![]() |
Home | En Español | Contact Us | A to Z |
![]() |
![]() |
||
![]() |
Indiana Audit ReportsDate Issued: July 23, 2007 Title: The Indianapolis Housing Agency, Indianapolis, Indiana, Lacked Adequate Controls over Expenses Charged to Its Section 8 ProgramThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Indianapolis Housing Agency's (Agency) 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 Agency based upon our analysis of risk factors relating to the housing agencies in Region V's jurisdiction. The objective of the audit was to determine whether the Agency appropriately used its program funds in accordance with HUD's requirements. This is the first of two audit reports on the Agency's program. The Agency failed to comply with HUD's requirements and its cost allocation plan regarding the allocation of administrative expenses. It did not document its initial allocation analysis in 2005, base allocations on actual historical data, or update its allocation percentages for 2006. Based on our review of administrative expenses for the period January 1, 2005, to November 30, 2006, the Agency used its restricted program administrative fees (fees) to pay more than $1.6 million for expenses that exceeded the program's reasonable fair share, allocated expenses that were unrelated to the program's operation, and lacked documentation to support expenses incurred. Based on our review, we estimate that over the next year the Agency will use more than $855,000 in fees for expenses not related to its program. We recommend that the director of HUD's Cleveland Office of Public Housing require the Agency to reimburse its program administrative fee reserve for the improper use of fees, provide documentation to support the reasonableness of the allocation of vehicle costs to its program or reimburse its program administrative fee reserve from nonfederal funds for the improper use of fees, and implement adequate procedures and controls to ensure that the Agency uses an appropriate basis for allocating administrative expenses to its program and that adequate expense documentation is maintained. Date Issued: March 23, 2007 Title: The Housing Authority of the City of Gary, Indiana, Lacked Adequate Controls over Refunding SavingsThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Housing Authority of the City of Gary's (Authority) nonprofit development activities. The review of public housing authorities' development activities is set forth in our fiscal year 2006 annual audit plan. We selected the Authority because it was identified as having high-risk indicators of nonprofit development activity. Our objective was to determine whether the Authority effectively and efficiently used resources subject to its annual contributions contract, other agreements, or HUD regulations regarding its nonprofit development activities. The Authority did not effectively and efficiently use resources subject to its annual contributions contract, other agreements, or HUD's regulations regarding its nonprofit development activity. It failed to properly administer refunding savings from the Fifth Avenue Housing Development Corporation's (Corporation) June 1992 refunding of mortgage revenue bonds, May 1993 redemption of mortgage revenue refunding bonds, and June 2001 refunding of mortgage revenue refunding bonds. It lacked adequate documentation to support that it used more than $900,000 in refunding savings from the Corporation's 1992 refunding of mortgage revenue bonds and 1993 redemption of mortgage revenue refunding bonds to provide affordable decent, safe, and sanitary housing to very low-income households. Further, the Authority and HUD were not aware of nearly $800,000 and at least $260,000, respectively, in refunding savings funds available to them until we brought it to their attention during our audit. We recommend that the director of HUD's Cleveland Office of Public Housing require the Authority to provide documentation or reimburse its refunding savings from nonfederal funds for the unsupported payments; submit a proposal for HUD's approval regarding the Authority's planned use of the unused refunding savings for affordable, decent, safe, and sanitary housing for very low-income households; and implement adequate procedures and controls to ensure that it uses the refunding savings and submits required certifications and reports in accordance with its financial adjustment factor refunding agreement with HUD. We also recommend that the director of HUD's Cleveland Office of Public Housing request The Bank of New York Trust Company, N.A., to disburse to HUD the remaining refunding savings in the trust account from the Corporation's refunding of the mortgage revenue refunding bonds in 2001. Date Issued: February 13, 2007 Title: The Housing Authority of the City of Evansville, Indiana, Needs to Improve Its Section 8 Housing Choice Voucher Program AdministrationThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Housing Authority of the City of Evansville'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 Vs 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, the effectiveness of its abatement and reinspection processes, and dependents being claimed by multiple households under both its Section 8 and public housing programs needs improvement. Of the 63 housing units statistically selected for inspection, 48 did not meet HUD's housing quality standards, and 44 had 230 violations that existed at the time of the Authority's previous inspections. The 44 units had between 1 and 18 preexisting violations per unit. Based on our statistical sample, we estimate that over the next