Missouri Audit Reports
Date: July 9, 2007
Report No.: 2007-KC-1006
File Size: 1.78KB
The Mansfield Housing Authority of Mansfield, Missouri, Misspent
Public Housing Funds and Did Not Fulfill Its Section 8 Program Contract
audited the Mansfield Housing Authority (Authority) in response
to a citizen complaint that the Authority misspent public housing
funds and used Authority assets for personal use.
Authority used public housing funds for ineligible expenses and
did not always adequately support the use of public housing funds.
Additionally, it did not fulfill its duties as a Section 8 contract
administrator for a multifamily property. We recommended that HUD
require the Authority to provide support for and/or repay its public
housing program from nonfederal sources for ineligible and unsupported
expenses paid from public housing funds.
We also recommended that HUD further evaluate the Authority's expenses,
require repayment of any additional misused funds, and verify that
the Authority has implemented adequate controls over expenses. Finally,
we recommended that HUD take administrative action against the executive
director for using federal funds for personal expenses, and require
the Authority to repay unearned Section 8 contract administrator
fees paid to it.
Date: October 11, 2006
Report No.: 2007-KC-1001
File Size: 1.29MB
The City of St. Louis, Missouri, Did Not Meet HUD�s Requirements
for Creating and Retaining Jobs
Office of Inspector General audited the City of St. Louis to determine
whether the City used its Community Development Block Grant funds
to create or retain the required number of jobs and properly allocated
administrative costs to the Block Grant.
City provided loans to 52 of 66 economic development projects totaling
nearly $4.5 million that could not demonstrate that they met the
U.S. Department of Housing and Urban Development's requirements
for creating and retaining jobs. We recommended that HUD require
the City to provide sufficient documentation to show that the 52
projects created or retained at least the minimum number of jobs,
or repay $1.7 million in forgivable loans provided to projects and
create additional jobs to offset the $2.8 million in repayable loans
that did not properly create or retain jobs.
City also did not require the St. Louis Development Corporation
to properly report the number of jobs it created with the HUD funds
it loaned to projects. We recommended that HUD require the City
to improve its control structure to ensure that the nearly $1.7
million in underway projects creates the appropriate number of jobs
and to impose sanctions against its development corporation if poor
did not find any material deficiencies in the City's allocation
of administrative costs to the Block Grant program.
Date: June 29, 2006
Report No.: 2006-KC-1012
File Size: 293.49KB
The Owner of HDC Retirement Village in St. Louis, Missouri, Violated
Its Regulatory Agreement
reviewed HDC Retirement Village, a 48-unit project located in St.
Louis, Missouri, to determine whether the managing owner complied
with regulatory agreement provisions when expending project funds.
HDC Retirement Village�s managing owner did not use project funds
in compliance with the regulatory agreement and also violated several
other terms of the agreement. These violations, totaling $209,716,
adversely affected the project�s financial stability. We recommended
that HUD take appropriate actions to correct deficiencies and ensure
that these violations will not occur in the future.
Date: June 29, 2006
Report No.: 2006-KC-1011
File Size: 311.72KB
The Owner of Wellston Townhouses in St. Louis County, Missouri,
Violated Its Regulatory Agreement
reviewed Wellston Townhouses, a 63-unit project located in St. Louis
County, Missouri, to determine whether the owner and management
agent used project funds in compliance with the regulatory agreement
and HUD�s requirements. Wellston Townhouses� managing owner did
not use project funds in compliance with the regulatory agreement
and violated several other terms of the agreement. These violations,
totaling $304,660, adversely affected the project�s financial stability.
We recommended that HUD take appropriate actions to correct deficiencies
and ensure that these violations will not occur in the future.
Date: March 30, 2006
Report No.: 2006-KC-1008
File Size: 91.42
The St. Joseph Housing Authority, St. Joseph, Missouri, Overhoused
16 Tenants under the Section 8 Housing Voucher Program
OIG reviewed the Section 8 Housing Choice Voucher program of the
St. Joseph Housing Authority, St. Joseph, Missouri (Authority) to
determine whether the Authority paid excess subsidies for oversize
Authority overhoused 16 tenants when it subsidized an additional
bedroom for medical purposes without proper justification. This
resulted in overpayments of $20,108 from 2002 through January 2006.
By correcting its weak controls, the Authority can avoid future
overpayments totaling $54,036.
recommended that the director, Office of Public Housing, ensure
that the Authority immediately corrects overhoused tenants' vouchers
and repays the overpayments. We also recommended that the director
verify that the Authority implements procedures to ensure that each
tenant receives the proper voucher size to avoid additional overpayments.
Date: March 15, 2006
Report No.: 2006-KC-1007
File Size: 774.49KB
American Lending Group Did Not Properly Originate 9 Loans and Did
Not Have Adequate Quality Control Procedures
audited the Federal Housing Administration loan origination process
of American Lending Group in St. Peters, MO, to determine whether
American Lending properly originated Federal Housing Administration
loans, properly submitted late requests for endorsement, and implemented
adequate quality control procedures. We found that American Lending
did not properly originate eight Federal Housing Administration
loans, improperly submitted one loan for late insurance endorsement,
and did not implement adequate quality control procedures. We recommended
that HUD require American Lending to indemnify HUD for current and
future losses due to improperly originated and late endorsed loans
and implement changes to its quality control procedures.
