Illinois Audit Reports
Issue Date: September 26, 2007
Audit
Report No.: 2007-CH-1015
File Size: 806.91KB
Title: Cook County, Illinois, Lacked Adequate Controls over Its
HOME Investment Partnerships Program
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited Cook County's (County) HOME Investment
Partnerships Program (Program). The audit was part of the activities
in our fiscal year 2007 annual audit plan. We selected the County
based upon on our analysis of risk factors relating to Program grantees
in Region V's jurisdiction. Our audit objectives were to determine
whether the County effectively administered its Program and followed
HUD's requirements.
The County did not effectively administer its Program and violated
HUD's Program requirements. It did not comply with HUD's regulations
and/or its manual of administrative procedures for residential rehabilitation
(manual) and/or policies and procedures for lead-based paint in
housing programs (policies and procedures) in providing housing
rehabilitation assistance for owner-occupied single-family rehabilitation
projects (projects) and/or American Dream Downpayment Initiative
(Initiative) activities' (activities) assistance with downpayments
and closing costs. It inappropriately provided more than $100,000
in Program funds to assist two projects that did not qualify as
affordable housing, used $15,000 in Program funds for excessive
project delivery costs for two projects, and was unable to support
its use of nearly $828,000 in Program and Initiative funds for projects
and activities, respectively.
We recommend that the Director of HUD's Chicago Office of Community
Planning and Development require the County to reimburse its Program
from nonfederal funds for the improper use of funds, provide support
or reimburse its Program from nonfederal funds for the unsupported
payments, and implement adequate procedures and controls to address
the findings cited in this audit report. These procedures and controls
should help ensure that nearly $154,000 in Program funds is used
over the next year for projects that qualify as affordable housing.
Issue Date: September 24, 2007
Audit
Report No.: 2007-CH-1014
File Size: 843.68KB
Title: The Peoria Housing Authority, Peoria, Illinois, Did Not
Effectively Administer Its Section 8 Housing Choice Voucher Program
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Peoria Housing Authority's (Authority)
Section 8 Housing Choice Voucher program (program). The audit was
part of the activities in our fiscal year 2007 annual audit plan.
We selected the Authority based upon our analysis of risk factors
relating to the housing agencies in Region V's jurisdiction. Our
objective was to determine whether the Authority administered its
program in accordance with requirements. This is the first of two
audit reports on the Authority's program.
The Authority's program administration regarding housing unit conditions
and timeliness of annual housing unit inspections was inadequate.
Of the 59 housing units statistically selected for inspection, 58
did not meet HUD's housing quality standards, and 28 had 88 exigent
health and safety violations that existed at the time of the Authority's
previous inspections. The 28 units had between 1 and 18 preexisting
exigent health and safety violations per unit. Based on our statistical
sample, we estimate that over the next year, HUD will pay more than
$1 million in housing assistance for units with housing quality
standards violations.
The Authority failed to ensure that its housing unit inspections
were conducted in a timely manner. Of the 3,062 unit inspections
conducted by the Authority from January 1, 2005, through January
31, 2007, 823 (26.8 percent) inspections were not conducted within
the required one year of the previous inspections. The number of
days late ranged from 1 to 488, and 402 of the late inspections
were more than 30 days late.
We recommend that the Director of HUD's Chicago Office of Public
Housing require the Authority to reimburse its program from nonfederal
funds for the improper use of nearly $107,000 in program funds and
implement adequate procedures and controls to address the finding
cited in this audit report. These procedures and controls should
help ensure that more than $1 million in program funds is spent
on housing units that meet HUD's requirements.
Issue
Date: August 17, 2007
Audit Report
No.: 2007-KC-1007
File Size:302.07KB
Title:
St. Clair County Housing Authority, Belleville, Illinois, Did Not
Properly Calculate Housing Assistance Payments
HUD-OIG
audited the St. Clair County Housing Authority (Authority) to determine
whether it properly calculated housing assistance payments for its
Section 8 Housing Choice Voucher program. Of the 89 files reviewed,
the Authority incorrectly calculated the housing assistance payments
of 52 households, resulting in overpayments and underpayments totaling
more than $29,000.
We
recommended that HUD require the Authority use administrative fee
reserves to reimburse its program for the overpayments and appropriate
households for the underpayments. Additionally, we recommended that
HUD require the Authority to implement adequate procedures and controls
to prevent future errors and improper payments.
Issue Date: July 20, 2007
Audit Report
No.: 2007-CH-1010
File Size: 712.12KB
Title: The Madison County Housing Authority, Collinsville, Illinois,
Did Not Effectively Administer Its Section 8 Housing Choice Voucher
Program
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Madison County Housing Authority's
(Authority) Section 8 Housing Choice Voucher program (program).
The audit was part of the activities in our fiscal year 2006 annual
audit plan. We selected the Authority based upon our analysis of
risk factors relating to the housing agencies in Region V's jurisdiction.
Our objective was to determine whether the Authority administered
its program in accordance with HUD's requirements.
The Authority's program administration regarding housing unit
conditions, documentation to support tenant eligibility, and housing
assistance payment calculations was inadequate. Of the 48 housing
units statistically selected for inspection, 40 did not meet HUD's
housing quality standards, and 35 had 264 violations that existed
at the time of the Authority's previous inspections. The 35 units
had between 1 and 34 preexisting violations per unit. Based on our
statistical sample, we estimate that over the next year, HUD will
pay more than $623,000 in housing assistance for units with housing
quality standards violations.
The Authority incorrectly calculated households' payments, resulting
in more than $39,000 in overpayments and $13,000 in underpayments
for the period January 2005 through August 2006. Based on our statistical
sample, we estimate that over the next year, the Authority will
overpay more than $137,000 in housing assistance. It did not ensure
that its households' files contained required documentation to support
its housing assistance and utility allowance payments. Of the 88
files statistically selected for review, 20 did not contain documentation
required by HUD and the Authority's program administrative plan
to support more than $126,000 in housing assistance payments.
The Authority also failed to adequately use HUD's Enterprise Income
Verification system to determine that reported zero-income households
had unreported income, resulting in more than $14,000 in improper
housing assistance payments.
We recommend that the director of HUD's Chicago Office of Public
Housing require the Authority to reimburse its program from nonfederal
funds for the improper use of nearly $84,300 in program funds, provide
documentation or reimburse its program more than $140,000 from nonfederal
funds for the unsupported housing assistance payments and administrative
fees, and implement adequate procedures and controls to address
the findings cited in this audit report to prevent more than $784,000
from being spent on units with material housing quality standards
violations and excessive housing assistance.
Issue Date: January 12, 2007
Audit Report
No.: 2007-KC-1004
File Size: 972.02KB
Title: The Housing Authority of East St. Louis, Illinois, Improperly
Used Public Housing Funds
HUD-OIG audited the East St. Louis Housing Authority (Authority)
to determine whether the Authority followed HUD's regulations and
its own policies when procuring goods and services, granting leave,
and managing vehicle operations. We found that the Authority improperly
procured goods and services, improperly granted leave to employees
at a cost of $147,934 in exchange for nonprofit contributions, and
poorly managed its general vehicle operations incurring $29,095
in improper vehicle allowances.
We recommended that HUD require the Authority to improve its procurement
controls by developing clearly written policies and procedures and
repay from nonfederal sources the funds improperly spent for employee
leave. We also recommended that HUD require the Authority to improve
its controls over vehicle operations, dispose of unnecessary vehicles,
and repay from nonfederal sources the funds improperly spent on
vehicle allowances.
Issue
Date: September 30, 2006
Audit Report No.:
2006-CH-1021
File Size: 909.28KB
Title:
Housing Authority of the County of Cook, Chicago, Illinois, Had
Weak Controls over Its Section 8 Housing Choice Voucher Program
The
U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Housing Authority of the County
of Cook's (Authority) Section 8 Housing Choice Voucher program (program).
The audit was part of the activities in our fiscal year 2005 annual
audit plan. We selected the Authority based upon a risk analysis
that identified it as having a high-risk program.
