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Colorado Audit Reports
Issue Date: April 10, 2007
Audit
Report No.: 2007-DE-1005
File Size: 187.35KB
Title: Rocky Mountain Mutual Housing Association, Denver, Colorado,
Paid Ineligible Owner Expenses
HUD-OIG audited the Rocky Mountain Mutual Housing Association (Association),
a nonprofit that develops and manages U.S. Department of Housing
and Urban Development (HUD)-subsidized multifamily properties. We
decided to perform an audit based on an anonymous tip. We wanted
to determine whether the Association inappropriately paid owner
expenses.
The Association did not always follow HUD disbursement requirements
when paying owner-related expenses. The nonprofit was unfamiliar
with HUD requirements relating to owner expenses and believed that
the expenses were eligible. These violations could deprive the properties
of almost $28,000 needed to pay reasonable operating expenses and
for necessary repairs.
We recommend that HUD ensure that the Association repays almost
$28,000 to the properties. We also recommend that the director of
HUD's Departmental Enforcement Center consider imposing civil money
penalties against the Association for the payment of ineligible
expenses that violated the regulatory agreements.
Issue
Date: October 18, 2006
Audit
Report No.: 2007-DE-1001
File Size: 574.12KB
Title:
The City and County of Denver, Colorado, Did Not Comply with HOME
Investment Partnerships Program Requirements
HUD's
Office of Inspector General reviewed the City and County of Denver,
Colorado's (City) HOME Investment Partnerships Program (HOME) to
determine whether the City properly established, administered, and
accounted for eligible HOME projects.
The
City did not properly enter its data into the Integrated Disbursements
and Information System. This resulted in the City incorrectly reserving
$722,000 in HOME funds.
In
addition, the City did not have adequate controls over the administration
of its HOME activities and funds. Therefore, HUD lacked assurance
that management properly accounted for or realized maximum benefit
from the HOME funds.
We
recommended that HUD require the City to implement policies and
procedures to ensure that it accurately and completely enters and
maintains all required information in the System and to ensure effective
administration of the HOME program.
Issue Date: August 31, 2006
Audit
Report No.: 2006-DE-1006
File Size: 244.29KB
Title: Nexgen Lending, Inc.'s Lakewood Branch Did Not Follow HUD
Requirements in Underwriting Two Insured Loans
HUD-OIG reviewed thirteen Federal Housing Administration loans
underwritten by Nexgen Lending, Inc.'s (Nexgen) Lakewood, Colorado,
branch office. Our objective was to determine whether Nexgen properly
processed insured loans and to determine whether its quality control
plan met the HUD requirements. Nexgen did not follow HUD requirements
in underwriting two of the loans. As a result, Nexgen placed HUD's
insurance fund at risk for as much as $207,000 and over insured
one mortgage for more than $1,100. Nexgen's quality control plan
met HUD's requirements.
We recommend that HUD require Nexgen to indemnify HUD for the potential
loss on the one loan with a significant deficiency and reimburse
the appropriate parties for the over insured mortgage on the other
loan.
Issue Date: March 15, 2006
Audit
Report No.: 2006-DE-1003
File Size: 56.38KB
Title: The Housing Authority of the City and County of Denver,
Colorado, Properly Assigned Section 8 Voucher Sizes But Made Errors
on Nine Vouchers
HUD-OIG reviewed the Housing Authority of the City and County of
Denver, Colorado's (Authority) Housing Choice Voucher program to
determine whether it paid excess subsidies for oversize units.
Authority staff properly calculated subsidies and made no overpayments
for 31 of the 40 files we reviewed. We found nine errors that resulted
in overpayments of $26,683 in Section 8 subsidies.
The Authority has already corrected the errors and repaid the $26,683
to the Section 8 program. Therefore, the U.S. Department of Housing
and Urban Development does not need to require additional action
by the Authority.
Issue Date: February 1, 2006
Audit
Report No.: 2006-DE-1002
File Size: 1.71MB
Title: American Title Services, Greenwood Village, Colorado, Did
Not Comply with Contract Terms When Closing Sales of HUD-Owned Properties
HUD-OIG audited American Title Services (American Title), a contractor
closing sales of U.S. Department of Housing and Urban Development
(HUD) homes in Colorado. We performed the audit at the request of
the director of the Denver Homeownership Center's Real Estate Owned
Division. We wanted to determine whether American Title complied
with contract terms for closing sales of HUD homes.