Date: March 3, 2006
Report No.: 2006-KC-1006
File Size: 436.66KB
The Housing Authority of Kansas City, Missouri, Unnecessarily Paid
Housing Choice Voucher Program Funds for Overhoused Tenants
OIG reviewed the Housing Authority of Kansas City, Missouri's (Authority)
Housing Choice Voucher program to determine whether the Authority
paid excess subsidies for overhoused tenants.
Authority overhoused 50 tenants. Since 2002, the Authority has unnecessarily
paid $30,946 in voucher program funds for these tenants. The Authority
could avoid future losses of $73,692 by enhancing its controls,
thereby allowing it to provide vouchers to additional tenants.
recommended that HUD require the Authority to immediately correct
overhoused tenant's vouchers, repay the unnecessary costs incurred,
and develop and implement procedures that improve controls over
assigning voucher sizes.
Date: January 31, 2006
Report No.: 2006-KC-1005
File Size: 3.24MB
Matrix Financial Services Corporation�s St. Louis, Missouri, Branch
Did Not Properly Underwrite and/or Close 40 Federal Housing Administration
reviewed 65 Federal Housing Administration loans sponsored by the
St. Louis, Missouri, branch of Matrix Financial Services Corporation.
Our audit objective was to determine whether Matrix properly underwrote,
closed, and submitted the loans for endorsement.
did not properly underwrite 32 loans with original mortgage amounts
totaling $3,279,345. Matrix did not properly close 13 loans; the
borrowers of each of these loans incurred excessive, unsupported,
and/or unallowable closing fees totaling $7,703. Matrix properly
submitted for endorsement all the loans in our sample.
recommended that HUD require the lender to indemnify improperly
underwritten loans and buy down the principal balance of the 13
loans not properly closed.
Date: November 30, 2005
Report No.: 2006-KC-1001
File Size: 337.60KB
Columbia Housing Authority, Columbia, MO, Is Unnecessarily Paying
Housing Choice Voucher Program Funds for Overhoused Tenants
reviewed the Columbia Housing Authority's (Authority) Housing Choice
Voucher program (voucher program) to identify savings that the Authority
will realize by not overhousing tenants. We identified 99 tenants
with larger than necessary vouchers. Since 2002, the Authority has
unnecessarily paid $216,352 in voucher program funds for these tenants.
funds were overpaid because the Authority's procedures were ineffective
in preventing overhousing. By enhancing its procedures to ensure
that voucher program tenants receive the proper voucher size and
subsidy payment, the Authority could avoid future losses of $300,276.
This would allow the Authority to provide vouchers to additional
recommended that HUD require the Authority to correct overhoused
tenants' vouchers, repay $216,352 from its reserve account to the
voucher program fund, and develop and implement procedures to ensure
that tenants receive correct sized vouchers.
Issue Date: July 28, 2005
Report No.: 2005-KC-1008
File Size: 250.78KB
Title: St. Louis Housing Authority Overhoused Section 8 Tenants
and Had Inaccurate Tenant Data
We audited the Housing Choice Voucher program of the St. Louis
Housing Authority to determine whether the Authority was operating
its Section 8 program in accordance with HUD requirements. We found
that the Authority does not have adequate procedures in place to
ensure that its tenants receive the proper voucher size, nor do
they have adequate procedures in place to ensure the accuracy of
data entry of key tenant identification information. These procedural
deficiencies caused the Authority to expend $24,750 in excess housing
assistance payments, and hinder the Authority's ability to obtain
tenant income information from the Enterprise Income Verification
system when calculating tenant rent and subsidy payments. We recommended
that HUD require the Authority to reimburse the $24,750 in excess
housing assistance payments, and ensure that the Authority develops
and implements procedures to ensure that each tenant receives the
proper voucher size. In addition, we recommend that the Authority
review the accuracy of the input of the tenant's identification
Issue Date: November 15, 2004
Report No.: 2005-KC-1002
File Size: 57.5KB
Title: The Housing Authority of St. Louis County, MO Has Not Used
Restricted Assets To Inappropriately Benefit Other Entities' Development
We completed an audit of the St. Louis County Housing Authority.
Our audit objective was to determine whether the Authority inappropriately
encumbered Annual Contributions Contract resources to the benefit
of other entities' financing or development activities. We found
that the Authority has entered into many and varied agreements such
as guaranties, lines of credit and loans to the benefit of other
entities and activities. However, these agreements have not encumbered
Annual Contributions Contract assets. Accordingly, this report contains
no findings or recommendations.
Issue Date: October 4, 2004
Report No.: 2005-KC-1001
File Size: 424.1KB
Title: Karim Enterprises, DBA Prime Mortgage, Did Not Follow Federal
Housing Administration Requirements
We received a complaint alleging that Prime Mortgage, a non-supervised
loan correspondent located in Saint Charles, MO, provided funds
to a Federal Housing Administration borrower to assist with closing
Our audit objective was to determine whether Prime Mortgage complied
with the U.S. Department of Housing and Urban Development's (HUD)
source of funds, gift documentation, and quality control plan requirements.
The owner of Prime Mortgage inappropriately provided funds to two
borrowers just prior to closing their loans. For a third loan, Prime
Mortgage did not obtain adequate documentation of the transfer of
gift funds. As a result, HUD has insured three loans that would
not have met the minimum requirements to qualify for a Federal Housing
Administration loan, placing the HUD insurance fund at risk for
loans totaling $376,102.