Our
objective was to determine whether the Authority managed its program
in accordance with the U.S. Department of Housing and Urban Development's
(HUD) requirements. This is the second of two audit reports of the
Authority's program. The Authority's program controls had weaknesses
in the areas of housing assistance payment calculations, the Family
Self-Sufficiency Program, and household portability. Of the 70 households'
files statistically selected for review, the Authority incorrectly
calculated housing assistance payments for 26 and lacked supporting
documentation regarding admission and selection for five households.
This resulted in the Authority paying nearly $28,000 in overpayments
of program housing assistance and utility allowances and more than
$47,000 in unsupported housing assistance.
The
Authority failed to adequately use HUD's Enterprise Income Verification
system to determine that reported zero-income households had unreported
income resulting in more than $62,000 in improper housing assistance
and utility allowance payments. It also did not monitor and correct
escrow balances of its Family Self-Sufficiency Program participants
and accurately account for payments related to household portability.
The Authority took proper abatement actions regarding housing assistance
and maintained its waiting lists in accordance with HUD's requirements.
As a
result of the deficiencies previously mentioned, program funds were
not always used efficiently and effectively, and fewer funds were
available to assist low- and moderate-income families on the Authority's
waiting list.
We recommend
that the director of HUD's Chicago Office of Public Housing require
the Authority to reimburse its program from nonfederal funds for
the improper use of program funds, provide support or reimburse
its program from nonfederal funds for the unsupported housing assistance
payments and related administrative fees, and implement adequate
procedures and controls to address the findings cited in this audit
report. These procedures and controls should help ensure that more
than $3 million in program funds are spent on housing assistance
payments that meet HUD's requirements.
Issue
Date: September 29, 2006
Audit Report No.:
2006-CH-1020
File Size: 909.28KB
Title:
Rockford Housing Authority, Rockford, Illinois, Needs to Improve
Its Controls over Program Housing Assistance and Utility Allowance
Payments
The
U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Rockford Housing Authority's (Authority)
Section 8 Housing Choice Voucher program (program). The audit was
part of the activities in our fiscal year 2005 annual audit plan.
We selected the Authority based upon a risk analysis that identified
it as having a high-risk program. Our objective was to determine
whether the Authority managed its program in accordance with HUD's
requirements.
The
Authority's program administration regarding housing assistance
and utility allowance payments was inadequate. The Authority did
not ensure that its households' files contained required documentation
to support its housing assistance and utility allowance payments.
Of the 85 files statistically selected for review, 73 did not contain
documentation required by HUD and the Authority's program administrative
plan to support more than $547,000 in housing assistance and utility
allowance payments.
The
Authority incorrectly calculated households' payments, resulting
in nearly $50,000 in overpayments and more than $2,500 in underpayments
for the period October 2003 through November 2005. Based on our
statistical sample, we estimate that over the next year the Authority
will overpay more than $338,000 in housing assistance and utility
allowance payments. We informed the Authority's interim executive
director and the director of HUD's Chicago Office of Public Housing
of minor deficiencies through a memorandum, dated September 29,
2006. Based on our review, the Authority ensured that program units
met HUD's housing quality standards.
We recommend
that the director of HUD's Chicago Office of Public Housing require
the Authority to provide documentation or reimburse its program
from nonfederal funds for the unsupported housing assistance and
utility allowance payments and associated administrative fees, reimburse
its program from nonfederal funds for the improper use of program
funds, reimburse the appropriate households for the underpayment
of housing assistance and utility allowance payments, and implement
adequate procedures and controls to address the deficiencies cited
in this audit report.
Issue Date: July 11, 2006
Audit Report No.:
2006-CH-1012
File Size: 3.05MB
Title: The Housing Authority of the County of Cook, Chicago, Illinois,
Needs to Improve Its Section 8 Housing Program Administration
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Housing Authority of the County
of Cook's (Authority) Section 8 Housing Choice Voucher program (program).
The audit was part of the activities in our fiscal year 2005 annual
audit plan. We selected the Authority based upon a risk analysis
that identified it as having a high-risk program. Our objective
was to determine whether the Authority managed its program in accordance
with HUD's requirements. This is the first of two audit reports
of the Authority's program.
The Authority needs to improve its program administration regarding
housing unit conditions, claiming of household dependents, and the
reasonableness of program rents. Quality control reviews were not
effective in identifying housing violations. Of the 83 housing units
statistically selected for inspection, 64 did not meet HUD's housing
quality standards and 61 had 279 violations that existed at the
time of the Authority's previous inspection. The 61 units had between
1 and 17 preexisting violations per unit.
The Authority improperly permitted 18 of 31,587 individuals reviewed
to be claimed as dependents in more than one program unit. This
resulted in more than $20,000 in overpayments of program housing
assistance. The Authority also failed to determine the reasonableness
of program rents before approving housing assistance payment contracts
for 11 of the 20 tenant files reviewed and lacked documentation
to support when its rent reasonableness database was last updated.
As a result, program funds were not used efficiently and effectively,
and fewer funds were available to assist low and moderate-income
families on the Authority's waiting list.
We recommend that the director of HUD's Chicago Office of Public
Housing require the Authority to reimburse its program from nonfederal
funds for the improper use of more than $123,000 in program funds,
ensure that program housing units inspected during this audit are
repaired to meet HUD's housing quality standards, and implement
procedures and controls to address the findings cited in this audit
report. These procedures and controls should help ensure that nearly
$10.1 million in program funds are spent on housing units that meet
HUD's requirements.
Issue Date: August 5, 2005
Audit Report No.
2005-CH-1014
File Size: 954.56KB
Title: Kankakee County Housing Authority's Low-Rent Housing Unit
Conditions; Kankakee, Illinois; The Authority's Family Units Were
Not in Good Repair, Order, and Condition; and The Authority Improperly
Used Funds to Pay Fines for Not Meeting the City of Kankakee's Ordinance
on Rental Licensing
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General (OIG) audited the Kankakee County Housing Authority's
(Authority) low-rent housing unit conditions. The audit was conducted
in response to a citizen's complaint to our office and was part
of our comprehensive audit of the Authority. Our objective was to
determine whether the Authority maintained its low-rent housing
units in accordance with HUD's requirements. We determined whether
the Authority maintained its units in good repair, order, and condition,
and whether the Authority ensured its low-rent housing units met
the City of Kankakee's (City) ordinance on rental licensing.
The Authority's
Housing units were in poor repair. An OIG appraiser inspected
39 statistically selected family housing units and identified 693
deficiencies causing units not to be in good repair, order, and
condition, as well as health and safety issues for 36 of the 39
units. The appraiser estimated that more than $152,000 in repairs
was needed to bring the 39 units into good repair.
The Authority improperly used HUD funds to pay more than
$10,000 in fines for its low-rent housing family units that did
not have valid rental licenses issued by the City.
We recommend that HUD's director of Public Housing Hub, Chicago
Regional Office, require the Authority to (1) reduce its low-rent
housing operating subsidy for the inappropriately used funds, (2)
seek reimbursement from the City for fines that may have been improperly
paid, and (3) implement procedures and controls to correct the weaknesses
cited in this report.
Issue Date: April 8, 2005
Audit Report No.:
2005-CH-1010
File Size: 1.02MB
Title: Kankakee County Housing Authority's Low-Rent Housing Program;
Kankakee, IL; The Authority Lacked Procedures and Controls Over
Subsidy Requests, Maintenance, Admission and Occupancy, Personnel,
and Its Homeownership Program
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General audited the Kankakee County Housing Authority's
(Authority) Low-Rent Housing program. The audit was conducted in
response to a citizen's complaint to our office and was part of
our comprehensive audit of the Authority. The objective of our audit
was to determine whether the Authority administered its Low-Rent
Housing program in an efficient and effective manner. We determined
whether the Authority had adequate procedures and controls over
its subsidy requests, preventive maintenance, admission and occupancy,
personnel practices, and Turnkey III Homeownership Opportunity program.
The Authority
Improperly included an average of five to seven Turnkey
III units in its calculation of its Low-Rent Performance Funding
Operating Subsidy since 1997, which resulted in the Authority receiving
excess operating subsidy totaling $119,376.