year, the Authority will pay more than $1.5 million in housing assistance payments on units with housing quality standards violations. The Authority needs to improve controls over its admissions and recertification processes. Of the 68 household files statistically selected for review, 20 did not contain the proper documentation to support the Authority's payment of housing assistance and utility allowances as required by HUD and the Authority's program administrative plan. The Authority did not comply with its abatement and reinspection processes. It did not abate 5 of the 25 program units that failed an annual housing quality standards inspection and reinspection(s) between January and June 2006. Additionally, it did not ensure that 138 of the 320 unit reinspections were performed in a timely manner. The Authority also needs to improve its controls over dependents being claimed by more than one household. It allowed four household members to be claimed as household dependents under both its Section 8 and public housing programs. We informed the Authority's executive director and the director of HUD's Cleveland Office of Public Housing of minor deficiencies through a memorandum, dated January 30, 2007. We recommend that the director of HUD's Cleveland 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 and utility allowance 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 $1.5 million in program funds is spent on payments that meet HUD's requirements. Date Issued: December 13, 2006 Title: The Marion Housing Authority, Marion, Indiana, Improperly Used HUD Funds for Nonprofit Development ActivitiesThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Marion Housing Authority's (Authority) nonprofit development activities. The review of public housing authorities' development activities is set forth in our fiscal year 2006 annual audit plan. We selected the Authority because it was identified as having high-risk indicators of nonprofit development activity. Our objective was to determine whether the Authority diverted or pledged resources subject to its annual contributions contract (contract), other agreement, or regulation for the benefit of non-HUD developments. The Authority, under direction of its former executive director and a considerably different board of commissioners (board), defaulted substantially on its contract when it inappropriately used public housing operating funds to support the activities of the Affordable Housing Corporation (Corporation), a nonprofit organization created by the Authority, without HUD approval. As of November 2006, the Authority owed its public housing program more than $180,000. The Authority inappropriately used nearly $19,000 in Housing Choice Voucher/Family Self-Sufficiency Program Coordinators (Coordinators) funds from January 2003 through June 2004 to pay its former family self-sufficiency/housing counselor's (former counselor) salary and benefits while the former counselor worked on the Corporation's activities. In addition, the Authority could not provide adequate documentation to support that its use of more than $25,000 in Coordinators funds to pay the former counselor's salary and benefits during the same period was appropriate. We recommend that the director of HUD's Cleveland Office of Public Housing require the Authority to reimburse its public housing operating and Coordinators funds from nonfederal funds for the inappropriate disbursements and implement adequate procedures and controls to ensure it uses public housing program and Coordinators funds appropriately. We also recommend that the director refer the Authority's substantial default of its contract to HUD headquarters and request appropriate action be taken against the Authority. Date Issued: December 22, 2005 Title: Trustcorp Mortgage Company, Nonsupervised Lender; South Bend, Indiana, Substantially Complied with Requirements Regarding Late Requests for Endorsement and Underwriting of LoansThe U.S. Department of Housing and Urban Development's Office of Inspector General audited Trustcorp Mortgage Company (Trustcorp), a nonsupervised lender approved to originate, underwrite, and submit insurance endorsement requests under HUD's single family direct endorsement program. The audit was part of the activities in our fiscal year 2005 annual audit plan. We selected Trustcorp for audit because of its high late endorsement rate. Our objectives were to determine whether Trustcorp complied with HUD's regulations, procedures, and instructions in the submission of insurance endorsement requests and underwriting of Federal Housing Administration loans. Trustcorp substantially complied with HUD's requirements on late requests for insurance endorsement; however, before Trustcorp improved its procedures, it improperly submitted five late requests for endorsement out of 1,035 loans tested. The loans were either delinquent or otherwise did not meet HUD's requirements of six monthly consecutive timely payments after delinquency but before submission to HUD. Four of the five loans were later paid in full and no longer pose a risk to the Federal Housing Administration insurance fund. Trustcorp also incorrectly certified that escrow accounts for taxes, hazard insurance, and mortgage insurance premiums for two of 34 loans' certifications reviewed were current when they were not. Further, Trustcorp substantially complied with HUD's underwriting requirements for nine loans reviewed. However, it included unallowable charges when determining the debt for two loans that went to claim in excess of HUD's maximum insurable mortgage limits. It also incorrectly certified