The objective of the review was to determine whether the Grantee's management controls were adequate to ensure that HUD grant monies were being used for eligible and supported program costs. We focused our review on two of Colorado Coalition's Supportive Housing Program grants and expanded our review when necessary. We found that the Colorado Coalition's management controls were not adequate to ensure that HUD grant monies were being used for eligible and supported program costs.

Contrary to HUD requirements, the Coalition did not adequately support the source and application of HUD funded activities. The Coalition used various budgets and/or estimates for charging direct and indirect salaries and other operating and supportive services to its HUD funded Supportive Housing Program grants. The various subgrantees carrying out various segments of the supportive housing for the HUD funded programs were not allocating costs on a properly supported basis and for the actual costs of providing housing to the program grant recipients, as required by HUD Regulations. In addition, Colorado Coalition has charged various miscellaneous ineligible costs to its HUD grants. As such, Colorado Coalition cannot fully support that the charges to the HUD grants represent the actual amount expended for each individual grant and program activity. Accordingly, appropriate changes need to be made to Colorado Coalition's method of charging costs to its HUD grant programs to ensure that only the actual costs of providing supportive housing and services are correctly charged to the program grants. Colorado Coalition will need to repay the ineligible amounts charged to the HUD funded grants. This includes the $9,531 for ineligible costs that we identified were charged to the Concord Plaza and/or Lowry projects.

HUD requires part of the Supportive Housing Program costs be funded by the grantee and used for eligible grant program activities. The Colorado Coalition reported, in the most current Annual Performance Reports reviewed for nine of Colorado Coalition Supportive Housing Program grant projects, that $283,235 in cash match funds were provided and used for eligible program activities. However, the cash match funds reported were not supported as expenditures of the particular Supportive Housing Program project, nor were the cash match funds recorded on the individual grant project's books of account. As a result, it is questionable whether the required cash match of $283,235 for the grant projects reviewed was actually provided.

The Colorado Coalition has charged the maximum five percent administrative allowance for their administrative fee under the two Supportive Housing Program projects we reviewed, rather than an amount based on actual supported costs. Colorado Coalition has based the five percent administrative total on the yearly budgets and estimates of its total general administrative costs and as such, considers the maximum five percent amount as justified. However, the $147,551 charged to the two Supportive Housing Program projects during the audit period is not supported by actual supported costs as required by HUD Regulations. As a result, the eligibility of the $147,551 as a program cost is questionable.

Issue Date: July 22, 2003
Audit Memorandum No.: 2003-DE-1802
File Size: 461.4.KB

Title: HUD Community Planning and Development Programs City of Boulder
Boulder, Colorado

We completed a review of the City of Boulder, Colorado administration of the HUD Community Planning and Development Programs that consisted of the HUD Community Development Block Grant and HOME Investment Partnerships programs. The objective of the review was to determine if the City of Boulder implemented a control structure that ensured that the grant activities were effectively accomplished and that the corresponding funds were properly expended.

Boulder had established effective management controls over the administration of the HUD programs. They had effective procedures for determining the projects to be funded and for monitoring the progress of the projects. Boulder had procedures for establishing and maintaining records for the projects and other activities related to the programs. The accounting records for the projects were adequately maintained. For the projects reviewed during our audit, we did not identify any ineligible projects or inappropriate use of program funds. Boulder was preparing the plans and reports required by HUD; however, these reports did not always contain all the required data. More specifically, Boulder must submit the Consolidated Plan and Annual Actions Plans to HUD on a periodic basic detailing information about the City of Boulder's administration of the HUD funded Community Development and Planning Programs. However, some of the required information was not incorporated into these plans; thereby limiting HUD's ability to review and evaluate Boulder's program plans. Also, Boulder is required to submit a Consolidated Annual Performance and Evaluation Report to HUD at the end of each grant year. HUD requirements specify the necessary information and statistics to be included in the annual consolidated report. However, some of the required information was not included in Boulder's annual submission to HUD. As a result, HUD had limited information to review and evaluate Boulder's Community Development and Planning Program activities.