Did not follow its Annual Contributions Contract with HUD to implement
an effective maintenance program. This contributed to the Authority
having 16 Low-Rent units vacant for longer than 18 months, which
resulted in lost rental proceeds of more than $69,000.
Failed to improve its Low-Rent Housing program's admission and occupancy
controls regarding maintaining proper documentation in tenant files,
conducting timely re-examinations, accurately calculating total
tenant payments, and assigning proper unit sizes for tenants.
Did not follow its personnel policies related to maintaining documentation
in personnel files, conducting performance appraisals in a timely
manner, and properly administering personnel benefits.
Failed to provide adequate oversight of its Turnkey III Homeownership
Opportunity program. It lacked adequate controls to properly manage
the program, such as maintaining accurate records and ensuring that
only eligible tenants receive the program's benefits.
We
recommend that HUD's Director of Public Housing Hub, Chicago Regional
Office, require the Authority to (1) reduce its Low-Rent Performance
Funding Operating Subsidy for the inappropriately used monies and
(2) implement procedures and controls to correct the weaknesses
cited in this report.
Issue Date: March 30, 2005
Audit Report No.:
2005-CH-1008
File Size: 218KB
Title: The City of Decatur 's Neighborhood Renewal Program; Decatur,
IL; The City Generally Followed HUD's Requirements
The U.S. Department of Housing and Urban Development's (HUD) Office
of Inspector General reviewed the City of Decatur's (City) Neighborhood
Renewal Program. We initiated the review based on a citizen's complaint
to our office. The complainant alleged the contractor who did the
housing rehabilitation work at 327 East Stuart Avenue charged for
work not within the final contract work specifications. Additionally,
the complainant alleged the City paid for work that was improperly
performed or that was not provided, and did not follow proper procurement
practices.
Our review objectives were to determine whether the complainant's
allegations were substantiated and whether HUD's requirements were
followed. Since there were deficiencies with the housing rehabilitation
work at 327 East Stuart Avenue and the work was completed in 1999,
we expanded our review objectives to determine whether the City
followed HUD's requirements for housing rehabilitation work completed
between August 1, 2002, and July 31, 2004. Further, the City's audited
financial statements for fiscal years 2001, 2002, and 2003 included
findings on the City's Community Development Block Grant (Block
Grant) and HOME Investment Partnership (HOME) Programs. Based on
these findings, we included in our review objectives to determine
whether the City: reported program income to HUD and spent the income
prior to drawing down additional HOME funds; conducted on-site monitoring
visits of community housing development organization sub-recipients;
reviewed original appraisals prepared prior to the purchase of real
property with Block Grant funds; and conducted desk reviews and
on-site monitoring visits on Block Grant sub-recipients.
We determined the City generally complied with HUD's requirements.
However, we informed the City's Manager of Neighborhood Renewal
of the Department of Economic and Urban Development and HUD's Director
of the Chicago Regional Office of Community Planning and Development
of minor deficiencies through a memorandum dated March 29, 2005.
Issue Date: November 29, 2004
Audit Report No.:
2005-CH-1002
File Size: 355.2KB
Title: Washington Mutual Bank's Underwriting of Federal Housing
Administration-Insured Loans; Downers Grove, IL
HUD's Office of Inspector General audited of Washington Mutual
Bank (Washington Mutual), a direct endorsement mortgagee,. The audit
was conducted because we identified during our audit of A-Pan-American
Mortgage Group (A-Pan-American) (see Office of Inspector General
(OIG) Audit Report #2004-CH-1007, issued on August 9, 2004) that
Washington Mutual had a high number of loans with over-insured Federal
Housing Administration (FHA) loan amounts and invalid borrowers'
Social Security numbers. The audit objectives were to determine
whether Washington Mutual: (1) exercised due diligence in resolving
or following-up on warnings regarding borrowers' Social Security
numbers; and (2) funded FHA-insured loans without exceeding the
Department of Housing and Urban Development's (HUD) maximum insurable
limits.
Washington Mutual Bank did not identify and follow-up on, or resolve
warnings on borrowers' Social Security numbers during the underwriting
process for 4 of the 22 loans reviewed. We reviewed 22 of the 94
(23 percent) FHA-insured loans that Washington Mutual underwrote
for A-Pan-American from October 2000 through September 2003. We
also found that Washington Mutual funded 79 of the 94 (84 percent)
loans reviewed above HUD's maximum insurable limits. As a result
of Washington Mutual's deficient underwriting process, HUD's FHA
insurance fund incurred a loss of $62,363 on four loans. Additionally,
the FHA insurance fund remains at risk by more than $393,000 for
32 loans.
We recommend that HUD's Assistant Secretary for Housing-Federal
Housing Commissioner and Chairman of the Mortgagee Review Board
require Washington Mutual to:
- Reimburse HUD $43,617 for the actual loss incurred on one terminated
loan underwritten in which the borrower had more than one Social
Security number as shown on the borrower's credit report;
- Indemnify HUD $337,501 against future losses from a foreclosed
property associated with one loan and two defaulted loans in which
the borrowers had invalid Social Security numbers or a Social
Security number belonging to a deceased person;
- Buy down $56,300 for the excessive FHA insurance amounts for
the 31 active loans and one loan with a claim paid, but HUD had
not resold the property;
- Reimburse HUD $18,746 for the losses incurred on four loans
with over-insured FHA loan amounts that were already sold by HUD;
and
- Implement procedures and controls to follow HUD's requirements
and/or prudent lending practices regarding warnings about borrowers'
Social Security numbers and maximum insurable limits.
We also recommend that HUD's Director of Departmental Enforcement
Center seek Civil Monetary Penalties against Washington Mutual for
the deficiencies cited in this report.
Issue Date: September 10, 2004
Audit Report No.:
2004-CH-1008
File Size: 1.25MB
Title: Cornerstone Mortgage Group, Limited Non-Supervised Loan
Correspondent Inverness, IL
HUD's Office of Inspector General completed an audit of Cornerstone
Mortgage Group, Limited, a non-supervised loan correspondent, approved
to originate FHA mortgage loans under the Single Family Direct Endorsement
Program. The audit was part of the activities set forth in our Fiscal
Year 2003 Annual Audit Plan. We selected Cornerstone for audit because
of its high loan default and claim rate. Our audit objectives were
to determine whether: (1) Cornerstone's Quality Control Plan, as
implemented, met HUD's requirements, and (2) Cornerstone followed
prudent lending practices and complied with HUD's regulations, procedures,
and instructions in the origination of FHA loans.
We concluded, that due to the lack of management oversight and
a deficient Quality Control Plan, Cornerstone did not adequately
perform Quality Control Reviews of FHA loans as required. Also,
Cornerstone did not: adhere to prudent lending practices; and comply
with HUD's regulations, procedures, and instructions when it originated
FHA-insured loans.
We recommend that HUD's Assistant Secretary for Housing-Federal
Housing Commissioner and Chairman of the Mortgagee Review Board:
- requires Cornerstone Mortgage Group and/or its sponsor to reimburse
HUD the applicable amount of $132,092 for the claim paid on FHA
Case 332-3774090 once the property is sold;
- requires Cornerstone Mortgage Group and/or its sponsor to reimburse
HUD $545,091 for the actual losses on FHA Cases 137-1393354, 332-3711691,
332-3723581, 332-3723733, 332-3738478, 332-3749537, 332-3754385,
332-3756760, 332-3759898, 332-3760584, 332-3781815, 332-3786727,
332-3792961, 332-3793422, and 332-3805123 since the properties
were already sold;
- requires Cornerstone Mortgage Group and/or its sponsor to indemnify
HUD against future losses on seven loans totaling $916,034 (FHA
Cases 137-0918329, 137-1368384, 137-1395974, 137-1396701, 137-1459042,
137-1481924, and 137-1497057);
- requires Cornerstone to fully establish and implement an adequate
Quality Control Plan and related reviews;
- reviews Cornerstone's implementation and ensure its Quality
Control process is fully implemented in accordance with HUD's
requirements; and
- determines whether HUD should withdraw Cornerstone's approval
to participate in HUD's Single Family Mortgage Insurance Program.