that due diligence was used in underwriting the two loans reviewed when it was not. As a result, the risk to HUD's Federal Housing Administration insurance fund was increased. We recommend that HUD's assistant secretary for housing-federal housing commissioner take appropriate action against Trustcorp for not following the requirements in effect at the time when it submitted one loan with a total mortgage value of nearly $100,000 without the proper six-month payment history, require Trustcorp to reimburse HUD more than $2,800 for unallowable charges on the two loans that went to claim, implement adequate procedures and controls to ensure its underwriters follow HUD's underwriting requirements regarding allowable charges and the accuracy of underwriting certifications submitted to HUD, and review Trustcorp's implementation of procedures and controls for full compliance with HUD's underwriting requirements. Date Issued: September 30, 2005 Title: HUD 's Interest in More Than $130,000 in Economic Development Initiative - Special Purpose Grant Funds Awarded to the City of Indianapolis Was Not Secured; Indianapolis, IndianaThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the City of Indianapolis, Indiana's (City) Economic Development Initiative - Special Purpose Grant (Grant). We initiated the audit in conjunction with our internal review of HUD's oversight of Economic Development Initiative - Special Purpose Grants. The review is part of our fiscal year 2005 annual audit plan. We chose the City's Grant based upon a statistical sample of fiscal years 2002 and 2003 Economic Development Initiative - Special Purpose Grants, in which 90 percent or more in funds were disbursed. Our objectives were to determine whether the City used its Grant funds in accordance with HUD's requirements and recorded HUD's interest on the assisted property. The City used the Grant funds in accordance with HUD's requirements. It disbursed $134,123 in Grant funds to the Indiana University Research and Technology Corporation (Corporation) to pay for the construction of the Indiana University Emerging Technologies Center's (Center) wet laboratory space. However, it did not place a covenant on the property title for the Center assuring nondiscrimination based on race, color, national origin, or handicap. We recommend that HUD's director of congressional grants require the City to ensure the Corporation records a covenant on the property title for the Center assuring nondiscrimination based on race, color, national origin, or handicap. If the covenant is not recorded, the City should reimburse HUD $134,123 from nonfederal funds for the Grant funds used to pay for the Center's wet laboratory space. Date Issued: September 30, 2005 Title: The Housing Authority of the City of Gary, Indiana Did Not Properly Manage its Section 8 Housing Program and Significant Weaknesses ExistedThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Housing Authority of the City of Gary's (Authority) Section 8 housing 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 Section 8 housing program. The objective of the audit was to determine whether the Authority managed its Section 8 program in accordance with HUD's requirements. Overall, the Section 8 housing program was not operated according to HUD and the Authority's requirements. The Authority's board of commissioners did not act responsibly to ensure federal requirements and the Authority's own policies were followed. The Authority's executive director did not exercise adequate day-to-day control over the operation of the Section 8 housing program. The Authority's Section 8 housing units were in poor physical condition. Our inspections noted 57 of 63 units that did not meet HUD's housing quality standards. We also noted significant weaknesses in using administrative fees, issuing vouchers without proper documentation, calculating housing assistance payments, and abating Section 8 vouchers. In addition, the Authority misused Section 8 funds by overpaying per diem, improperly disallowing tenant income, and erroneously charging expenses to its Section 8 housing program. We recommend that HUD's general deputy assistant secretary for public and Indian housing issue a notice of default to the Authority regarding the administration of its Section 8 housing program. We also recommend that the director of HUD's Public Housing Hub, Cleveland Field Office, require the Authority to contract out its Section 8 program or transfer control to HUD, and ensure the Authority reimburses its program for the inappropriate uses of Section 8 funds cited in this report. Date Issued: September 28, 2005 Title: HUD 's Interest in $1 Million in Economic Development Initiative - Special Purpose Grant Funds Awarded to the City of Carmel Was Not Secured; Carmel, IndianaThe U.S. Department of Housing and Urban Development's Office of Inspector General audited the City of Carmel, Indiana's (City) Economic Development Initiative - Special Purpose Grant (Grant). We initiated the audit in conjunction with our internal review of HUD's oversight of Economic Development Initiative - Special Purpose Grants. The review is part of our fiscal year 2005 annual audit plan. We chose the City's Grant based upon a statistical sample of fiscal years 2002 and 2003 Economic Development Initiative - Special Purpose Grants, in which 90 percent or more in funds were disbursed. Our objectives were to determine whether the City used its Grant funds in accordance with HUD's requirements and recorded HUD's interest on the assisted property. The City used the Grant funds in accordance with HUD's requirements. It