Home | En Español | Contact Us | A to Z 

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.

Content Archived: September 9, 2010

FOIA Privacy Web Policies and Important Links [logo: Fair Housing and Equal Opportunity]
U.S. Department of Housing and Urban Development
451 7th Street S.W.
Washington, DC 20410
Telephone: (202) 708-1112 TTY: (202) 708-1455