Prime Mortgage satisfied one of HUD's quality control requirements
by developing a written quality control plan, but failed to perform
the required quality control reviews. As a result, HUD lacks assurance
that Prime Mortgage is identifying and correcting potential deficiencies
in its loan origination process before submitting loans for Federal
Housing Administration insurance.
We recommend that the Assistant Secretary for Housing - Federal
Housing Commissioner, and Chairman, Mortgagee Review Board take
appropriate administrative action against Prime Mortgage for its
improper actions, and against the sponsors of the three loans with
We recommend that the Acting Director, Departmental Enforcement
Center, take appropriate action against Karim Enterprises, dba Prime
Mortgage; such as debarring the business and principals for providing
funds to Federal Housing Administration borrowers while making it
appear that the funds came from allowable sources, and for providing
loans to borrowers to use as funds to close.
If HUD allows Prime Mortgage to maintain its Federal Housing Administration
approval status, we recommend that the Assistant Secretary for Housing
- Federal Housing Commissioner, and Chairman, Mortgagee Review Board
require Prime to implement controls that ensure that it follows
HUD's quality control review requirements, and verify that Prime
has implemented appropriate controls.
Issue Date September 30, 2004
Report No.: 2004-KC-1801
File Size: 400.87KB
Title: Survey of NovaStar Home Mortgage's Use of Net Branches
We surveyed NovaStar Home Mortgage�s (NovaStar) use of net branches
to determine whether it is complying with applicable requirements
in its use of net branches. We determined that it was not fully
complying with applicable U.S. Department of Housing and Urban Development
(HUD) requirements in its use of net branching at the time of our
review. We found the agreements used in its branch offices contained
language prohibited by HUD. We also determined that NovaStar improperly
used independent contract loan officers in the origination of Federal
Housing Administration mortgages. As a result, HUD lacks assurance
that NovaStar has the capability to successfully originate Federal
Housing Authority-insured loans, and therefore, assumes an increased
NovaStar has initiated actions to correct these deficiencies by
eliminating all limited liability company agreements, as well as
removing the prohibited language from the employment and lease/sublease
agreements. Also, as of June 1, 2004, NovaStar is no longer allowing
the employment of independent loan officers. These changes should
help ensure that NovaStar complies with HUD requirements in its
use of net branches.
We recommended that the Assistant Secretary for Housing - Federal
Housing Commissioner, Chairman, Mortgagee Review Board verify that
NovaStar follows through and corrects all the deficiencies identified
in its branch office agreements. At a minimum this should include:
- Removal of all limited liability company agreements.
- Removal of prohibited language from employment agreements.
- Removal of prohibited language from lease/sublease agreements.
Issue Date: September 30, 2004
Report No.: 2004-KC-1006
File Size: 324.2KB
Title: The Housing Authority of Kansas City, Missouri Did Not
Consistently Follow HUD Rules Over its Housing Choice Voucher Program
We selected the Housing Authority of Kansas City, Missouri based
on information from the Kansas City Office of Public Housing regarding
recent reviews of the Housing Authority's Housing Choice Voucher
Program. The results of these reviews, performed in 2002 and 2003,
indicated that the Housing Authority was not consistently following
HUD rules in administering its Housing Choice Voucher Program. The
reviews identified problems regarding quality control, verification
of tenant information, and a lack of proper documentation. Because
of the volume of vouchers administered by the Housing Authority,
it poses a significant risk to the voucher program in the Kansas
Our objective was to determine if the Housing Authority was following
HUD rules and regulations in establishing tenant eligibility and
calculating tenant income and rent, and was performing Housing Quality
Standards inspections in a timely manner.
Housing Authority of Kansas City, Missouri, personnel did not consistently
follow HUD rules and regulations in calculating tenant income and
rent or verifying tenant information. These results confirmed problems
identified in previous reviews. Further, the Housing Authority did
not follow an established quality control plan to ensure that errors
would be captured and immediately corrected. As a result, the Housing
Authority could not ensure that it would identify and correct errors
in rents and subsidies.
We also determined that the Housing Authority performed Housing
Quality Standards inspections within the timeframes established
by HUD and properly documented the completed inspections.
We recommend that the Kansas City Office of Public Housing ensure
that the Housing Authority has implemented an adequate quality control
plan and made all appropriate corrections to the tenant files, rents,
Issue Date: August 11, 2004
Report No.: 2004-KC-1005
File Size: 3.12MB
Title: The City's Housing Program and the Role of the Housing
Economic Development Financial Corporation, City of Kansas City,
We have completed an audit of Kansas City, Missouri's Housing Program
and the role of the Housing and Economic Development Financial Corporation
(HEDFC) in that program. This was a joint audit conducted with the
City Auditor for Kansas City, Missouri. Our objectives for this
audit were to determine what system the City used to implement its
housing policy, what role HEDFC played in the system, how well HEDFC
carried out that role, and whether changes in the system could improve
the City's performance and its ability to meet its housing goals.