Issue Date: March 10, 2003
Audit Report No.: 2003-KC-1005
File Size: 875KB

Title: Choice Enterprises Inc.
950 S. Cherry Street Suite 118
Denver, CO 80246

We have completed an audit of Choice Enterprises Inc., a Denver Home Ownership Center contractor performing insurance endorsement review procedures. Our objective was to determine if Choice Enterprises Inc, followed HUD's regulations and contract terms, for reviewing "Late Requests for Endorsement." We found Choice Enterprises inappropriately endorsed 75 of the 297 loans we reviewed. The 75 loans, valued at $6,567,024, did not have the required documentation for processing. The improper late endorsement of the 75 mortgages increases the probability that HUD will have to pay insurance claims for loans that default, thereby, increasing the risk to the Federal Housing Administration insurance fund. We recommended HUD seek indemnification of the 75 improperly endorsed loans from the mortgagees who originated the loans and take appropriate administrative action against Choice Enterprises.

Issue Date: February 11, 2003
Audit Memorandum No.: 2003-DE-1801
File Size: 3.35MB

Title: Review of the Section 8 Housing Choice Voucher Program for the Housing Authority of the City and County of Denver, Colorado

We completed a review of the Section 8 Housing Choice Voucher Program of the Housing Authority of the City and County of Denver. We conducted the review to determine if the Denver Housing Authority is operating its Section 8 Programs in accordance with HUD requirements; has established controls to assure effective and efficient administration of program funds; and has established controls to assure the Section 8 Housing Choice Voucher units meet HUD's quality standards.

We reviewed the Denver Housing Authority's operations to determine whether the Authority used funds in accordance with applicable HUD policies and procedures. Specifically, we reviewed the selection of applicants; tenant admissions, to include certification and annual recertifications; receipt and disbursement of HUD funds; and Housing Quality Standards for the period January 01, 2000 through October 31, 2002. We accomplished our objectives by: reviewing and evaluating records and files maintained by the Denver Housing Authority, interviewing the Housing Authority's staff, and conducting housing inspections of properties housing voucher recipients. In addition, we reviewed applicable HUD records and files and interviewed HUD staff within Denver's Office of Public Housing. We performed the on-site review work from November 2002 through January 2003. We performed this audit in accordance with the Generally Accepted Government Auditing Standards.

Based upon the review and analysis of the records and files of both HUD's Denver Public Housing Office and the Denver Housing Authority and an inspection of properties housing voucher recipients, we determined that the Authority is substantially complying with all the rules and regulations applicable to the Section 8 Housing Choice Voucher Program. We also determined that the Finance Department had adequate internal controls to safeguard and manage HUD funds. We noted that the Authority maintains a thorough and comprehensive housing inspection program. We communicated insignificant or immaterial deficiencies noted during our audit survey to officials of the Authority separately. Management took our recommendations under advisement and in most cases initiated corrective actions immediately. Often the changes were in place before we completed the review. Our review did not identify any areas that require additional audit work or corrective action.

Issue Date: October 7, 2002
Audit Report No.: 2003-DE-1002
File Size: 2.36MB

Title: Delta Housing Authority Delta, Colorado Low-Rent Housing and Section 8 Housing Assistance Payments

We have completed an audit of the Delta Housing Authority in Delta, Colorado. The audit resulted from a request by the Office of Investigations that we review allegations it received from citizen complaints. Our overall audit objective was to determine whether complainants' allegations against the Delta Housing Authority were valid and to determine whether Housing Authority funds were used in accordance with applicable HUD policies and procedures.

We found that the Housing Authority had deviated from its own policies and procedures in some areas and was not conforming to HUD requirements in carrying out its HUD funded housing programs. As a result, HUD funds were used to pay ineligible expenses; procurement policies were circumvented to provide contracts to favored contractors; admission policies were ignored to facilitate favoritism on the public housing waiting lists; excess Section 8 voucher payments and administration fees were collected for Authority-owned housing units; and unrecorded tenant fees and deposits were used for unallowable activities.

Issue Date: August 26, 2002
Audit Memorandum No.: 2002-DE-1004
File Size: 4044KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant Awarded to the Housing Advocacy Coalition, Colorado Springs, Colorado, Grant Number FFOT00008CO

