North Carolina Audit Reports

Issue Date: September 26, 2007
Audit Report No.: 2007-AT-1011
File Size: 1.36MB

Title: The Wilmington Housing Authority, Wilmington, NC, Did Not Follow HUD Requirement for its Nonprofit Development Activities

As part of the U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) strategic plan, we audited the Wilmington Housing Authority (Authority) in Wilmington, North Carolina. Our audit objective was to determine whether the Authority violated requirements when it noncompetitively procured services from its affiliate, Housing and Economic Opportunities, Inc., and whether it returned program income to HUD in accordance with its Up-Front Grant Special Warranty Deed.

The Authority did not follow requirements for selection of its affiliated nonprofit entity to be a development partner for two of the Authority's development projects. As a result, it inappropriately paid its affiliate more than $296,000 in HOPE VI funds. Also, in violation of its Special Warranty Deed with HUD's Multifamily Property Disposition Center, the Authority inappropriately allowed its affiliate to retain more than $1.2 million in program income it received from home sales.

We recommend that HUD require the Authority to (1) repay $296,655 from nonfederal funds to its HOPE VI program, (2) implement procedures to ensure that it follows Notice: PIH-2007-15 for transactions with its affiliate, (3) return to HUD $1.2 million in program income received by its affiliate, and (4) implement procedures to ensure that the affiliate recaptures home sales proceeds and returns the appropriate amount to the Federal Housing Administration insurance fund. We also recommend that the director of the Atlanta Enforcement Center, in coordination with the director of the Multifamily Division, take appropriate administrative action against the Authority and affiliate for not complying with Up-Front Grant Special Warranty Deed requirements.

Issue Date: March 9, 2007
Audit Report No.: 2007-AT-1004
File Size: 873.41KB

Title: The Wilmington Housing Authority, Wilmington, North Carolina, Needs to Improve Internal Controls over Its Programs

We audited the Housing Authority of the City of Wilmington to determine whether the Authority inappropriately used federal funds to support other programs or entities in violation of requirements. Our review found that Authority management did not implement adequate internal controls to ensure that program funds were used only for eligible program activities or that costs were properly allocated and supported. Further, the Authority did not have policies governing employee use of Authority vehicles. As a result, in violation of its annual contributions contract (contract) with HUD, the Authority inappropriately used $744,916 in operating subsidies to pay expenses of other federal and nonfederal programs. In addition, the Authority could not support that it appropriately spent more than $880,000 in accordance with requirements. Further, it did not follow Internal Revenue Service requirements to determine and report the value of fringe benefits received by employees from use of employer provided vehicles.

Our recommendations include requiring the Authority to (1) repay ineligible costs of $744,916; (2) provide support for more than $880,000 of costs; (3) develop and implement procedures to ensure that program expenditures are eligible and properly supported, thereby putting an estimated $563,908 to better use; and (4) develop and implement policies and procedures governing employee use of Authority-owned vehicles.

Issue Date: June 19, 2006
Audit Report No.: 2006-AT-1011
File Size: 553.17

Title: The Housing Authority of the City of Raleigh, North Carolina, Generally Administered Its Housing Choice Voucher Program in Accordance with Requirements

We reviewed the Section 8 Housing Choice Voucher program of the Housing Authority of the City of Raleigh, North Carolina (Authority), pursuant to a citizen's complaint. The complainant alleged that the Authority mismanaged its Section 8 program by incorrectly determining tenant rent and unit sizes and not leasing or inspecting units in a timely manner. Our objective was to determine whether the complainant's allegations were valid and whether the Authority effectively administered its Section 8 program.

The Authority generally administered its Section 8 Housing Choice Voucher program in accordance with requirements; however, it did not always terminate housing assistance payments in a timely manner, paid excess housing assistance payments of more than $7,000; did not conduct all required quality control reviews; and did not properly update some information in the Public and Indian Housing Information Center, a management information system used by the U.S. Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing, which resulted in inaccurate data.

We recommend that the director of the Office of Public Housing, Greensboro, North Carolina, require the Authority to

•Obtain the balance remaining on the $7,012 in housing assistance overpayments and properly account for the funds as part of its year-end settlement,

•Perform quarterly quality control reviews in accordance with HUD requirements and the Authority's policies and procedures, and

•Verify tenant data in the management information system upon each family's recertification and include spot checks of data during its quality control reviews.