We found that the City's system is fragmented and overly complex,
resulting in higher than necessary administrative costs; lack of
information; poor communication; delays; and lack of accountability
for poor performance. In addition, the City has failed to adequately
define HEDFC's role in providing affordable housing, causing it
to cede decisions about the use of public funds to HEDFC, and preventing
it from fulfilling its responsibilities as a recipient of federal
grant funds. We also noted significant deficiencies in HEDFC's operations.
Since HEDFC is an integral component of the City's housing program,
financial and operational problems result in not just underperformance
for HEDFC, but for the system as a whole.
We recommend that the City Manager reevaluate and revise the city's
processes for developing housing policy and administering housing
funds. These revisions should include bringing some functions of
the program in-house and competitively awarding the remaining services.
We also recommend that the City Manager require HEDFC to repay $900,000
in Beacon Hill program income it used without authorization and
to repay the $600,000 balance of the Westside Business Park Section
We recommend that the Director of HUD's Office of Community Planning
and Development ensure the City develops and implements the procedures
necessary to ensure an effective and efficient housing program,
and recovers from HEDFC the $900,000 in Beacon Hill program income
it used without authorization and the $600,000 balance of the Westside
Business Park Section 108 loan.
Issue Date: July 28, 2004
Report No.: 2004-KC-1004
File Size: 1.07MB
Title: Gershman Investment Corporation,
Non-Supervised Direct Endorsement Lender, Clayton, MO
We have completed an audit of Gershman Investment Corporation,
a non-supervised direct endorsement lender approved to originate
Federal Housing Administration insured loans. We selected Gershman
for audit because they are one of the larger mortgagees in the St.
Louis area and had a slightly above average default rate.
Our audit objectives were to determine if Gershman complied with
HUD regulations, procedures, and instructions in the origination
of the FHA-insured single-family mortgages and to determine whether
Gershman's late requests for endorsement complied with HUD's requirements.
Gershman did not adhere to HUD requirements and prudent lending
practices when originating 27 of the 43 loans we examined for compliance.
The 27 loan files contained unsupported income, unsupported assets,
underreported liabilities, questionable and/or derogatory credit
histories, inadequate qualifying ratios, and other inconsistent
and/or questionable documentation. The deficiencies occurred because
Gershman did not have an adequate control environment to ensure
that its employees followed HUD requirements when processing and
underwriting loans. These 27 loans totaling $2,476,749, represent
an increased risk to the Federal Housing Administration insurance
Overall, Gershman's procedures for submitting late requests for
endorsement were effective. However, Gershman did improperly submit
five loans for insurance endorsement when the borrowers had delinquent
payments prior to loan submission. These five improperly submitted
loans, with mortgages totaling $525,402, represent an increased
risk to the Federal Housing Administration insurance fund.
Gershman was deficient in its quality control review activities.
Gershman did not conduct reviews within 90 days of loan closing
and did not review the required number of loans closed. Without
fully implementing adequate quality control policies and procedures,
Gershman is unable to ensure the accuracy, validity, and completeness
of its loan origination operations.
We recommend that the Assistant Secretary for Housing-Federal Housing
Commissioner, and Chairman, Mortgagee Review Board, take appropriate
administrative action against Gershman Investment Corporation. This
action should, at a minimum, include requiring indemnification for
the 28 actively insured loans and reimbursement for claims and related
losses already incurred on the three loans that have gone into claim
Issue Date: March 10, 2004
Report No.: 2004-KC-1002
File Size: 936.8KB
Title: Use of Project Funds, Timberlake Care Center, Kansas City, Missouri
We have completed an audit of Timberlake Care Center, a nursing
home located in Kansas City, Missouri. We selected the project based
on an audit request from the Office of Multifamily Housing, Kansas
City Hub, which indicated there were unallowable disbursements from
project funds. Our objective was to determine whether the Owner/Management
Agent used project funds in accordance with applicable requirements.
Timberlake Care Center made payments for other than reasonable
operating expenses and necessary repairs of the project. Timberlake
paid $76,192 in unsupported and/or unallowable disbursements from
the operating account during fiscal years 2002 and 2003. Timberlake's
owner did not alter property operations to ensure HUD rules and
regulations were followed after Timberlake obtained HUD insured
financing in August 2001. As a result, funds that should have been
used to pay the operating expenses of the property were used for
unsupported and/or unallowable purposes, contributing to Timberlake's
negative surplus cash position.
Timberlake Care Center also did not reconcile the operating account
bank statements to the general ledger each month to ensure the amounts
balanced. Over the two-year audit period, the operating account
general ledger balance was understated by $17,590. Timberlake's
staff was aware that the operating account bank statements did not
reconcile to the general ledger balance. However, they did not know
how to correct the problems, and therefore, took no action.
We recommend that HUD ensure Timberlake Care Center owners develop
and implement policies and procedures to control funds in accordance
with HUD requirements, and require that Timberlake's operating account
be reimbursed $76,192 for the unsupported and/or unallowable disbursements
paid during our audit period. We also recommend that HUD ensure
Timberlake owners provide adequate support for the adjusting entry
to cash made at the end of fiscal year 2002, and properly correct
the fiscal year 2003 general ledger, or repay Timberlake's general
operating account the amount that cannot be supported up to $17,590.
Finally, we recommend that HUD verify that Timberlake owners are
correctly reconciling the bank statements to the general ledger
each month, and if they are unable to determine how to identify
and resolve all reconciling items, have obtained outside assistance
in doing so.