We also recommend that HUD's Director of Departmental Enforcement
Center takes appropriate administrative action(s) against Cornerstone.
Issue Date: August 9, 2004
Audit Report No.:
2004-CH-1007
File Size: 334.1KB
Title: A-Pan-American Mortgage Group, Non-Supervised Loan Correspondent,
Chicago, IL
HUD's Office of Inspector General completed an audit of A-Pan-American
Mortgage Group, a non-supervised loan correspondent, approved to
originate FHA mortgage loans under the Single Family Direct Endorsement
Program. The audit was part of the activities set forth in our Fiscal
Year 2003 Annual Audit Plan. We selected A-Pan-American for audit
because of its high loan default and claim rate. Our audit objectives
were to determine whether: (1) A-Pan-American's Quality Control
Plan, as implemented, met HUD's requirements, and (2) A-Pan-American
complied with HUD's regulations, procedures, and instructions in
the origination of FHA loans.
We concluded that A-Pan-American did not comply with HUD's regulations,
procedures, and instructions in the origination of FHA-insured loans.
It allowed unapproved branches and/or non-employees to originate
loans using A-Pan-American's FHA lender identification number. Also,
A-Pan-American did not have an adequate Quality Control Plan or
any evidence that it implemented the Plan.
We recommend that HUD's Assistant Secretary for Housing-Federal
Housing Commissioner and Chairman of the Mortgagee Review Board:
- requires A-Pan-American to indemnify HUD $6,541,291 against
future losses on the 49 active loans originated in violation of
HUD's requirements;
- reimburses HUD $145,056 for the actual losses incurred on the
four terminated loans with a claim originated in violation of
HUD's requirements;
- reimburses HUD the appropriate amount of $128,296 for the future
loss on one terminated loan with a claim originated in violation
of HUD's requirements once the property is resold; and
- withdraws A-Pan-American's approval to participate in HUD's
Direct Endorsement Program.
We also recommend that HUD's Director of Departmental Enforcement
Center:
- takes appropriate administrative action against A-Pan-American;
and
- seeks Civil Monetary Penalties against A-Pan-American for the
deficiencies cited in this report.
Issue Date: June 17, 2004
Audit Report No.:
2004-CH-1005
File Size: 666.5KB
Title: Connexions Enterprise, Inc.'s Supportive Housing Grant
Program; Chicago, IL
HUD's Office of Inspector General completed an audit of Connexions'
Supportive Housing Grant Program. We conducted the audit based on
a request from HUD's Chicago Regional Office of Community Planning
and Development. The objectives of our audit were to determine whether
Connexions: (1) had adequate management controls over the Program;
(2) obtained matching funds and used Program funds according to
HUD's requirements; and (3) Program participants received the in-kind
services as set forth in the HUD-approved Grant Application.
Although Connexions met its cash matching requirements under the
Supportive Housing Program (number IL01B110028), we concluded that
Connexions lacked adequate management controls to ensure that Program
costs were eligible and adequately supported; Program participants
received the required services; and its Financial Management Policies
and Procedures were followed. Specifically, we determined that Connexions:
- Used $30,788 of Program funds for ineligible costs;
- Lacked sufficient documentation that its use of another $174,583
benefited the Program;
- Did not receive the in-kind services for its Program participants
as set forth in the HUD-approved Grant Application; and
- Did not ensure that its Chief Executive Officer followed its
Financial Management Policies and Procedures.
We recommend that HUD's Director of Community Planning and Development,
Chicago Regional Office, declares Connexions in default as permitted
by the Supportive Housing Program Grant Agreements and recaptures
any ineligible Program funds used. HUD's default notice should help
ensure that over $173,000 in Supportive Housing Program funds are
used appropriately. We also recommend that HUD's Director of Departmental
Enforcement Center takes administrative action against Connexions'
Board of Directors and its Chief Executive Officer for failing to
administer the Supportive Housing Program in accordance with Federal
requirements.
Issue Date: November 26, 2003
Audit Report No.:
2004-CH-1001
File Size: 4.24MB
Title: Kankakee County Housing Authority
Section 8 Housing Program
Kankakee, Illinois
HUD's Office of Inspector General completed an audit of the Kankakee
County Housing Authority's Section 8 Housing Program. The objectives
of our audit were to determine whether the Authority: (1) administered
its Section 8 Program in an efficient and effective manner; and
(2) provided decent, safe, and sanitary housing for its Section
8 tenants. This audit is part of our ongoing comprehensive audit
of the Authority. The audit was conducted based upon a citizen's
complaint to our Office. The complainant alleged that the Authority's
former Executive Director, who left the Authority in 2001, was not
qualified for his position.
The Authority's management controls over its Section 8 Housing
Program were very weak. The Authority lacked adequate procedures
and controls over Housing Quality Standards and administrative processes.
The Authority's Section 8 units contained health and safety violations.
A total of 873 Housing Quality Standards violations were found in
47 of the 50 units inspected. In addition, the Authority failed
to properly enforce the City of Kankakee's Ordinance governing the
licensing of housing units occupied by persons other than the owners.
Additionally, the Authority: (1) made $36,259 in Housing Assistance
Payments for 11 units without executing Housing Assistance Payments
contracts with the landlords; (2) lacked Housing Assistance Payments
contracts, lease agreements, and/or tenancy addendums to show $324,364
in Housing Assistance Payments for 40 units were appropriate; (3)
incorrectly calculated Housing Assistance Payments for 19 units;
(4) failed to conduct five reexaminations for four tenants; (5)
did not complete seven reexaminations prior to the anniversary date
for nine tenants; (6) lacked other required supporting documentation
for 56 reexaminations for 29 units; (7) failed to review and/or
did not have documentation to support its utility allowances and
Section 8 Housing Choice Program Payment Standards; (8) did not
properly establish or manage its Family Self-Sufficiency Program
according to the minimum required Program size; (9) failed to open
a Federally insured interest bearing investment account and deposit
escrow balances totaling $37,383 into the account; and (10) did
not properly complete rent reasonableness certifications for Section
8 housing units placed under contract.
The Authority's Board of Commissioners did not adequately exercise
their responsibility to effectively manage the Authority. The Authority's
former Executive Directors did not implement adequate controls to
ensure that Section 8 units were free of health and safety violations.
Further, the Authority lacked adequate controls over its operations.
The Authority's Board and its former Executive Directors did not
follow Federal requirements, the City of Kankakee's Ordinance, or
the Authority's own policies.
We recommend that HUD's Acting Director of Recovery and Prevention
Corps, Cleveland Field Office, assures that the Authority implements
procedures and controls to correct the weaknesses cited in this
report. Additionally, we recommend that HUD's Acting Director: (1)
takes administrative action against the Authority's former Executive
Directors and its Board of Commissioners for failing to administer
the Authority according to Federal, the City of Kankakee, and its
own requirements; (2) provides training and technical assistance
to the Authority's staff and its Board of Commissioners regarding
their duties and responsibilities; and (3) issues a notice of default
to the Authority as permitted by Section 15 of the Consolidated
Annual Contributions Contract. HUD's default notice should help
ensure that the Authority's $2,232,180 in Section 8 Program funds
are used appropriately.
Issue Date: July 18, 2003
Audit Report No.:
2003-CH-1018
File Size: 1.36MB
Title: Chicago Housing Authority Outsourced Property Management
Contracts Review Chicago, Illinois
HUD's Office of Inspector General completed an audit of the Chicago
Housing Authority's Outsourced Property Management Contracts. The
audit was part of our Fiscal Year 2001 Annual Audit Plan. Our audit
objectives were to: (1) evaluate the Housing Authority's controls
over contracts for the private management of family and elderly
housing developments; and (2) determine whether the private management
contractors were meeting their obligations to the Housing Authority
under the terms of their contracts.
We found that the Housing Authority failed to properly monitor
and administer its management agreements with nine private management
firms and two resident management corporations. The Housing Authority
did not properly monitor its contractors' compliance with requirements
of the Minority, Women, and Disadvantaged Business Enterprises and
Section 3 Programs. The management contractors also failed to adhere
to their management agreements and other requirements for maintenance,
work orders, unit inspections, and tenant recertifications.