We found American Title did not comply with contract terms for
closing sales of HUD homes. It did not disburse funds on time or
in correct amounts, improperly commingled HUD funds with retail
funds, earned interest on closing funds, and did not reimburse HUD
for bank charges. American Title was not prepared to perform its
duties when it got the contract. Its poor handling of closing funds
increased HUD's and homebuyers' risk of not meeting financial obligations
and not receiving funds to which they were entitled. However, since
HUD cut back its number of closings in August 2005, American Title's
performance improved.
We recommend that HUD require that American Title correct the problems,
improve controls, complete all disbursements, and pay HUD $4,380
in interest.
Issue Date: December 20, 2005
Audit
Report No. 2006-DE-1001
File Size: 1.08MB
Title: First Magnus's Denver Branch Did Not Follow HUD Requirements
in Underwriting 31 Loans
HUD-OIG reviewed 51 Federal Housing Administration loans underwritten
by First Magnus Financial Corporation's (First Magnus) Denver, Colorado,
branch office. Thirty-two of the loans required full underwriting,
and 19 were streamline refinances. First Magnus did not follow HUD
requirements in underwriting 31 of the loans. We found significant
underwriting deficiencies for 12 of the 32 loans that required full
underwriting. We also identified overinsured mortgages and unallowable
fees in 19 of the loans. The branch office lacked supervision and
formal policies to ensure compliance with HUD requirements. As a
result, First Magnus placed HUD's insurance fund at risk for $1,643,617,
overinsured mortgages totaling $10,004, and charged unallowable
fees totaling $1,611.
We recommend that HUD require First Magnus to: (1) Indemnify and/or
reimburse HUD for the potential and actual losses on 11 loans with
significant deficiencies, (2) Reimburse the appropriate parties
for the overinsured and unallowable charges, and (3) Develop policies
and procedures to ensure adequate supervision over its underwriting
process.
Issue Date: March 9, 2005
Audit
Report No.: 2005-DE-1002
File Size: 1.74MB
Title: Boulder County Housing Authority, Boulder, CO, Did Not
Properly Manage or Account for HUD Public Housing and Multifamily
Program Funds
We audited Boulder County Housing Authority. Our audit objectives
were: to determine the effectiveness of the controls over and accounting
for the receipt and use of HUD funds; to evaluate the effectiveness
of the controls over HUD-funded personnel functions; and, to determine
the effectiveness of HUD-funded tenant eligibility and certification
procedures and to evaluate controls over tenant rent subsidies.
Boulder County Housing Authority did not properly use HUD funds,
which resulted in at least $433,139 of ineligible and $123,784 of
unsupported costs. The internal controls over and procedures for
accounting functions were inadequate and utilized inappropriate
accounting practices. We also determined that the personnel functions
performed by Authority staff were effectively completed and documented.
Boulder County Housing Authority had implemented effective controls
over the tenant eligibility, certification procedures, and tenant
rent subsidy functions and had complete, well-maintained tenant
files and rent subsidy documentation.
We recommended repayment to the Authority's appropriate HUD programs
of the ineligible costs and any of the unsupported costs for which
adequate supporting documentation could not be provided. We also
recommended changes to accounting controls and procedures to ensure
compliance with HUD's requirements and accounting principles.
Issue
Date: June 22, 2004
Audit
Report No.: 2004-DE-1003
File Size: 2750KB
Title:
Housing Authority of the City of Greeley and Weld County Housing
Authority, Greeley, Colorado
We
have completed an audit of the Low-Rent Public Housing and Section
8 Housing Choice Voucher Programs for the Housing Authority of the
City of Greeley (GHA) and the Weld County Housing Authority (WCHA).
Our review focused on tenant selection and continued occupancy activities
based on information we received concerning allegations of improprieties
in these areas. The Greeley Housing Authority through a consortium
agreement with HUD administers these program activities for both
Housing Authorities. The objective of our review was to determine
whether the Housing Authorities tenant selection and continued occupancy
activities were administered in conformity with HUD requirements
and their own adopted policies and procedures.
Our audit disclosed the need to improve the administration of the
Housing Authorities' tenant selection and continued occupancy activities.