Issue Date: March 30, 2006
Audit Report No.: 2006-AT-1007
File Size: 693.93KB

Title: The Housing Authority of the City of Winston-Salem, North Carolina, Used More Than $4.9 Million in Operating Subsidies for Other Programs

We audited the Housing Authority of the City of Winston-Salem. Our objective was to determine whether the Authority used funds subject to its low-income housing annual contributions contract (contract) for the benefit of other programs or entities without HUD approval.

In violation of its contract with HUD, the Authority used more than $4.9 million in operating subsidies to pay expenses of other federal and nonfederal programs. Further, the Authority violated its contract by encumbering assets when it executed a guarantee of payment agreement for a $475,000 loan for an affiliated entity. As a result, the funds were not available for operation or modernization of public housing units, and assets are at risk. The Authority's board of commissioners often was not aware of transactions that occurred because it did not establish control procedures that ensured it was provided necessary financial reports and ensured management fully informed it of Authority activities.

Our recommendations include requiring the Authority to repay ineligible costs of $4,976,616 to its public housing fund, establish a procedure that requires the executive director to provide monthly financial documents to the board prior to meetings to assist the board in providing oversight, and obtain release of encumbered assets, thereby putting potentially as much as $475,000 to better use. We also recommend that the director of the Office of Public Housing, Greensboro, North Carolina, determine whether the Authority substantially defaulted on its contract.

Issue Date: January 18, 2006
Audit Report No.: 2006-AT-1005
File Size: 711.11KB

Title: The Housing Authority of the City of Winston-Salem, Winston-Salem, North Carolina

We audited the Housing Authority of the City of Winston-Salem's (Authority) Section 8 Housing Choice Voucher program. Our audit objective was to determine whether Section 8 units met housing quality standards.

Fifty-one of the 67 units we inspected did not meet minimum housing quality standards. Of the 51 units, 26 were in material noncompliance with housing quality standards. As a result, tenants lived in units that were not decent, safe, and sanitary, and HUD made housing assistance payments for units that did not meet standards. We estimate that over the next year, HUD will pay housing assistance payments of more than $6.4 million for units in material noncompliance with housing quality standards.

We recommend that HUD require the Authority to inspect the 51 units that did not meet minimum housing quality standards to verify that the landlords took appropriate corrective actions. If appropriate actions were not taken, abate the rents or terminate the tenants' vouchers. We also recommend HUD require the Authority to implement an internal control plan to ensure its Section 8 units meet housing quality standards and inspections meet HUD requirements to prevent an estimated $6.4 million from being spent on units that are in material noncompliance with standards.

Date Issued: August 23, 2005
Audit Memorandum No.: 2005-AT-1802
File Size: 38.30KB

Title: Housing Authority of Winston-Salem, Winston-Salem, North Carolina

As part of the Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) strategic plan, we performed an audit survey of the Housing Authority of Winston-Salem's (Authority) administration of its Section 8 housing choice voucher program. Our survey objective was to determine whether the Authority properly administered the program. This review was limited to tenant eligibility and subsidy calculations, program financial operations, and whether tenants were housed in appropriate sized units.

We did not find any significant deficiencies in these areas during this review, thus we did not perform additional audit work in these areas. However, we did find one case where a tenant was authorized a two bedroom unit, but was inappropriately housed in a three bedroom unit. As a result, the Authority overpaid $472 in subsidy for the tenant during our review period. Our review also found that the PIC data pertaining to bedroom sizes was incorrect for all 48 files.

We recommend the director of Public and Indian Housing require the Authority to correct tenant information in its database for the 48 tenants identified, and provide assurance it has implemented procedures to ensure tenant bedroom sizes are correctly entered in the future.

Date Issued: June 27, 2005
Audit Report No.: 2005-AT-1011
File Size: 643KB

Title: The Housing Authority of the City of High Point, NC

We completed an audit of the procurement practices of the Housing Authority of the City of High Point, North Carolina (Authority). Our audit objective was to determine whether the Authority solicited and awarded contracts in accordance with procurement regulations and other requirements.

We found the Authority paid at least $524,337 from October 1, 2003, through September 30, 2004, without following procurement requirements. This occurred because the Authority did not have adequate internal controls to ensure it procured goods and services in accordance with procurement requirements. As a result, the Authority cannot ensure it received the resulting goods and services at the best price or that it properly used HUD funds to meet its mission of providing safe and sanitary housing.