We recommend that HUD's Director of Public Housing, Chicago Regional
Office, ensures that the Chicago Housing Authority: (1) imposes
any or all of the available remedies against the contractors for
their noncompliance with the Minority, Women, and Disadvantaged
Business Enterprises and Section 3 Programs or obtains all necessary
documentation to support the unsupported program expenses of $11,223,024;
(2) implements policies and procedures to monitor the performance
of its contractors and maintain the required documents to support
the contractors' compliance; (3) provides training and refresher
courses for the management contractors to assure that contractors
are fully aware of the Federal requirements and standards in place
and implements them; (4) implements policies and procedures to correctly
perform and document unit inspections at housing developments, and
to generate and address repair work orders timely; and (5) assures
that its contractors implement policies and controls to recertify
the housing developments' tenants on their move-in anniversary dates
and maintain signed certification documentation in tenant files
at the housing sites.
Issue
Date: June 13, 2003
Audit Report No.:
2003-CH-1017
File Size: 1024KB
Title: Housing Continuum Inc., Homebuyers Assistance Program,
Geneva, Illinois
HUD's Office of Inspector General completed an audit of Housing
Continuum, Inc.'s Homebuyers Assistance Program. The audit resulted
from a citizen complaint to Speaker of the United States House of
Representatives Dennis Hastert. The objectives of our audit were
to determine whether the complainant's allegations were substantiated
and whether HUD's rules and regulations were followed. The complainant
alleged Housing Continuum did not ensure that rehabilitated homes
met HUD's requirements. HUD's HOME Investment Partnerships Program
funded Housing Continuum's Homebuyers Assistance Program.
We found that Housing Continuum did not ensure that rehabilitated
homes met HUD's Housing Quality Standards and/or the State of Illinois'
requirements. Specifically, Housing Continuum failed to sufficiently
document the required cost analysis and did not assess the reasonableness
of the contract price. We determined that housing rehabilitation
work was not authorized, not provided, or was improperly performed.
Moreover, contractors did not obtain construction permits in a timely
manner as required by HUD's regulation and/or the State of Illinois'
requirements.
We recommend that HUD's Acting Director of Community Planning
and Development, Chicago Regional Office, assures Housing Continuum
reimburses its Homebuyers Assistance Program for the inappropriate
use of HUD funds and implements controls to correct the weaknesses
cited in this report.
Issue Date: October 29, 2002
Audit Memorandum
No.: 2003-CH-1003
File Size: 169KB
Title: Congressionally Requested Audit of Section 514 Outreach
and Training Assistance Grants Awarded to Tenants United for Housing,
Inc.; Chicago, Illinois; Grant Numbers FFOT00013IL and FFOT98007IL
We completed an audit of Tenants United for Housing, Inc.'s Section
514 Outreach and Training Assistance Grants awarded under the Multifamily
Assisted Housing Reform and Affordability Act of 1997. The objectives
of the audit were to determined whether Tenants' had: management
controls in place to ensure that Section 514 Grant funds were used
for eligible activities; and expended the Grant funds for any lobbying
activities. The audit identified that Tenants United for Housing:
(1) did not establish a cost allocation plan to allocate costs to
the Grants; (2) failed to maintain time records for staff that specifically
show the time they spent working on the Grants' activities; and
(3) needed to return $6,900 in Grant funds to pay for two meetings
that were canceled. Our report contains four recommendations to
address the issues identified in this audit.
Issue Date: October 24, 2002
Audit Memorandum
No.: 2003-CH-1001
File Size: 171KB
Title: Housing Authority of Champaign County Citizen Complaint
Champaign, Illinois We have completed an audit of the Housing Authority
of Champaign County.
The audit resulted from a citizen complaint to our Office. The
objectives of our audit were to determine whether the complainant's
allegations were substantiated and whether HUD's rules and regulations
were followed. The complainant's specific allegations were the Housing
Authority: (1) inappropriately used monies from its Comprehensive
Improvement Assistance Grant, Public Housing Drug Elimination Grant,
and Resident Opportunities for Self Sufficiency Grant Programs;
and (2) did not maintain its units in a decent, safe, and sanitary
condition. We found that the Housing Authority charged its HUD-funded
Grants (Public Housing, Drug Elimination, and Comprehensive Improvement
Assistance) $27,360 in unallowable expenses. Of this total, $23,599
was ineligible and $3,761 was unsupported. The ineligible amount
consists of stipends paid to the Housing Authority's residents who
were not eligible to receive them because they were not officers
of the Authority's Resident Council as required. The $3,761 in unsupported
expenses consists of $2,135 charged to the Drug Elimination Grant
and $1,626 charged to the Comprehensive Improvement Assistance Grant.
Issue Date: March 29, 2002
Audit Memorandum
No.: 2002-CH-1002
File Size: 452KB
Title: Housing Authority of the City of Alton, Low-Income Housing
and Public Drug Elimination Programs Alton, Illinois
HUD's Office of Inspector General completed an audit of the Housing
Authority of the City of Alton's Low-Income Housing and Public Housing
Drug Elimination Programs. The audit resulted from citizen complaints
to our Office. The objectives of our audit were to determine whether
the complainants' allegations were substantiated and whether HUD's
rules and regulations were followed. The complainants' specific
allegations were: (1) the Authority's former Executive Director
was granting preferential treatment to certain tenants; (2) improper
use of HUD funds by the Authority; and (3) poor controls over the
Authority's equipment.
We found no evidence that the Housing Authority's former Executive
Director was granting preferential treatment to certain tenants.
However, we found that the Housing Authority did not follow HUD's
requirements, the Annual Contributions Contract, and its policies
to ensure the Authority's Low-Income Housing and Public Housing
Drug Elimination Programs were operated efficiently and effectively.
Specifically, the Authority: failed to make required tax payments
totaling $50,870; claimed at least $38,823 in excess operating subsidies
over a four year period; did not make sufficient efforts to collect
tenant accounts receivable totaling $39,701; inappropriately charged
expenses of $144,767 to its Drug Elimination Grants; and improperly
paid its former Executive Director $6,635 for accrued but unused
sick leave. We also found that the Housing Authority's system of
management controls were weak. The Housing Authority's controls
did not assure that it adhered to its policies concerning performance
appraisals, inventory of equipment, allocation of unit size, tenant
grievances, rental collections and evictions, and travel reimbursements
to members of the Board of Commissioners and the Authority's staff
for authorized travel. As a result, HUD lacks assurance that the
Housing Authority's resources were used to the maximum extent to
benefit low and moderate income tenants.
Issue Date: September 28, 2001
Audit Memorandum
No.: 2001-DE-1802
File Size: 248KB
Title: Review of Management Controls over Disbursements, Lafayette
Square Apartments, Macomb, Illinois
We reviewed the management controls over the disbursements functions
and related accounting activities. We also reviewed the reasonableness
of the expenses from May 1999 through June 2000. We expanded the
review to June 2001 for specific expenses. We found that the project
management oversight by the project fee management agent and Board
of Directors to be deficient. The fee management agent has not carried
out their responsibilities of managing the project. The management
agent has not executed the required management agreement with the
project owner detailing what services were to be provided and the
basis for compensation. While the management agent contracted for
the establishment of the project's books of account, the accounting
records have not been used in providing financial information to
the on-site project managers for the daily operation of the project.
In addition, the official accounting records have not been independently
audited for the 1999 and 2000 fiscal years as required by HUD. Furthermore,
the management agent has not administered the tenant selection,
rent calculations and tenant payment and HUD rental assistance collection
activities but has allowed them to be performed by the on-site project
managers or staff.
The fee management agent, located in Montana, has not exercised
any meaningful oversight of the Illinois located Lafayette Square
Apartments project and its managers and staff. The on-site project
managers and staff have been effectively carrying out the daily
operations of the project. Without a management agreement and without
the expected management services being provided, the total fee of
$112,943 paid to the management agent for the period from May 1999
through June 2001 is questionable.