Issue Date: November 24, 2003
Report No.: 2004-KC-1001
File Size: 1.50MB
Title: Use of HUD Grant Funds, East Meyer Community Association, Kansas City, Missouri
We have completed an audit of East Meyer Community Association,
a Community Development Corporation located in Kansas City, Missouri.
We selected East Meyer Community Association for review on the basis
of a request by the Kansas City Office of Community Planning and
Development. Our audit objective was to determine if East Meyer
used the Community Development Block Grant and Neighborhood Initiative
Grant funds it received during fiscal years 2000 and 2001 in accordance
with applicable guidelines.
East Meyer Community Association (East Meyer) mismanaged Neighborhood
Initiative and Community Development Block grant funds by improperly
using the grant funds for purposes other than those specified in
the contract and/or grant agreement. East Meyer improperly spent
$726,850 of the $1,000,000 Neighborhood Initiative Grant, incurred
$57,464 of unsupported expenses charged to its Neighborhood Initiative
Grant, and charged $65,379 of unsupported expenses to its Community
Development Block Grant. We recommend that the Director, Economic
Development Initiative take administrative action against East Meyer
management and Board of Directors, that will prevent them from participating
in future HUD funded activities. Additionally, we recommend that
the Director take action to recoup the $726,850 that was inappropriately
spent. Further, we recommend the Director require East Meyer to
provide documentation to support $57,464 in unsupported Neighborhood
Initiative Grant expenditures and the Director, Office of Community
Planning and Development, 7AD require East Meyer to provide documentation
to support $65,379 in unsupported Community Development Block Grant
funds or repay the amounts that cannot be supported.
Issue Date: March 24, 2003
Memorandum No.: 2003-KC-1803
File Size: 164KB
Title: Richmond Terrace Retirement Center, Richmond Heights, Missouri, (FHA #085-43068)
We have completed a review of the Richmond Terrace Retirement Center.
The review was initiated as a result of our local audit planning
and concerns raised by the St. Louis Multifamily Program Center.
Our objective was to determine if bond funds and project funds were
We concluded that the mortgagee provided key certifications at
initial closing that contained incorrect cost amounts, causing mortgage
proceeds to be drawn down and used for unsupported expenses. These
acts exposed HUD's mortgage insurance fund to unnecessary risk because
the owner did not have adequate funds at initial closing. We also
identified residual bond funds that were improperly being held by
the Bond Trustee. During our review we coordinated with the Office
of Housing and the Office of General Counsel to exercise HUD's legal
claim to the residual bond funds. As a result, HUD collected residual
bond funds totaling $50,063 from the Bond Trustee.
We recommend that the St. Louis Multfamily Program Center take
appropriate legal and administrative actions in coordination with
the Region 7 Regional Counsel/Office of Program Enforcement.
Date: December 26, 2002
Memorandum No.: 2003-KC-1802
File Size: 142KB
Title: Housing Authority of Independence, Section 8 Review,
have completed a review of the Section 8 department of the Housing
Authority of Independence. We conducted this review as a follow-up
to a prior audit in which we identified discrepancies in the Authority's
Section 8 department. The overall objective of our review was to
determine if the Authority's Section 8 department is complying with
applicable HUD rules and regulations. We determined that the Authority
has an effective and well-run Section 8 department and is substantially
complying with all applicable rules and regulations. This memorandum
does not contain any recommendations.
Date December 26, 2002
Report No.: 2003-KC-1003
File Size: 201KB
Title: St. Louis, Missouri/East St. Louis, Illinois Empowerment
have completed an audit of the City of St. Louis Empowerment Zone
program. We conducted the audit based on a request from Congress.
The objectives of the audit were to determine whether the City:
(1) efficiently and effectively used Empowerment Zone funds; and
(2) accurately reported the accomplishments of its Empowerment Zone
program to HUD. We concluded that the City did not accurately report
all planned and actual outputs or funding commitments in its June
30, 2002 Performance Review. For one of four projects we evaluated,
the Performance Review contained information that overstated the
projected number of area residents to be served and understated
the actual number of area residents served. For two projects, total
funding commitments were understated. We made one recommendation
that the City of St. Louis establishes and implements management
controls to ensure accurate reporting.
Issue Date December 17, 2002
Memorandum No.: 2003-KC-1002
File Size: 1.12MB
Title: Congressional Requested Audit of the Outreach and Training
Assistance Grant awarded to Housing Comes First, St. Louis, Missouri,
Grant Numbers FFOT98018MO and FFOT00022MO
We have completed an audit of Housing Comes First and determined
that Housing Comes First did not comply with HUD and Office of Management
and Budget (OMB) requirements. This occurred because Housing Comes
First did not maintain a staff with the experience and knowledge
necessary to effectively manage the organization. As a result, HUD
has no assurance that grant funds were used within program requirements.
Housing Comes First did not comply with HUD and Office of Management
and Budget (OMB) requirements because it:
* Did not establish and implement controls to ensure grant funds
according to applicable regulations. The grantee did not have adequate
and procedures or complete and reliable accounting records. The
grantee also did not segregate executive and financial functions
or perform monthly reconciliations of its bank accounts.
* Could not adequately support how it used $336,108 in grant funds.
* Did not use a reasonable method to allocate common costs. The
grantee informed us that costs are allocated based on a predetermined
percentage rather than on actual use or benefit.