We recommended that the director of the Office of Public Housing (1) require the Authority to develop and implement procurement policies and procedures that ensure future procurements are in accordance with requirements, thus providing assurance that at least $524,337 will be put to better use during the next 12 months; (2) require the Authority to discontinue paying vendors who do not have valid contracts or purchase orders; and (3) monitor the Authority to ensure it complies with procurement requirements and, if necessary, implement appropriate sanctions to ensure compliance.

Date Issued: November 19, 2004
Audit Report No.: 2005-AT-1004
File Size: 331.1KB

Title: Housing Authority of the City of Durham, Durham, NC

We completed an audit of the Durham Housing Authority's (Authority) financial operations and procurement procedures. Our audit objectives were to determine if the Authority's misuse of funds, identified in a prior report, jeopardized its ability to operate its projects in a manner that promotes serviceability, economy, efficiency, and stability, and whether the Authority followed Department of Housing and Urban Development (HUD) procurement regulations when purchasing goods and services.

The Authority jeopardized project stability by misusing funds to subsidize operations of Development Ventures, Inc., (DVI) a non-profit subsidiary. The Authority's cash and investments decreased from $2.8 million in 1996 and $800,000 in 2003. For the same period, its accounts receivable balance increased from $400,000 to $4.6 million. As of June 30, 2004, DVI and its related entities owed $4.1 million to the Authority. At its current rate of spending, we estimated the Authority only had enough funds to continue operations for about 7 months.

Because the Authority did not implement adequate procurement procedures, it inappropriately spent $6,855,271 for goods and services. Further, the Authority could not support $953,477 spent for goods and services. We believe the Authority can put the remaining unobligated balance of $2.2 million of Capital Funds to better use by developing and implementing improved procurement procedures.

Our recommendations include requiring the Authority to devise plans with multiple strategies for resolving both its short-term and long-term financial problems, repay $6,855,271 and provide support for another $953,477.

Date Issued: August 2, 2004
Audit Report No.: 2004-AT-1012
File Size: 4.12MB

Title: Housing Authority of the City of Durham, Durham, North Carolina

The Authority violated its ACC by inappropriately advancing funds to its related non-profit and other entities. As of September 30, 2003, the Authority had inappropriately advanced at least $1,994,955 from its Conventional Public Housing General Fund. The Authority also violated its Turnkey III Administrative Use Agreement when it inappropriately advanced or failed to require loan repayments totaling at least $2,803,579. Also, the Authority inappropriately guaranteed a $350,000 loan obtained by a Limited Liability Company (LLC) and executed a Promissory Note for a $1.5 million line of credit on behalf of another LLC. The Authority also failed to properly allocate operating costs to other entities. Further, the Authority has not completed several of its development efforts, thus we question its ability to successfully complete its HOPE VI Revitalization Plan. These actions occurred because the Authority Board of Commissioners and management did not establish and implement sufficient controls to monitor activities and ensure transactions adhered to Federal regulations. Additionally, the Board did not adequately fulfill its fiduciary responsibilities to oversee Authority operations, and management disregarded HUD requirements and instructions. These actions reduced funds available to operate and maintain the Authority's conventional public housing and deprived tenants of needed housing.

Our recommendations include requiring the Authority to repay $3,454,660, obtain release of any currently encumbered assets, establish adequate controls, and develop and implement an acceptable cost allocation plan. We also recommend HUD continue to perform reviews of all drawdowns of funds until HUD determines the Authority is properly administering its programs, issue a Notice of Substantial Default in accordance with Section 17(C) of the ACC, and take administrative actions against the former Executive Director, Interim Executive Director and Board members. We also recommend HUD perform a comprehensive review of the Authority's capacity and ensure the Authority takes appropriate measures to address any capacity issues to successfully complete activities in accordance with the HOPE VI Grant Agreement and Revitalization Plan. If the review finds the Authority does not have the capacity to complete the activities, or finds the Authority in serious default of the Grant Agreement or regulations, terminate the Grant and recapture the remaining $27,590,236, or current balance, of unused funds.