We completed an audit of the Housing Advocacy Coalition and the Community Resource Center's Outreach and Training Assistance Grant. The Housing Advocacy Coalition and the Community Resource Center jointly submitted a grant application. The two non-profits share the grant as co-recipients, even though the HUD grant agreement identifies the Housing Advocacy Coalition as the grantee. The audit identified that the grantees over charged the grant at least $3,827 for salaries and did not comply with other requirements under the Office of Management and Budget's Circular A-122, Cost Principles for Non-Profit Organizations. In addition, the grantees participated in lobbying activities, contrary to the enabling legislation and OMB Circular A-122. Our report contains seven recommendations to address the issues identified in the report and other recommendations to strengthen management controls over the grantees. In conducting the audit, we reviewed the grantees accounting records and interviewed responsible staff. We also reviewed the requirements in MAHRA, the OTAG Notice of Fund Availability, the OTAG grant agreement, HUD's requirements for grant agreements for nonprofit entities, and Office of Management and Budget's guidance on the allowability of cost for nonprofit grantees. The audit covered the period January 2001 through April 2002 for the OTAG grant and the period May 2000 through April 2001 for the Public Entity Grant (a Section 514 grant received from an Intermediary Technical Assistance Grant), awarded to the Community Resource Center. We performed the fieldwork at the Housing Advocacy Coalition located at 2023 East Bijou Street, Colorado Springs, CO 80909 and the Community Resource Center located at 655 S. Broadway, Suite 300, Denver, CO 80203 during April through June 2002. We conducted the audit in accordance with Generally Accepted Government Auditing Standards.

Issue Date: August 21, 2002
Audit Memorandum No.: 2002-DE-1805
File Size: 320KB

Title: Congressionally Requested Audit of the Section 514 Outreach and Technical Assistance Training Contract, C-OPC-21280, awarded to Cox & Associates, Washington, DC

We completed a review of Cox & Associates, Washington, District of Columbia - Section 514 Outreach and Technical Assistance Training Contract, C-OPC-21280, Cox Contract. The objectives of the review were to determine if Cox & Associates used Section 514 grant funds for only eligible activities as identified in Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), their agreements, and/or other requirements to further the Mark-to-Market Program. Specifically we wanted to determine if Cox & Associates expended Section 514 funds for any lobbing activities. MAHRA specially identified lobbying as an ineligible activity. Based upon the review and analysis of the Drawdown Invoices and the Bi-Weekly Activity Reports, we determined that all of the funds obligated, drawn down, and paid to Cox & Associates, for services provided under the Cox Contract, were for authorized costs. These costs consisted of salaries, consulting fees, travel expenses, and materials associated with the financial management technical assistance training of OTAG/ITAG grantees. There was no evidence of spending of Section 514 monies on unauthorized activities. In addition, we did not discover any evidence of lobbying activities.

Issue Date: May 10, 2002
Audit Memorandum No.: 2002-DE-1802
File Size: 280KB

Title: Pikes Peak Towers, Colorado Springs, Colorado - Section 202/Direct Loan for Elderly Housing

We completed a review of Pikes Peak Towers, Colorado Springs, Colorado - Section 202/Direct Loan for Elderly Housing. The objectives of the review were to determine if Pikes Peak Towers had management controls in place to ensure that:

Only eligible tenants were admitted to the project; The project received competitive prices for the products and services it purchased; and The upkeep of the facilities was decent, safe and sanitary. We reviewed Pikes Peak Towers' management controls over: their procedures for the selection of tenants; their procedures that ensured they were only paying competitive prices for products and services; and their procedures that ensured maintenance and upkeep of the project's facilities provided for decent, safe and sanitary conditions. Pikes Peak Towers had adequate policies and procedures for both the selection of tenants and the upkeep and maintenance of facilities at Pikes Peak Towers. However, several management control weaknesses were noted in the procedures relating to only paying competitive prices for products and services.

In connection with these management control weaknesses, evidence could not be found to show an active role by the Board of Directors in providing proper oversight into the purchase of products and services. The Regulatory Agreement states "payments for services, supplies, or materials shall not exceed the amount ordinarily paid for such services, supplies, or materials in the area where the services are rendered or the supplies or materials furnished." Furthermore, the Employment Agreement signed by the Administrators states, "Employee may not incur a single debt or purchase a particular service or item with a cost in excess of $300.00 without prior approval of the Employer." There was no evidence that the Administrators or the Board of Directors was accomplishing either of these provisions. Along with this, no evidence could be found to show that the Administrators did comparative pricing for these products and services. In addition, the President of the Board, who subsequently had resigned from the Board, had pre-signed numerous blank checks that were to be used in the purchase of products and services for Pikes Peak Towers. With these deficiencies in procedures, the project, Pikes Peak Towers, has had limited assurance that products and services that have been procured were made at the best available price and within the parameters established by the Board. We discussed these management control weaknesses with project officials who are now in the process of establishing new management controls to ensure their non-reoccurrence.