* Made payment requests to HUD based on budget amounts when HUD
regulations required it to obtain funds on a reimbursement basis
for actual costs incurred.
* Engaged in lobbying that possibly violated Federal regulations.
We concluded that HUD has no assurance that grant funds were used
within program requirements, or that Housing Comes First would properly
use future OTAG funds. Our report contains one recommendation that
HUD take appropriate administrative action against Housing Comes
First and its management.
Issue Date: November 14, 2002
Memorandum No.: 2003-KC-1801
File Size: 160KB
Title: University Forest Nursing Care Center University City,
Missouri (FHA # 085-43064)
We completed a review of the University Forest Nursing Care Center.
The review was initiated as a result of our local audit planning
and concerns raised by the St. Louis Multi-Family Program Center
on a project related to University Forest. Our objective was to
determine if University Forest complied with the provisions of its
Regulatory Agreement with HUD. We identified significant violations
of University Forest's Regulatory Agreement involving unauthorized
payments and unnecessary expenses. During the review we actively
coordinated our efforts with HUD's Office of Housing and Office
of General Counsel to resolve the violations. While our review was
in progress and HUD was pursuing corrective actions, the owner sold
the project. We recommended that the St. Louis Program Center ensure
that the project's mortgage insurance is terminated as a result
of the sale and that the Enforcement Center take appropriate administrative
actions against University Forest's president and chairman of the
board, members of the board, and the management agent for their
noncompliance with HUD's requirements and the Regulatory Agreement.
Issue Date: April 19, 2002
Memorandum No.: 2002-KC-1802
File Size: 107KB
Title: Audit Survey of Golden Oaks Apartments FHA Number 084-35143
Section 8 HAP No. MO16-0003-022 Kansas City, Missouri
We completed a survey of the Golden Oaks Apartments at the request
of the Office of Multifamily Housing Kansas City HUB. The Office
of Housing requested the review because they believe the owners
were disbursing surplus cash while the project was in need of numerous
physical improvements. Our survey objective was to determine whether
the finanical status and physical condition of Golden Oaks Apartments
warranted an audit. We determined that further review at this time
is not warranted.
Issue Date: March 29, 2002
Report No.: 2002-KC-1001
File Size: 1,090KB
Title: Dutchtown Care Center, Review of Project Disbursements,
St. Louis, MO
We completed an audit of Dutchtown Care Center. The objective
of our audit was to determine whether the owners of Dutchtown Care
Center complied with the terms of the Regulatory Agreement, as well
as all applicable statues, regulations, handbooks and other requirements
of HUD. We decided to conduct an audit of Dutchtown because its
financial statements had indications of equity skimming.
We found the Dutchtown improperly used $484,253 in project funds
to repay owner advances when the project did not have surplus cash.
Dutchtown also paid $308,559 in project funds to provide a salary
to one of the owners. Salary paid to an owner is prohibitied unless
HUD has approved the salary as essential to project operations.
In addition, project funds totaling $51,959 were paid for other
ineligible or unsupported purposes.
Issue Date: September 28, 2001
Report No.: 2001-KC-1005
File Size: 1,069KB
Title: First Community Resources, Inc., Section 203(b) Home Mortgage
Insurance Program, St. Louis, MO
We have completed an audit of First Community Resources, Inc,
a loan correspondent approved by HUD on August 3, 1995. We selected
First Community for audit because of the high default rate experienced
in St. Louis, MO. Our audit objective was to determine whether First
Community originated its HUD/Federal Housing Administration (FHA)
insured loans in accordance with HUD�s requirements.
We reviewed five HUD/FHA insured defaulted loans that were originated
by First Community. The loans were originated under HUD�s section
203(b) program. We concluded that First Community did not originate
four of the five loans in accordance with HUD�s requirements. We
did not find any problems with the other loan.
Issue Date: September 28, 2001
Memorandum No.: 2001-KC-1803
File Size: 475KB
Title: Review of Oak Tree Park Apartments, Overland, Missouri,
Project No. 085-11052
We have completed a review of the operations of Oak Tree Park
Apartments for the period from November 1998 until the transfer
of physical assets on August 28, 2000. We reviewed Oak Tree Apartment�s
use of project funds to determine if the owners complied with the
terms of their Regulatory Agreement. We did not review any other
operations of the property.
We determined that the owners, G & K Properties, used $222,012
in violation of the Regulatory Agreement during the audit period.
This includes tenant rental payments that were never deposited to
the project bank account and disbursements for uses that were ineligible
or not documented. Although the owners were also the HUD-approved
management agent, they never accrued or paid themselves a management
fee. As the management agent, they earned a management fee of $57,299
during our audit period that they should have paid themselves but
did not. We offset the $57,299 against the $222,012 and determined
the net diversion was $164,713.
Issue Date: July 9, 2001
Report No.: 2001-KC-1004
File Size: 433KB
Title: Department of Housing and Community Development Review
of Subrecipient Selection, Monitoring and Reporting Kansas City,
We have completed an audit of the Department of Housing and Community
Development of the City of Kansas City, Missouri (City). The audit
was the second joint effort between the local Office of Inspector
General, U.S. Department of Housing and Urban Development (HUD)
and the City Auditor�s Office of Kansas City, Missouri. The first
report, "Kansas City Needs a Housing Policy," was issued in April
This report focuses on the activities of the City�s Department
of Housing and Community Development and its use of subrecipients
to accomplish housing-related program objectives administered with
HUD funds. The overall objectives of our audit were to determine
whether the City is adequately ensuring that HUD funds are administered
in an efficient and effective manner, and in accordance with applicable
rules, regulations and guidance.