Date Issued: April 28, 2004
Audit Memorandum No.: 2004-AT-1007
File Size: 403.2KB

Title: Housing Authority of the City of Asheville, Asheville, North Carolina

We found the Authority violated its ACC with HUD by inappropriately advancing funds and pledging assets for non-Federal development activities. HUD did not approve the development activities. As of September 30, 2002, management had advanced $1,850,833 of public housing funds for development expenses on behalf of the owners of two tax credit developments. The advances reduced funds available to operate and maintain the Authority's conventional public housing and other HUD programs, and resulted in cash flow problems for the Authority. Management further violated its ACC by pledging the Authority's full faith and credit for a $1.3 million letter of credit obtained to fund development activity. In addition, the Authority pledged a $649,140 certificate of deposit as collateral for a loan. The Authority also entered into inappropriate development and guarantee agreements that placed assets at further risk. The guarantee agreements were extremely one-sided in favor of the investors. Further, the Authority did not properly allocate costs attributable to the non-Federal properties. These actions occurred because the Board of Commissioners did not establish sufficient controls to monitor the Authority's development activities and ensure transactions adhered to Federal regulations.

Date Issued: July 31, 2003
Audit Memorandum No.: 2003-AT-1007
File Size: 335.3KB

Title: Citizens Complaint, Mount Airy, North Carolina Housing Authority

Our review of the Mount Airy North Carolina Housing Authority was in response to a citizen's complaint. We found that some of the citizen's allegations were valid. The Authority allowed: (1) identity-of-interest companies to bid against one another and then allowed losing bidders to perform the work as subcontractors, and (2) did not perform required cost and price analyses, enforce contractor performance, or always obtain a formal contract. Also, the Authority split the cost of one contract into separate contracts to attempt to reduce costs. This occurred because Authority management did not have adequate knowledge of procurement requirements. Also, the Authority allowed the Executive Director and other staff to use Authority-owned vehicles to commute daily between their homes and work without accounting and reporting the taxable employee fringe benefits. This occurred because management was not aware of the IRS requirements. The Authority had taken actions to correct most of the deficiencies; however additional improvements were needed in some areas. HUD and the Authority agreed with our findings and took or agreed to take appropriate corrective actions.

Date Issued: January 9, 2002
Audit Report No.: 2003-AT-1001
File Size: 2.25MB

Title: Northwestern Regional Housing Authority - Public Housing Program
Boone North Carolina

Our audit of the Northwestern Regional Housing Authority (Authority) in Boone, N.C., was in response to a citizen's complaint. We found the Authority repeatedly violated regulatory requirements and its public housing and Section 8 contracts. Management pledged Authority assets as collateral for unauthorized bank loans, misused $584,858 of Section 8 and public housing funds for private development activities, and guaranteed repayment of private development loans. The Authority incurred unnecessary and ineligible travel and other costs. It paid lavishly for meals, hotels, and tips, made frequent out-of-region trips, and paid travel expenses for family members of management and the Board. Also, it spent $114,302, for miscellaneous items, half of which was for entertaining and pampering its Board members and employees, their spouses and guests at Board meetings, a beach retreat, a Christmas party, and with theater tickets, jewelry, bath products, libations, and other personal gifts. The Authority did not maintain its public housing units and grounds in good repair, did not maintain accurate accounting records, and did not follow Section 8 fund requisition requirements resulting in excess withdrawals. Management did not properly segregate tenant escrow funds, adequately pursue collection of tenant rents, or follow its own nepotism policies. Due to the nature and extent of the violations, we recommend HUD declare the Authority in substantial default, recover $4.3 million of ineligible costs, take appropriate administrative and other needed actions.

Date Issued: September 27, 2002
Audit Memorandum No.: 2002-AT-1005
File Size: 364KB

Title: Congressionally Requested Audit of the Outreach and Technical Assistance Grants and Intermediary Technical Assistance Grants awarded to the North Carolina Low Income Housing Coalition, Inc. Raleigh, North Carolina

We did not identify any ineligible lobbying activities. However, the Grantee obtained advances in excess of program needs, claimed reimbursement for expenditures not paid, and claimed reimbursement for the same expenses twice, resulting in overcharges to the grants of $52,083. Also, the Grantee did not use a cost allocation method or plan that complied with guidance in OMB Circular A-122. The lack of an adequate cost allocation plan resulted in overcharges to the grants of at least $9,030. Furthermore, the Grantee hired a nonprofit organization to conduct portions of the grant activities under a cost reimbursable type contract. Of the invoices submitted by the contractor in the amount of $166,470, we determined $73,361 was not adequately supported. Without adequate supporting documentation, the $73,361 represents potential overcharges to the grants. In addition, we determined that $2,344 in contractor salaries and benefits represents overcharges to the grant. Our report contains recommendations to address these issues and to strengthen management controls over the Grantee. We recommend you consider suspending grant funding until the Grantee develops and implements appropriate management controls to ensure that only eligible activities receive funding and that the documentation for the expenditures complies with OMB Circular A-122.