used $1 million in Grant funds to pay for the area wide subterranean detention system and reflecting pool design of Veterans Plaza and the Reflecting Pond. However, it did not place a covenant on the property title for Veterans Plaza and the Reflecting Pond, assuring nondiscrimination based on race, color, national origin, or handicap. Further, HUD did not request the City to record HUD's interest on the property title for Veterans Plaza and the Reflecting Pond. We recommend that HUD's director of congressional grants require the City to record a covenant on the title assuring nondiscrimination based on race, color, national origin, or handicap and record a lien on the property title for Veterans Plaza and the Reflecting Pond showing HUD's interest in the assisted property. If the covenant and lien are not recorded, the City should reimburse HUD $1 million from nonfederal funds for the Grant funds used to pay for the area-wide subterranean detention system and reflecting pool design of Veterans Plaza and the Reflecting Pond. Date Issued: April 7, 2005 Title: Union Federal Bank of Indianapolis, Supervised Direct Endorsement Lender; Fort Wayne, INThe U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General reviewed Union Federal Bank of Indianapolis (Union Federal) (also known as Union Federal Savings Bank of Indianapolis), a supervised lender approved to originate Federal Housing Administration mortgage loans under HUD's Single Family Direct Endorsement program. The review was part of the activities in our fiscal year 2004 Annual Audit Plan. We selected Union Federal for audit because of its high late endorsement rate. Our review objectives were to determine whether Union Federal complied with HUD's regulations, procedures, and instructions in the submission of late insurance endorsement requests and payment of upfront mortgage insurance premiums to HUD. Union Federal implemented improvements to its procedures and controls for late requests for endorsement and payment of upfront mortgage insurance premiums. Our audit tests of 662 loans identified only 12 (1.8%) that were improperly submitted for endorsement. Of the 12 loans, 10 remain Federal Housing Administration-insured. These 10 loans increased the risk to the Federal Housing Administration insurance fund by $1,175,305 because the borrowers had not made six consecutive timely monthly payments at the time their loans were submitted to HUD and/or were behind on their mortgage payments. Union Federal also paid penalties for not paying upfront mortgage insurance premiums in a timely manner for 272 loans of the 5,415 total loans subject to HUD's upfront mortgage insurance premium requirements. The staff of Union Federal's authorized agent was not adequately trained or was not aware of HUD's requirements regarding late requests for endorsement. In addition, Union Federal's authorized agent did not always pay upfront mortgage insurance premiums due to an automation problem and its lack of adequate monitoring of the wholesale and retail areas involved in processing Federal Housing Administration loans. We recommend that HUD's Assistant Secretary for Housing-Federal Housing Commissioner and Chairman of the Mortgagee Review Board Require Union Federal to indemnify HUD for any future losses on nine loans with a total mortgage value of $965,777. Require Union Federal to reimburse HUD for any future loss for a claim on one insured loan (with a total mortgage value of $197,402) once the associated property is sold.Date Issued: September 23, 2004 Title: Decatur Mortgage Company, L.L.C., Non-Supervised Loan Correspondent, Indianapolis, INHUD's Office of Inspector General completed an audit of Decatur Mortgage Company, L.L.C., a non-supervised loan correspondent approved to originate FHA mortgage loans under the Single Family Direct Endorsement Program. We selected Decatur for audit because of its high loan default rate. Our audit objectives were to determine whether: (1) Decatur acted in a prudent manner and complied with HUD's regulations, procedures, and instructions in the origination of FHA loans; and (2) Decatur's Quality Control Plan as implemented met HUD's requirements. Decatur did not originate FHA-insured loans in accordance with HUD's requirements and prudent lending practices. Decatur did not exercise due diligence to: (1) verify or support borrowers' income level and stability; (2) support appraisals; (3) investigate credit inquiries and additional Social Security Numbers shown on credit reports; (4) establish the borrower's ability and willingness to pay; (5) document the source of deposits and gift funds, and not use gift funds to pay off borrower's debts; (6) estimate borrower's expenses and property taxes; and (7) keep interested third parties from handling key documentation. Additionally, Decatur did not ensure that Quality Control reviews were completed on FHA loans as required. Specifically, Decatur did not: (1) perform Quality Control Reviews on early default FHA loans as required; (2) document work done to determine if loans were originated properly; and (3) identify origination deficiencies and corrective actions needed for its loan originations. We recommend that HUD's Assistant Secretary for Housing-Federal Housing Commissioner and Chairman, Mortgagee Review Board:
Additionally, we recommend that HUD's Director of Departmental Enforcement Center: Date