We found the City does not have a formal process for selecting
subrecipients, does not adequately monitor subrecipients, and does
not provide adequate information to the City Council.
Issue Date: May 11, 2001
Report No.: 2001-KC-1002
File Size: 357KB
Title: One McKnight Place - #085-36602, St. Louis, Missouri
We have completed an audit of One McKnight Place�s use of project
funds to determine if the owners complied with the terms of their
Our report contains four findings with recommendations. The four
findings address premature distributions of surplus cash to the
owners, excessive withdrawals from the replacement reserve account,
deficiencies relating to the management agreement, and the use of
the project�s funds for other than reasonable and necessary project
Issue Date: October 24, 2000
Report No.: 01-KC-202-1001
File Size: 442KB
Title: Housing Authority of Independence, Internal Control Review,
We completed an audit of the Housing Authority of Independence.
The overall objectives of our audit were to evaluate the Authority�s
internal controls and to determine whether the Authority complied
with applicable laws and regulations related to disbursements, receivables
and cash, procurement, inventory, investments, human resources,
grant administration, Board of Commissioners� oversight, application
processes, public housing evictions, maintenance, and the management
information system. We assessed the Authority�s efforts to resolve
deficiencies identified in its financial statement audit for fiscal
year ended March 31, 1999. We also assessed the Authority�s actions
regarding a Section 8 Management Review conducted by HUD in 1999,
and two consultant reviews also conducted in 1999. Further, we evaluated
the Authority�s compliance with the "Housing Opportunity Program
Extension Act of 1996."
We found that the Authority did not always have policies and procedures
for its operations; and where policies and procedures did exist,
they were not always complete, approved by the Board of Commissioners,
or enforced. Also, the Authority lacked an acceptable system of
controls over its assets; did not resolve deficiencies identified
in its financial statement audit for fiscal year ended March 31,
1999; did not ensure Board of Commissioners meetings complied with
a Missouri statute; lacked adequate controls over its procurement
process; and lacked an acceptable system of controls over its Section
8 program. Further, the Authority needs to improve its human resources
Because of the lack of controls, HUD has minimal assurance the
Authority adequately controlled its operations and conducted business
in the most efficient and effective manner.
Issue Date: May 31, 2000
Report No.: 00-KC-209-1002
File Size: 1668KB
Title: St. Louis Housing Authority Paul Simon Tenant Association
We have completed an audit of the Tenant Association Board for
the Paul Simon Elderly Building. The objective of our audit was
to determine if the Board followed proper procedures and fully accounted
for its funds. The audit was conducted in response to a citizen�s
We determined that the Board�s officers failed to comply with the
requirements governing them. They did not apply sound financial
management principles, and as a result could not account for $15,158
in funds they received during the audit period. They also did not
perform other duties assigned to them and did not meet individual
eligibility requirements to serve on the Board. Therefore, the current
officers should be replaced. The St. Louis Housing Authority needs
to establish procedures to monitor the Association, and execute
a written agreement with the Tenant Association that clearly outlines
the Association�s and its Board�s responsibilities.
Issue Date: April 6, 2000
Report No.: 00-KC-231-1801
File Size: 1602KB
Title: City Housing Policies City of Kansas City, Missouri
We have completed a review of the City of Kansas City, Missouri�s
City housing policy, strategies and activities. This was a joint
review conducted with the Kansas City, Missouri City Auditor.
In short, we found that the City of Kansas City needs a housing
policy. It currently bases its housing policy on what is contained
in its Consolidated Housing and Community Development Plan, which
includes only vague descriptions of the City�s housing strategies.
When these strategies are used to measure performance, any outcome
can be viewed as a success. We also found that the City did not
maintain current housing related data that could be used for identifying
and developing effective housing policy, strategies and activities.
This report recommends that the City Manager take certain actions
to ensure that the City develops and maintains an effective housing
policy and accurate housing related data.
Issue Date: September 28, 1999
Report No.: 99-KC-244-1002
File Size: 337KB
Title: City of St. Louis Community Development Block Grant Program,
St. Louis, MO
We completed a limited scope audit of the Community Development
Agency of the City of St. Louis� (Grantee) administration of HUD�s
Community Development Block Grant program. The purpose of the examination
was to determine if the Grantee carried out its activities in an
economical, efficient and effective manner; complied with requirements,
laws and HUD�s regulations; and only charged eligible and reasonable
costs to the programs.
We determined the Grantee and its subrecipients did an excellent
job managing the housing programs we reviewed; however, the economic
development programs did not always comply with program requirements,
laws and regulations. The Community Development Agency could not
adequately demonstrate that 10 of 16 economic development activities
funded by $2,427,000 of Community Development Block Grant monies
met a national objective. One of 16 activities examined that had
a grant for $730,000, did not use the funds for an eligible purpose.