Date Issued: January 4, 2001
Audit Report No.: 01-AT-202-1802
File Size: 420KB

Title: Procurement of the Kimberly Park HOPE VI Developer HA City of Winston-Salem, NC

The Authority did not comply with its procurement policies or Federal requirements when it selected the developer for the Kimberly Park HOPE VI project. Specifically, the Authority's evaluation panel did not follow prescribed evaluation procedures and the Authority did not properly document its selection process. Thus, we were unable to determine; whether it provided full and open competition, its rationale for accepting or rejecting contractors, or whether its selection was objective, impartial, consistent, and fair. Also, HUD has no assurance the contractor selected was the most advantageous to the program. This occurred because the Executive Director, rather than an experienced Contract Administrator, acted as the Contracting Officer responsible for overseeing the procurement.

We recommended the Authority issue a new Request for Proposal (RFP) and select a developer for the Kimberly Park HOPE VI project using required procurement procedures. The Authority must fully document the procurement.

The Director, Office of Urban Revitalization, HOPE VI, agreed with our recommendation and advised us the Authority terminated its Memorandum of Understanding with the developer and will re-issue a Request for Qualifications (RFQ). The Authority will use a selection and documentation process consistent with Authority and Federal procurement policy. We concurred in these management decisions and consider final action for the recommendation to be complete.

Date Issued: September 29, 2000
Audit Report No.: 00-FW-222-1007
File Size: 609KB

Title: Shapiro & Ingle, Inc. Closing Agent Contract, Raleigh, North Carolina

We performed an audit of the law offices of Shapiro & Ingle, Inc. (Shapiro & Ingle), a closing agent for HUD, as part of a nationwide effort to review closing agents. Our audit objective was to determine whether management controls were adequate to ensure the prevention of fraud, waste, and abuse. To meet this objective, we performed audit steps to determine whether the closing agent complied with its contract terms and conditions.

Overall, Shapiro & Ingle's controls were insufficient to ensure substantial compliance with its HUD contract.

Date Issued: March 27, 2000
Audit Report No.: 00-AT-202-1005
File Size: 136KB

Title: Benson Housing Authority, Public Housing Programs, Benson, NC

We completed an audit of the Benson Housing Authority, Benson, North Carolina, pertaining to its public housing programs. This report presents the results of our audit and includes three findings with recommendations for corrective action.

Date Issued: June 16, 1999
Audit Report No.: 99-AT-204-1808
File Size: 56KB

Title: Citizen Complaints - Elizabeth City HA Elizabeth City, NC

In response to a citizen's complaints, we reviewed activities of the Elizabeth City Housing Authority (Authority) as they pertain to portions of the Authority's Public Housing Management Assessment Program (PHMAP) certifications for the years 1994 through 1998. We also performed a preliminary review of other complaints to determine if further audit work should be performed. The purpose of our review was to determine whether the Authority complied with applicable laws, regulations and HUD requirements. We found no evidence of false PHMAP certifications by the Authority. The Authority had documentation that properly supported the certifications we reviewed. Our preliminary review of allegations of possible misuse of Authority assets and a conflict of interest found no basis for the need to perform additional audit work.

Date Issued: June 3, 1999
Audit Report No.: 99-AT-204-1806
File Size: 76KB

Title: Citizen Complaints Housing Authority of the City of Winston-Salem, North Carolina

The Authority did not timely and effectively complete a major project to install air conditioning and heating equipment in 1,624 of the Authority's apartments. The Authority did not comply with procurement requirements to ensure free and open competition for three of seven procurements we tested. The Authority did not have proper support of the eligibility of a $10,000 payment to a local private school. The Authority also did not follow its procedures to prevent the appearance of a conflict of interest.

Date Issued: April 14, 1999
Audit Report No.: 99-AT-204-1805
File Size: 59KB

Title: Citizen Complaints Residents Council of Asheville Housing Authority, Inc. Asheville, NC

The TOP expenditures we reviewed were eligible and properly supported.

The Council did not obtain an audit of the activities of its TOP grant. As a result, HUD did not have assurance that the Council administered its grant in accordance with program requirements.