Issue Date: March 15, 2002
Audit Report No.: 2002-DE-1001
File Size: 1.04MB

Title: Review of Management Activities for Denver Northeast Apartments, Mitchell 66 Apartments, and Rotella Park Manor, Mitchell Management, Denver, Colorado

We performed an audit of Mitchell Management, the Management Agent responsible for managing three HUD insured multifamily projects located in the Denver, Colorado area. The multifamily projects that Mitchell Management manages are Denver Northeast Apartments, Mitchell 66 Apartments, and Rotella Park Manor Apartments.

We found that the projects were not maintained in a decent, safe, and sanitary condition. The overall effect of not performing the necessary maintenance of the projects and related housing units is that the tenants are occupying units that fail to meet the minimum HUD requirements for being decent, safe, and sanitary. Furthermore, deficient maintenance of the projects' buildings and surrounding grounds affects the tenants' ability to live in a healthy and hazard-free environment. In addition, the projects had excessive vacant units that had not been repaired timely. The vacant units need to be repaired timely in order to accommodate those families waiting for available housing. As a result of the deficient maintenance, the projects are unable to generate the maximum amount of revenues that is needed to fund the projects' operations.

Our review identified basically the same conditions that had been presented in reports issued by HUD and in reports issued by the projects' independent public accountant. Even with these previous reports identifying needed management changes and improvements, we found that limited changes had been made by the Management Agent in the operations of the HUD insured projects.

Issue Date: September 28, 2001
Audit Report No.: 2001-DE-1002
File Size: 658KB

Title: Review of Housing Activities in FHA Single Family Insurance Programs, Brothers Redevelopment, Inc., Denver, Colorado

We have completed a review of Brothers Redevelopment, Inc. (Brothers Redevelopment), Denver, Colorado, of their housing activities in the Federal Housing Administration (FHA) Single Family Insurance Programs. This review was done as part of a nationwide audit of nonprofit organizations' participation in the FHA Single Family Insurance Programs.

Brothers Redevelopment is a nonprofit organization that has been approved by HUD to participate in the FHA Single Family Insurance Programs. Brothers Redevelopment was authorized by HUD to carryout the program in conformity with its Affordable Housing Program. Under this program, Brothers Redevelopment purchased HUD properties at a discount, rehabilitated the structures as needed and resold the houses at market value to qualifying homebuyers. Brothers Redevelopment did not pass on any benefits realized from the discounted property purchases from HUD to the low- and moderate-income homebuyer as intended by HUD.

We found that Brothers Redevelopment was not carrying out its Affordable Housing Program in conformity with HUD requirements. Brothers Redevelopment allowed an outside independent Contract Developer to administer all phases of its Affordable Housing Program. The Contract Developer operated the program to realize the maximum profit possible. The realized profits were shared by Brothers Redevelopment, the Contract Developer and a conflict of interest program lender. As a result, no discounts were passed on to the ultimate homebuyer as intended by the program. Basically, Brothers Redevelopment served as a strawbuyer for a fee for the purchase of HUD properties while the Contract Developer functioned as an investor.

Issue Date: June 1, 2001
Audit Report No.: 2001-DE-222-1801
File Size: 285KB

Title: Clarion Mortgage Capital, Inc., Centennial, Colorado

The objectives of the review were to determine if Clarion was fulfilling loan correspondent requirements relating to the functions of its loan officers; and, had management controls pertaining to its loan officer functions concerning FHA mortgage insurance loan origination, and that such controls ensured that FHA loan origination files were properly established and processed.

Our review of Clarion's management controls over its FHA loan origination functions showed Clarion was not in compliance with HUD requirements in two areas: (1) Clarion used contract loan officers, rather than regular employees, to originate FHA loans; and, (2) three of the four branch offices were actually individual offices of contract loan officers who paid their own operating expenses. HUD representatives told Clarion officials that the contract loan officers would be considered employees if Clarion executed a memorandum of understanding requiring that each loan officer work exclusively for Clarion. Clarion executed the required memoranda of understanding. Therefore, Clarion considered the loan officers to be employees and their loan origination activities to be in compliance with HUD requirements. HUD needs to provide clarifying instructions to Clarion for complying with HUD requirements concerning loan origination procedures and for the proper structure of their branch offices.