Operating procedures did not ensure that only eligible tenants were
being assisted under the HUD programs and that tenants were paying
or receiving the proper assistance amounts. Specifically, our review
disclosed that management controls over the tenant admissions and
continued occupancy requirements were not sufficient to ensure that
the applicable Housing Authority properly:
� Determined applicant eligibility and rent/assistance payments;
� Implemented the GHA Income Disregard Program;
� Implemented the GHA Low-Rent applicant waiting list procedures;
� Administered tenant repayment agreements;
� Established/collected security deposits from GHA Low-Rent Program
tenants; and � Determined the WCHA monthly Section 8 administrative
fees.
During our review, several areas relating to the accounting for
tenant service charges and tenant account receivables were identified
that need further review and corrective action.
Issue Date: March 11, 2004
Audit
Memorandum Report No.: 2004-DE-1002
File Size: 310KB
Title: Treehouse Mortgage, LLC, Non-Supervised Loan Correspondent
Denver, Colorado
We have completed an audit of Treehouse Mortgage, LLC, a HUD approved
Non-Supervised Loan Correspondent, in Denver, Colorado. We selected
Treehouse for review because of their high default and claim rates.
The objectives of our review were to determine whether: (1) the
mortgagee complied with HUD regulations, procedures, and instructions
in the origination of FHA-insured loans; and (2) the mortgagee's
quality control plan, as implemented, met HUD requirements.
Our review identified two findings. Contrary to FHA requirements,
Treehouse used contract loan officers that were not HUD-approved
to originate FHA insured loans.Treehouse also did not have a formal
written quality control plan and was deficient in its overall quality
control activities.
Treehouse contracted with several independent loan officers to
originate FHA insured loans. Treehouse paid the contract loan officers
a commission on each FHA loan. Because these loan officers worked
as independent contractors, Treehouse management were not able to
oversee their performance with the same level of control as their
own employees. HUD considers proper oversight and control of the
loan origination process as key to reducing FHA mortgage insurance
risks.
During our fieldwork, Treehouse implemented changes over the use
of contract loan officers. Two of the three remaining contract loan
officers were converted to full time employees. The third contract
loan officer will no longer originate FHA insured loans. These changes
have brought Treehouse into compliance with HUD requirements
Treehouse did not comply with HUD quality control requirements
for over two years. Treehouse's quality control plan was informal
and inadequate. In addition, Treehouse did not perform required
quality control reviews on all defaulted loans or meet FHA's minimum
sampling requirements. Treehouse also did not submit any written
reports to senior management that identified deficiencies noted
in the files reviewed or the responsible loan officers. Treehouse's
non-compliance with HUD requirements prevented management from taking
corrective actions on deficiencies noted or ensuring the completeness,
accuracy, and validity of their loan origination files.
Prior to our on-site review, Treehouse management hired an independent
consultant to develop a new comprehensive quality control plan that
would be in full compliance with HUD requirements. Using this new
quality control plan, Treehouse management reviewed all FHA insured
loans currently in default and ten percent of all FHA insured loans
originated. If Treehouse continues to follow this new quality control
plan, as written, it should provide adequate assurance to management
that their origination operations comply with HUD directives.
Issue Date: September 15, 2003
Audit
Report No.: 2003-DE-1005
File Size: 970KB
Title: MortgageStream Financial Services, LLC Greenwood Village,
Colorado Non-Supervised Direct Endorser
We completed a review of MortgageStream Financial Services, LLC
(MortgageStream), a FHA approved non-supervised direct endorser,
with a main office located in Greenwood Village, Colorado and branch
offices located in Wheatridge and Westminster, Colorado. We did
not perform an in-depth on-site review at MortgageStream's branch
offices.
We found that MortgageStream did not always exercise due diligence
in the origination and underwriting of FHA-insured loans, or perform
these functions in accordance with HUD requirements and prudent
lending practices. Also, MortgageStream has not adequately implemented
its quality control process and is deficient in its overall quality
control activities. Furthermore, MortgageStream did not administer
or carry out its non-supervised direct endorser activities in conformity
with HUD-FHA approval requirements. As a result, six FHA-insured
loans, with unpaid balances of $940,764, are being recommended for
indemnification. Lastly, MortgageStream was charging its borrowers
an ineligible fee and overcharging its borrowers on two other fees.
The reimbursed amount to the borrowers and HUD for these ineligible
and overcharged fees total $141,934.28.
Issue
Date: August 26, 2003
Audit
Report No.: 2003-DE-1006
File Size: 1505KB
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.
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