Issued: June 23, 2004 Title: Housing Authority of the City of Evansville, Indiana's Housing Assistance Payment Savings Refunding Agreements, Evansville, IndianaHUD's Office of Inspector General completed an audit of the Housing Authority of the City of Evansville's Housing Assistance Payment Savings Refunding Agreements. The audit was conducted based upon an anonymous complaint to our Hotline. The complaint alleged that the Housing Authority's former Executive Director who left the Authority in November 2003: (1) abused his authority; (2) improperly used Federal funds; and (3) had a conflict of interest as Executive Director of two corporations. Our audit objectives were to determine whether the complaint's allegations were substantiated and whether HUD's requirements for the Agreements were followed. The audit identified that the complaint's allegations were generally substantiated with regard to the improper use of Federal funds and HUD's requirements for the Agreements were not followed. Specifically, the Authority: (1) did not have adequate controls over HUD funds when it drew down $796,858 in Housing Assistance Payment Savings funds that did not fulfill the Agreements' requirements; (2) lacked adequate documentation to support that $768,517 in Savings funds benefited very low-income persons and families; and (3) disbursed $28,341 for ineligible expenses. The allegations regarding the former Executive Director's abuse of authority and conflict of interest were not substantiated. We recommend that HUD's Director of Public Housing Hub, Cleveland Field Office, ensure the Housing Authority of the City of Evansville: reimburses a control account from non-Federal funds for the ineligible and unsupported expenses cited in this report; and implements procedures and controls to ensure that Housing Assistance Payment Savings funds are used appropriately. These procedures and controls should help ensure that $61,515 in remaining Savings funds is used appropriately. We also recommend that HUD's Director of Departmental Enforcement Center takes appropriate administrative action against the Housing Authority's former Executive Directors who left the Authority in January 2001 and November 2003, respectively. Date Issued: September 29, 2003 Title: Federal Property Management Corporation, Civil False Claims and Multifamily Equity Skimming, Indianapolis, INHUD's Office of Inspector General completed a review of the books and records of Federal Property Management Corporation. The objectives of the review were to determine whether Federal Property Management: (1) used Project funds in compliance with the Regulatory Agreements and HUD's requirements; and (2) maintained the Projects' units according to HUD's Housing Quality Standards. The review was performed based upon a request from the United States Attorney's Office for the Southern District of Indiana. We did not conduct the review in accordance with Generally Accepted Government Auditing Standards. We found that Federal Property Management Corporation inappropriately claimed Section 8 Housing Assistance Payments from HUD for units at all six Projects that did not meet HUD's Housing Quality Standards and/or its tenant income re-certification requirements. Additionally, Federal violated the Regulatory Agreement by improperly disbursing Savoy-Hoosier Apartments Project funds for ineligible costs. As a result of Federal's mismanagement, the Projects defaulted on their HUD-insured mortgages. We referred our draft audit findings to the United States Attorney's Office for the Southern District of Indiana for civil matters. HUD and the United States Attorney's Office executed a settlement agreement with Federal Property Management effective September 18, 2003. Under the terms of the settlement, Federal Property Management, without any admission of wrongdoing, agreed to pay the Federal Government $400,000 on or before December 17, 2003. As part of the settlement, Federal agreed to a two-year voluntary exclusion from seeking new contracts with HUD and any other agency of the Executive Branch of the Federal Government. We recommend that HUD's Director of Chicago Multifamily Housing Hub, Chicago Regional Office, ensures that Federal Property Management Corporation pays the Federal Government $400,000 as required by the settlement agreement. Date Issued: July 29, 2003 Title: Indiana State Department of Health's Housing Opportunities for Persons With AIDS ProgramHUD's Office of Inspector General completed an audit of the Indiana State Department of Health's Housing Opportunities for Persons With AIDS Program. The audit was conducted based upon a citizen's complaint to our office. The complainant alleged that Program funds were misused and wasted. Our audit objectives were to determine whether the complainant's allegations were substantiated and whether HUD's rules and regulations for the Program were followed. We concluded the Indiana State Department of Health's Human Immunodeficiency Virus Sexually Transmitted Disease Division did not maintain adequate oversight of its Program. Specifically, we determined the Department of Health: * Inappropriately drew down $53,695 in HUD funds that did not benefit
its Program; * Paid AIDServe, the managing entity of its program,
$33,322 in non-HUD funds that did not benefit its program, for which
the Department of Health is expecting reimbursement from HUD; We recommend that the Indianapolis Field Office Director of Community Planning and Development assure that the Indiana State Department of Health reimburses its Program for the inappropriate drawdowns of HUD funds for its Program and implements controls to correct the weaknesses cited in this report. Date Issued: July 25, 2003 Title: Fayette County Housing Authority Section 8 Housing Program
|
|
![]() |
||
![]() |
Content Archived: September 9, 2010 | |
![]() |
||
![]() |
||