The Board of Directors has not fulfilled its responsibilities for
oversight of the project. The Board has not taken necessary action
to ensure that the management agent is performing its required duties.
The Board has allowed its management agent to receive fees for administering
the project even though many of the required management agent services
have not been performed.
Issue Date: June 19, 2001
Audit Report No.:
00-CH-1008
File Size: 131KB
Title: Travelers and Immigrants Aid/Chicago Connections, Supportive
Housing Program Grant, Chicago, Illinois
We completed an audit of the Supportive Housing Program Grant
awarded to Travelers and Immigrants Aid/Chicago Connections in 1997.
The audit was conducted in response to an anonymous complaint alleging
that food coupons, Chicago Transit Authority fare tokens and corporate
credit cards used in connection with a Travelers' supportive housing
grant program were misused. The objectives of the audit were to
determine whether: (1) there was any basis to substantiate the allegations;
(2) the expenses incurred and paid by Travelers were eligible and
properly supported; and (3) adequate internal controls were implemented
for the Supportive Housing Grant Program.
We determined that $529 in cash was stolen in May or June 1998
from a metal lockbox used by the NextStep Program, one of Travelers'
supportive services. Travelers could not attribute this theft to
any particular employee, and we were unable to establish how many
employees may have had access to the cash. Written control procedures
were in effect but Travelers could not locate an internal incident
report to document the theft. There was no basis to support the
allegations concerning misuse of the food coupons and other items.
We also found that Travelers charged HUD $20,491 in unallowable
expenses. As a result, Travelers failed to disburse a portion of
the grant funds as prescribed in HUD's grant agreement and other
regulations. Additionally, HUD could not be assured that Travelers
was accurately reporting its expenses.
Issue Date: September 26, 2000
Audit Report No.:
00-CH-211-1005
File Size: 427KB
Title: Golden Feather Realty Services, Inc., Management and Marketing
Contractor, Chicago, Illinois
We completed an audit of Atlanta Homeownership Center's Management
and Marketing contractor, Golden Feather Realty Services, Inc.,
for Atlanta Area A-1. The audit was conducted as part of a nationwide
internal audit of the Federal Housing Administration's Single Family
Property Disposition Program. The objectives were to determine whether
Golden Feather managed HUD's single-family disposition program in
accordance with HUD policies, procedures, and regulations and with
the terms and conditions of Golden Feather's Management & Marketing
Contract.
The audit disclosed that Golden Feather did not provide sufficient
oversight of appraiser work assignments necessary to discourage
the solicitation of a kickback. In addition, Golden Feather did
not execute or record land use restriction addendums necessary to
restrict nonprofit organizations from purchasing properties at a
30 percent discount and reselling the properties for more than 110
percent of the cost. Furthermore, Golden Feather did not always
maintain properties, use approved appraisers to appraise HUD properties,
and process appraisals and disposition programs timely.
Issue Date: August 8, 2000
Audit Report No.:
00-CH-212-1004
File Size: 205KB
Title: Neighborhood Commons Cooperative, Multifamily Rental Housing,
Audit of Project Operations, Chicago, Illinois
We completed an audit of the project operations at Neighborhood
Commons Cooperative. The audit was conducted in response to a request
from the Chicago Multifamily Hub to assess HUD's concerns about:
(1) management and operational problems at the complex, and (2)
a change in management agents. The objective of the audit was to
determine whether project funds were used in compliance with the
Regulatory and other agreements, and applicable HUD policies and
procedures.
We found that the former management agent failed to adequately
collect monthly rent payments because it did not take corrective
actions in a timely manner to uniformly apply the HUD-approved rent
schedule, and did not maintain accurate books and records. We also
found that the former Board abused its authority and undermined
the management agent by taking control of the Cooperative's daily
operations. In addition, the Board ignored HUD directives and took
various actions that benefited some Board members, their relatives
and friends.
Issue Date: December 15, 1999
Audit Memorandum
No.: 00-CH-211-1804
File Size: 20KB
Title: YMCA of Metropolitan Chicago Foundation, Chicago, Illinois
The results of our review were presented to the Assistant United
States Attorney on May 14, 1999, who used the review results to
negotiate a settlement agreement between HUD and the YMCA. The settlement,
which contains no admissions by the YMCA, calls for restitution
payments to be paid to HUD totaling $197,317 over a four-year period.
As a result, we consider this audit assignment to be closed.
Issue Date: October 20, 1999
Audit Memorandum
No.: 00-CH-211-1802
File Size: 41KB
Title: Onterie Center Multifamily Equity Skimming, Chicago, Illinois
We completed a review of the books and records of Onterie Center.
We performed the audit to determine whether the use of project operating
funds was reasonable and complied with the Regulatory Agreement
and applicable HUD regulations. The review was part of Operation
Safe Home and was conducted in coordination with the Assistant United
States Attorney.
We concluded the Onterie Associates Partnership improperly disbursed
$2,150,732 of the Onterie Center Project funds and assets. The inappropriate
disbursements included: (1) $282,845 for ineligible salary expenses;
(2) $297,191 for ineligible payments to the wife of the General
Partner; (3) $409,888 to Monroe Partners and $49,013 to PSM International,
both identity-of-interest companies, for unnecessary computer, facsimile,
and photocopier related expenses; (4) $97,843 for refinancing and
mortgage workout related legal and accounting expenses; (5) $40,758
for ineligible brokerage commissions paid to the General Partner;
(6) $528,383 for ineligible management fees paid to the General
Partner; and (7) $333 for supplies used to clean up a lot at 600
North Lake Shore Drive that was unrelated to the Project. Additionally,
$53,299 of income was lost. This represented free parking and health
club memberships, and excess rental rebates given for the General
Partner and his family. If the misused funds had been available
to the project, it could have earned another $391,179 in interest
by investing the funds in one-year Treasury Bills. The inappropriate
disbursements and uses of cash and assets occurred when the Project
was in a non-surplus cash position. Onterie Associates Partnership
overstated Project expenses and understated Project income. As a
result, fewer funds were available for normal operations or debt
service and HUD's security interest in the Project was weakened.
Issue Date: October 6, 1999
Audit Memorandum No.: 00-CH-185-1801
File Size: 40KB
Title: Peoria Housing Authority HOPE VI Grant, Peoria, Illinois
Our audit objectives were to determine whether the Housing Authority:
(1) submitted accurate information to HUD in its HOPE VI grant application
regarding a City of Peoria funding commitment; (2) properly rated
and selected the developer for the HOPE VI project; and (3) properly
selected the tax credit syndicator for the HOPE VI project.
To ascertain whether the Authority submitted accurate information
to HUD regarding a City of Peoria funding commitment, we reviewed
the HOPE VI grant application and Revitalization Plan submitted
to HUD. We also interviewed City Council members, and reviewed City
Council meeting minutes. To determine whether the HOPE VI developer
was properly selected, we reviewed the Authority's and HUD's procurement
requirements. Additionally, we reviewed the Request for Qualification
and responses received, and interviewed members of the Authority's
selection panel.
To determine whether the HOPE VI tax credit syndicator was properly
selected, we interviewed Authority employees and its HOPE VI Program
Manager. We also reviewed proposals received from tax credit syndicators
and the Authority's analyses of the proposals.
We found that the grant application submitted to HUD in July 1997
did not include a specific dollar amount of City of Peoria funding
committed to the HOPE VI project. However, the Revitalization Plan
submitted to HUD in January 1999 stated that the City would provide
$4 million of funding for the HOPE VI project. In actuality, the
Housing Authority did not request funding from the City Council
until July 1999. Therefore, the funding commitment contained in
the Revitalization Plan was not valid. However, in August 1999,
the City Council approved $3.6 million of funding for the HOPE VI
project in a separate action that had no effect on HUD's approval
of the Authority's application.
We did not find any evidence that the process for rating and selecting
the HOPE VI developer was unfair or otherwise biased in favor of
a particular developer. Additionally, the selection of the HOPE
VI tax credit syndicator did not violate conflict of interest requirements.
However, as discussed in the attached finding, the Housing Authority
did not select the highest bidder as the tax credit syndicator.