Issue Date: September 21, 2000
Audit Report No.: 00-DE-222-1003
File Size: 1,989KB

Title: Management and Marketing Contract for Denver Area 3, First Preston Management Inc., Denver, Colorado

We have concluded a review of the Department of Housing and Urban Development's (HUD's) Management and Marketing Contract with First Preston Management, Inc., as it pertains to HUD properties in Denver Area 3, which consists of the states of Missouri, Kansas, Arkansas, Louisiana and Oklahoma. This program contracts out the full responsibility for the management and marketing of properties owned by, or in the custody of, HUD. The primary objective of the review was to determine whether First Preston Management, Inc., managed HUD single family properties in compliance with HUD policies, procedures, and regulations, and within the terms and conditions of the Management and Marketing Contract. This included assessing whether First Preston's: (a) operations are effective, efficient, and economical and (b) management controls are adequate to effectively identify and address operational deficiencies and noncompliance with requirements.

First Preston has been performing within the Management and Marketing contract for a little over a year, and while improvements were noted in their overall compliance with the contract over the last year, we identified where First Preston needs to improve its:

• procedures for the protection and preservation of HUD properties within Area 3, and
• timeliness for the completion of the processing steps for acquired HUD owned properties.

Issue Date: August 18, 2000
Audit Memorandum No.: 00-DE-212-1802
File Size: 43KB

Title: Review of Village Garden Apartments' Operations, Aurora, Colorado

In our review we examined records that were maintained by Village Garden Apartments and Urban Inc. Management Company. All of the records reviewed pertained to the functions of: Cash, Tenant Occupancy, Bookkeeping, Section 8 Housing Assistance Payments and Housing Quality Standards. We found that Village Garden Apartments and Urban Inc. were adequately fulfilling the obligations of their Regulatory Agreement and Housing Assistance Payment Contract and no significant deficiencies were noted.

In summary, we concluded that the internal controls incorporated by Urban Inc. were thorough, comprehensive and effective. All of the internal controls were being effectively utilized by the staff of Village Garden Apartments and Urban Inc. Several minor discrepancies were noted and passed on to the auditee for correction.

Issue Date: July 26, 2000
Audit Memorandum No.: 00-DE-212-1801
File Size: 110KB

Title: Review of Project Operations, Village 88 Apartments, Thornton, Colorado

We have completed a review of the program operations for Village 88 Apartments. The objectives were to evaluate the management controls for cash, residual receipts, occupancy, and Section 8 Housing Assistance Payments for Village 88 Apartments, and to evaluate compliance with HUD requirements.

Overall, we noted the management controls of Village 88 Apartments were good. We determined that the management controls over petty cash, cash disbursements and allocations of costs, surplus cash and residual receipts, occupancy, and Section 8 Housing Assistance Payments were adequate. The management controls over cash receipts were adequate, except for the controls over laundry revenue.

Issue Date: February 25, 2000
Audit Report No.: 00-DE-259-1001
File Size: 345KB

Title: City and County of Denver's Housing Opportunity for Persons with AIDS Program Audit

We have concluded our audit of the City and County of Denver's Housing Opportunity For Persons With AIDS Program. The audit included six objectives to determine the effectiveness of the City and County of Denver's Program.

Our review identified that the City and County of Denver needs to improve its oversight and monitoring, and ensure that project sponsors comply with HUD requirements.

Issue Date: March 2, 1998
Audit Report No.: 98-DE-249-1801
File Size: 31KB

Title: Cole Coalition Youthbuild Program, Denver, CO

We found that Cole Coalition had developed an adequate financial management system and had financial records and supporting documentation which supported the funds that had been spent on the Youthbuild Program.

We found that the Cole Youthbuild Program had produced few positive results because of poor working relationships between the grant applicant partners. Cole Coalition suspended the program during July 1997 and released the remaining students from the program.

Issue Date: October 3, 1996
Audit Memorandum No.: 97-DE-241-1801
File Size: 101KB

Title: Southern Ute Indian Tribe, Ignacio, CO

During our limited review we did not find any fraudulent activities. However, three items concern us which may warrant further Office of Native American Programs attention:

1. The Southern Ute Indian Tribe failed to notify HUD of significant changes in the scope of work during the Sky Ute Lodge renovation project.

2. The rating of the multi-family housing construction project under the Economic Development category.

3. The Southern Ute Indian Tribe shows a pattern of delay in the completion of Community Development Block Grant funded projects. Thus they appear to be getting more grants than they have the capacity to manage and execute.

Issue Date: March 19, 1996
Audit Report No.: 96-DE-219-1004
File Size: 22KB

Title: California Park East Apartments, Denver, CO

We found that the Office of Multifamily Housing had effectively monitored and directed the owner's progress toward resolving HUD's concerns with the project. However, the books and records of the project's operations were not maintained in accordance with the terms and conditions of the Regulatory Agreement, or with HUD's regulations and requirements.