Additionally, nine other assisted projects, with grants/loans totaling
$1,697,000, did not have adequate documentation to show that the
use of funds was for an eligible purpose. This report contains one
Issue Date: May 28, 1999
Related Memorandum 99-KC-211-1802
File Size: 31KB
Title: Plaza Square Apartments, St. Louis, MO
We concluded that the Project Owner did not comply with the Regulatory
Agreement. We identified two significant violations of Plaza Square's
Regulatory Agreement. The violations included payments of approximately
$1.35 million made from the Project's operating account to the Owner
and/or affiliated companies of the Owner while the Project's mortgage
was in default or the Project was in a non-surplus cash position.
The payments were to repay advances, which the Owner made to the
Project when the Project was not generating enough receipts to cover
operating expenses and debt service. However, repayment of advances
is not permitted by the Regulatory Agreement except when the Project
is in a surplus cash position. Also, the Owner did not fund approximately
$149,000 in security deposits as required by the Regulatory Agreement.
To resolve the issues we identified, in April 1999, the Owner modified
and restructured the HUD-insured mortgage loan by investing capital
of more than $2.4 million from non-Project sources. Approximately
$1.5 million was used to bring delinquent principle and interest
current; and approximately $900,000 was put into escrow accounts
under HUD's control. The Owner also fully funded the security deposits
in a separate account.
We believe the actions the Owner has taken to modify the loan,
invest capital from non-Project sources, and put funds in HUD controlled
escrow accounts satisfactorily resolves the problems we identified.
This report does not contain any recommendations.
Issue Date: February 26, 1999
Report No. No. 99-KC-211-1801
File Size: 30KB
Title: Brittany Acres Apartments, Bridgeton, Missouri
We completed our review of Brittany Acres Apartments, a HUD-insured,
300-unit apartment complex. We performed the review at your request.
Our objective was to determine if the owners complied with the terms
of their Regulatory Agreement.
We identified significant violations of the Brittany Acres' Regulatory
Agreement. At a joint meeting with your staff, we discussed our
concerns with one of the partners. He decided that refinancing the
mortgage and terminating HUD insurance would be in the partnership's
best interest. He later arranged refinancing and full payment of
the original mortgage. The HUD insurance was terminated on September
4, 1998. The partners are not currently participating in any other
Issue Date: March 10, 1998
Report No. 98-KC-204-1001
File Size: 688KB
Title: HA, Kansas City, MO
We concluded the JOC program was developed with internal control
weaknesses, implemented with management deficiencies, and abused
by a contractor. In addition, the JOC consultant, The Gordian Group
(Gordian), did not fulfill all its responsibilities under its contract.
As a result, the HAKC was not adequately prepared to administer
its JOC program.
Further, we concluded the HAKC has not fully met the provisions
of Section 9 of Public Law 104-120. Neither the HAKC screening procedures
nor its lease agreement contain all provisions required by Section
9 of the Act regarding tenant alcohol abuse and off premises drug-related
criminal activity. Because the HAKC has not fully complied with
Section 9 provisions, the HAKC may not be able to deny tenancy to
applicants or evict current tenants for violations of these provisions.
Therefore, we recommend the Director of the Office of Public Housing
require the HAKC to amend its screening procedures and lease agreement
to include the appropriate language regarding alcohol abuse and
drug-related criminal activity on or off the premises. In response
to our draft report, the HAKC provided an amended lease agreement
which properly addressed the issue of drug-related criminal activity
on or off the premises. However, it did not specifically address
alcohol abuse. As a result, we modified our recommendation to address
only the alcohol abuse provisions.
Issue Date: December 8, 1998
Report No. 99-KC-244-1001
File Size: 520KB
Title: Community Development Block Grant Program Department of
Housing and Community Development, City of Kansas City, Missouri
We performed a limited review of the City's CDBG program. The
review was not a comprehensive evaluation of all the activities
of the City's Department of Housing and Community Development. Rather,
the review concentrated on monitoring of subrecipients and the related
activities of some selected subrecipients. Our objectives were to
determine whether the City had adequate controls to ensure that
subrecipients carried out activities prescribed in their contract
and complied with applicable Federal requirements.
We found the City made some improvements in its monitoring of
subrecipients through changes made as a result of HUD's monitoring
review last year. Also, the City was in the process of establishing
a new Monitoring Division to further improve its monitoring efforts
by focusing on evaluating performance and compliance of subrecipients.
However, our review showed the City still needs to make further
The City did not adequately oversee the performance of the Kansas
City Downtown Minority Development Corporation (Corporation) and
did not hold the board responsible for effecting collections of
monies loaned. As a result, businesses receiving loans seldom made
the required payments; loan repayments were not available to make
new loans; and the Corporation is currently due about $13 million.
We recommended the Director, Office of Community Planning and Development,
verify that the City implements monitoring procedures and develops,
implements and maintains a loan collection program.
The City did not ensure that the East Meyer Community Development
Corporation complied with contract award requirements because it
did not properly monitor corporation activities. East Meyer did
not have a written contract for a major sanitary sewer installation.
In addition, it did not properly monitor the contractor's work.
As a result, East Meyer and the contractor are now in dispute over
the propriety of a $157,000 change order. We recommended that the
Director also verify the City strengthens its monitoring and provide
subrecipients technical assistance on required Federal contracting
The City executed contracts with community development corporations
to perform housing activities and included performance standards
that were not met. The City needs to consider past performance,
evaluate reasons for not meeting the performance goals, and adjust
subsequent contracts to more realistic goals.