Also attached are the Executive Director's comments received in
response to the finding.
Issue Date: July 16, 1999
Audit Report No.:
99-CH-213-1006
File Size: 126KB
Title: West Park Place Residents Association for Preservation
Resident Homeownership Program Grant Preservation Technical Assistance
Planning Grant, Chicago, IL
We completed an audit of the Resident Homeownership Program Grant
and Preservation Technical Assistance Planning Grant awarded to
the West Park Place ResidentsAssociation for Preservation. We conducted
the audit in response to a complaint received from some residents
of the property. The objectives of our review were to determine
whether: (1) grant costs incurred were eligible and properly supported
and (2) theproposed rehabilitation work was satisfactorily performed.
We found that the Resident Homeownership Program Grant costs incurred
by the Association were eligible and properly supported. However,
the Association did not effectively administer nor did HUD effectively
monitor the grant. Additionally, the Association did not expend
all of its Preservation Technical Assistance Planning Grant funds
received from HUD.
Issue Date: December 2, 1998
Audit Memorandum
No.: 99-CH-201-1801
File Size: 566KB
Title: Followup on OIG Review, Assessment of Progress, Chicago
Housing Authority, Chicago, Illinois
We completed a followup to the OIG September 30, 1996 review of
the Chicago Housing Authority entitled Assessment of Progress. The
objective of our review was to determine whether the Authority had
taken appropriate actions to correct the problems identified in
the previous report. Further, since our previous review, the Authority's
Inspector General determined that the Authority expended HOPE VI
funds for two self sufficiency programs that did not achieve program
objectives. Therefore, as part of this review, we also assessed
the adequacy of the Authority's internal controls over the HOPE
VI self sufficiency programs and construction activities to ensure
program goals and objectives are met.
The Authority took actions to address the problems found in our
previous review; however, as with any effort of this size, some
actions were delayed or overlooked and require increased emphasis.
Of particular importance are those actions related to Security,
Preventive Maintenance, Annual Inspections, and Risk Management
that can affect the living conditions of tenants. The Authority
did not have an adequate system of controls to ensure that projects
funded by HOPE VI achieved their program goals.
Issue Date: October 15, 1998
Audit Report No.:
99-CH-259-1002
File Size: 369KB
Title: City of Chicago Empowerment Zone Program, Chicago, IL
Based on our review of 26 of the 84 activities reported to HUD
in its June 30, 1997 Performance Review, we concluded that the City
did not maintain adequate control over its Empowerment Zone Program
to assure efficient and effective use of the funds or accurate reporting
of the Program's accomplishments. The City: inappropriately used
$670,417 of Empowerment Zone funds and was billed $121,590 that
did not benefit Zone residents; did not have documentation to show
that another $892,484 of Zone funds paid and $120,012 billed to
the City benefited Zone residents or were reasonable and necessary
expenses; inaccurately reported the accomplishments of its Empowerment
Zone activities; and reported to HUD 15 projects as Empowerment
Zone activities when they were not. As a result, Empowerment Zone
funds were not used efficiently and effectively, and the impression
exists that the benefits of the City's Empowerment Zone Program
were greater than actually achieved.
Issue Date July 9, 1998
Audit Report No.:
98-CH-221-1004
File Size: 340KB
Title: Legend Mortgage Company Single Family Mortgage Insurance
Program Lisle, IL
We reviewed all four HUD/FHA 203(k) loans originated by Legend
Mortgage Corporation that were in default as of April 1997. At the
time we started our audit, Legend's 203(k) default rate was 2.21
percent; and it has risen to 5.33 percent as of April 30, 1998.
We concluded that Legend did not originate the four 203(k) loans
in accordance with HUD's requirements. All four of the loans were
originated by the same loan officer, Legend's President. Strawbuyer's
were identified in all four loans. Legend Mortgage: (1) added fictitious
information into loan files and applications without the knowledge
or approval of borrowers; (2) collected the fictitious information
from a contractor without the knowledge or approval of borrowers;
(3) failed to obtain evidence that 401(k) accounts were redeemed;
(4) failed to consider the taxation and early withdrawal penalties
when valuing a 401(k) account; (5) failed to verify the source of
partnership assets used to qualify borrowers; and (6) failed to
verify the receipt of funds by the partnership for the borrowers.
The deficiencies occurred because of Legend's poor loan origination
practices. The fictitious information added by Legend Mortgage enabled
the borrowers to appear to qualify for mortgages by improving their
liquid asset and income positions. All four loans involved either
a fictitious "partnership agreement" or a fictitious residence lease.
All four documents appeared to have the forged signatures of the
borrowers. Consequently, applications submitted to HUD contained
false information about the borrowers' intention to be actual borrowers,
and the true value of their assets and income. HUD relied on Legend's
origination process and as a result assumed abnormally high risks
when it insured the four loans which together were valued at $310,200.
Date Issued: April 22, 1998
Audit Report No.:
98-CH-209-1001
File Size: 52KB
Title: Peoria HA, Peoria, IL
We found that the Peoria Housing Authority implemented its Drug
Elimination Program in accordance with HUD's requirements except
for the purchase of computer equipment that was not being used for
the intended objectives of the Program.
Date Issued: January 21, 1998
Audit Memorandum
No.: 98-CH-211-1806
File Size: 14KB
Title: Sheridan Plaza Apts., Chicago, IL
We concluded that Sheridan Plaza Associates Partnership and its
management agent: Improperly charged the Project $67,934 for the
salary of a General Partner of Sheridan Plaza Associates. The General
Partner's salary should have been paid from either management fees
collected or from the identity-of-interest construction company
that the General Partner was President of. The ineligible disbursements
occurred when the Project was in a non-surplus cash position. Consequently,
fewer funds were available for normal operations of debt service
and HUD's security interest in the Project was weakened.
Improperly used $5,000 of Project operating funds to pay ineligible
legal fees. The legal fees did not relate to Project operations
and instead were applicable to the Project owner's attempts to refinance
the HUD-insured mortgage. As a result, Project expenses were overstated
and less funds were available for normal operations and debt service.
Issue Date: November 20, 1997
Audit Memorandum
No.: 96-CH-221-1802
File Size: 17KB
Title: Dearborn Place Apts., Chicago, IL
We Concluded that Dearborn Delaware Associates and its management
agents:
Improperly used $840,333 of Project operating funds to make payments
on bank loans. The payments were made while the project was in default,
and in a non-surplus cash position. The loans were paid because
the former identity-of-interest management agent believed these
were eligible project expenses.
As a result, the project was deprived of needed revenues for reasonable
and necessary operating expenditures. As a result of rent concessions
and writeoffs of rent due, the former identity-of-interest management
agent paid the Project $189,204 less than the market rate rent between
November 1988 and December 1995. The former management agent did
not enforce on itself the Landlord's Remedies as outlined in the
lease. Consequently, the Project was deprived of needed revenues
for reasonable and necessary operating expenditures.
Improperly used $220,000 of funds relating to HUD's partial payment
of claim. Specifically, funds escrowed for building improvements
were used for legal expenses, architectural expenses, loan repayments,
and other miscellaneous partnership expenses. The management agent
considered all these expenses to be eligible Project expenses. As
a result of the inappropriate payments, HUD lacks assurance that
Project operating funds and mortgage proceeds were used for their
intended purposes.
Used Project operating funds totaling $109,316 to pay ineligible
and unsupported expenditures. Specifically, $66,685 was used to
pay ineligible or unsupported legal fees; $26,365 was used to pay
for ineligible consulting; and $16,266 was used to pay other miscellaneous
ineligible expenditures. As a result, the Project was deprived of
needed revenues and HUD lacked assurance that Project funds were
used only for reasonable and necessary operating expenses.
Did not remit monthly remaining net cash to HUD as payment on its
HUD-held second mortgage. A total of $27,230 was not remitted as
required. As a result of the payments not being made, HUD did not
receive funds to apply against the HUD-held mortgage.
Issue Date: May 27, 1997
Audit Memorandum
No.: 97-CH-211-1804
File Size: 18KB
Title: Colonial Park Apts., Park City, IL
We Concluded that Colonial Park Associates, LTD, and it's Management
Agent: Improperly used project operating funds of $201,640 to make
payments on loans from an identity-of-interest entity and to make
owner distributions. Loan repayments totalled $153,837 and owner
distributions totalled $47,803. Because of the poor financial condition
of the Project, bank lines of credit were obtained in the name of
the identity-of-interest entity rather than in the name of the Project.
The managing general partner said he was unaware of any restrictions
on the repayment of owner advances. The improper repayments and
distributions contributed to the mortgage default and reduced the
amount of project funds available to pay HUD subsequent to the mortgage
default. Paid $11,028 in costs which were not necessary to the operation
or maintenance of the Project. The costs included legal fees of
$10,250; accounting fees of $548; and miscellaneous partnership
fees of $230. All of these disbursements occurred while the Project
was in a non-surplus cash position. Consequently, the Project had
less funds available for operations, maintenance, and debt service.
Issue Date: May 22, 1997
Audit Report No.:
97-CH-229-1007
File Size: 82KB
Title: Developing Economical and Better Living, Inc., Chicago,
IL
We concluded the nonprofit organization did not comply with HUD
requirements. The nonprofit organization: (1) sold ten homes for
amounts greater than allowed on the same day it purchased the homes
from HUD; (2) violated HUD's conflict of interest requirements;
and (3) did not ensure that the home purchasers met the Program
qualifications, resulting in sales to investors; (4) had an excessive
number of unsold, vacant, and boarded up properties. Additionally,
the nonprofit organization did not have a functional accounting
system to track and record property costs.
Issue Date: October 10, 1996
Audit Memorandum
No. 97-CH-211-1802
File Size: 18KB
Title: Terrace Lakes Apts., Aurora, IL
We concluded that Fox Valley Development Partnership did not comply
with the Regulatory Agreement or with other HUD requirements. Fox
Valley Development Partnership inappropriately disbursed $483,575
of Project funds for ineligible expenses and therefore, did not
adequately protect and use resources economically and efficiently.
The ineligible disbursements included: (1) $197,712 in excessive
profits to an identity of interest maintenance contractor; (2) $129,475
for refinancing and mortgage workout related expenses; (3) $94,292
for excessive management fees; (4) $44,096 for insurance premiums;
and (5) $18,000 to an identity of interest project. The disbursements
occurred when the Project was in a non-surplus cash position, the
mortgage was in default, or both. As a result, Fox Valley Development
overstated Project expenses, fewer funds were available for normal
operations or debt service, and HUD's security interest in the Project
was weakened.
Issue Date: October 3, 1996
Audit Report No.:
97-CH-202-1001
File Size: 152KB
Title: Franklin County HA, West Frankfort, IL
The Franklin County Housing Authority needs to improve its procedures.
The Authority needs to do more to improve the administration of
its programs and ensure compliance with the Annual Contributions
Contract and other HUD requirements. This report addresses issues
related to: (1) poor cash receipt controls; (2) improper administration
of the Public Housing Drug Elimination grant; (3) inadequate safeguards
over its inventories of parts and supplies; and (4) inadequate controls
over tenant accounts receivables.
Issue Date: September 30, 1996
Audit Report No.:
96-CH-201-1815
File Size: 555KB
Title: Chicago HA, Chicago, IL
Our assessment shows that the Chicago Housing Authority is improving
its operations on many different fronts. Many of the improvements
made so far deal with the Housing Authority's operational infrastructure
where the impact is not readily noticeable. Nonetheless, the improvements
are necessary as a prelude to more visible changes. Although improvements
are being made, the Chicago Housing Authority has much work to do
before it will be operationally sound. Many of the Authority's actions
have not been completed or involve continuing activities. The Authority
needs to periodically assess its actions to assure its initiatives
correct the problems they were designed to address. The Housing
Authority needs to make sure the actions it has initiated or planned
are adjusted when necessary, and carried through to completion.
In addition, the Authority needs to be more diligent and aggressive
in pursuing corrective actions in the areas of security, modernization,
work orders, and preventive maintenance.
Issue Date: September 5, 1996
Audit Memorandum
No.: 96-CH-212-1813
File Size: 48KB
Title: Ada Throop Apts., Chicago, IL
We concluded that Ada Throop Apartments, LTD, and it's Managing
Agents: Failed to maintain the Project in decent, safe, and sanitary
condition. The Project owner, and its managing agents failed to:
(1) implement preventive maintenance procedures; (2) conduct timely
unit inspections; (3) ensure work orders were written and completed
for inspection deficiencies; (4) establish controls over outstanding
work orders; (5) ensure maintenance staff adequately completed work
order repairs; (6) correct inspection deficiencies identified by
HUD; and (7) ensure contract work was completed before paid. Disbursed
$16,720 of ineligible costs and $96,538 of unsupported costs from
Project funds for miscellaneous expenses. The disbursements occurred
when the Project was in a non-surplus cash position. Ineligible
costs included: (1) $13,700 paid to MWS Associates, an identity-of-interest
firm, for services that were not rendered to the Project or not
rendered by the payee; (2) $1,800 for refinancing costs; (3) $630
for excessive accounting fees; (4) $339 for payments made in error
and (5) $251 for an owner advance and miscellaneous fees.
As a result, the Project was in deplorable condition, expenses
were overstated, and fewer funds were available for normal operation
and maintenance of the Project. Tenants lived in conditions that
were not decent, safe, and sanitary and costs were charged to the
Project for contract work that was not completed.
Issue Date: August 8, 1996
Audit Memorandum
No.: 96-CH-201-1810
File Size: 95KB
Title: Chicago HA, Chicago, IL
The Authority has made progress towards addressing some of the
severe problems which have adversely affected its maintenance operations
for many years. The Authority has improved its maintenance operations
in the following areas and has set goal dates for implementing improvements
in other areas of its maintenance operations. The Authority has:
Improved its internal communications systems. Implemented revised
tenant screening and eviction procedures.
Modified its system for accounting and tracking the inventory of
materials and supplies. Centralized its system for delivering materials
and supplies from the Central Warehouse to its developments. Increased
the use of maintenance mechanics for routine maintenance. Established
and ensured that staffs follow procedures for voiding and deleting
work orders. Complied with HUD requirements in classifying and reporting
work order activity.
Issue Date: May 23, 1996
Audit Report No.:
96-CH-202-1008
File Size: 82KB
Title: Rock Island HA, Rock Island, IL
While the Rock Island Housing Authority is striving to improve
its procedures, the Authority can do more to improve the administration
of its programs and ensure compliance with the Annual Contributions
Contract and other HUD requirements.
Issue Date: December 11, 1995
Audit Memorandum
No.: 96-CH-212-1804
File Size: 21KB
Title: Barbara Jean Wright Courts, Chicago, IL
The Project currently needs approximately $5.3 million of funds
for project rehabilitation. However, because the Project has no
reserve for replacement or excess operating funds available, it
will become increasingly difficult for the Project's owners to properly
rehabilitate this Project.
Issue Date: October 30, 1995
Audit Case No.:
96-CH-202-1004
File Size: 21KB
Title: Henderson Cty. HA, Oquawka, IL
During our review, the Housing Authority attempted to address
our concerns and improve its operations. However, the Authority
can do more to improve the administration of its programs and ensure
compliance with the Annual Contributions Contract and other HUD
requirements. This report addresses issues relating to inadequate
control of its disbursements.
Issue Date: October 5, 1995
Audit Memorandum
No.: 96-CH-221-1801
File Size: 3KB
Title: Carl I. Brown Mortgage, Downers Grove, IL
We have completed a survey of Carl I. Brown Mortgage's branch
office, located in Downers Grove, Illinois. The objective of the
survey was to evaluate Carl I. Brown Mortgage's internal controls
relating to the origination of HUD/FHA insured loans from its Downers
Grove office. The survey did not include a review of Carl I. Brown's
headquarters office in Kansas City, Missouri, or any of the firm's
other branch offices. Based upon our survey results, we found no
basis for a detailed audit.