The Council required the signature of only one officer on disbursement checks. This policy did not provide effective internal control for disbursements.

Date Issued: April 14, 1999
Audit Report No.: 99-AT-204-1804
File Size: 77KB

Title: Citizen Complaints Housing Authority of the City of Asheville Asheville, North Carolina

The Authority paid ineligible monthly stipends of $33,455 to Public Housing residents as part of its Drug Elimination Program. The payments were ineligible based on the Notice of Funding Availability for the program which prohibited the payment of wages or salaries to housing residents for their participation in voluntary tenant patrols. Authority staff thought that this prohibition did not apply to their program.

The Authority improperly loaned Public Housing funds of $44,550 to the Residents Council when the Council could no longer pay expenses it incurred mowing lawns under a contract with the Authority. The Authority then paid the Residents Council $70,000 a year for lawn mowing services that the Council subcontracted to a third party for $60,000. The annual difference of $10,000 was an unnecessary cost.

The Authority needed to improve management controls over its activities with the Residents Council. The Authority made payments to residents without proper support and did not report the payments to the Internal Revenue Service. The Authority also did not have a written agreement for its lease of mowing equipment to the Council.

Issue Date: December 24, 1998
Audit Report No.: 99-AT-241-1803
File Size: 968KB

Title: Citizen Complaints Eagle/Market Streets Development Corporation Asheville, North Carolina

The Corporation did not administer land acquisition and procurement activities in accordance with CDBG Program requirements. In acquiring a parcel of land, the Corporation paid $14,000 in excess of the land's appraised value to a Board member, creating the appearance of a conflict of interest. Similarly, it created the appearance of favoritism in awarding a $60,950 consulting contract by not documenting how it selected the contractor.

The City also paid the Corporation $6,000 for activities not authorized in the City's contract with the Corporation.

Issue Date: December 22, 1998
Audit Report No.: 99-AT-241-1802
File Size: 150KB

Title: Pine Knolls Neighborhood Revitalization Program Town of Chapel Hill, North Carolina

The Town needed to improve the effectiveness of the Pine Knolls Neighborhood Revitalization Program. The Center, as program administrator, did not timely repair and sell houses purchased with CDBG loans. As a result, the objective of home ownership was not met, and the Center had not repaid $181,500 of the loans to the Town.

Issue Date: September 24, 1997
Audit Case No.: 97-AT-202-1005
File Size: 104KB

Title: HA of the City of Durham, Durham, NC

The exteriors of 14 of the Authority's 15 projects were generally in good repair and, except for three projects, the grounds of the Authority's projects were generally well maintained. However, the Authority needed to improve the maintenance of the interiors of its projects. Twenty-seven of the 30 housing units we inspected failed the Department of Housing and Urban Development's (HUD) housing quality standards (HQS). We recorded 244 HQS violations or other items which required repair in the 30 units we inspected. Examples of the problems were: windows and doors which did not seal properly or would not lock, inoperable plumbing fixtures and kitchen ranges, peeling and cracked paint, holes in walls, broken tile, hazardous electrical switches, insect infestation, and inoperable smoke detectors.

As a result, families were not living in decent, safe and sanitary housing. The maintenance problems were due to insufficient staffing and ineffective procedures for inspecting units and preparing work orders. Two of the 12 indicators of the Authority's PHMAP fiscal year 1995 score which we tested were overstated. The two parts related to the Authority's performance in maintaining its housing units. The Authority's PHMAP score should have been about 79 instead of the 93 the Authority received. The Authority's score was overstated because it: (1) did not have accurate data for maintenance work orders; and (2) did not fail some units which had HQS violations.

As a result, HUD, and possibly the Authority Board of Commissioners, were not aware of the actual maintenance condition and performance of the Authority and could not properly evaluate the amount of monitoring which should be performed.

Issue Date: May 14, 1996
Audit-Related Memorandum No.: 96-AT-256-1814
File Size: 20KB

Title: HA of the City of High Point, High Point, NC

The Authority provided its local match but did not record the transaction correctly in its accounting records. The required match in December 1995 was about $90,750 based on 33 percent of grant expenditures. The Authority provided a match of $161,331 from money HUD allowed the Authority to retain from home sales in its Turnkey III Program. The Authority used the money to make loans to families so they could purchase homes rehabilitated in the HOPE 3 Program. The Authority incorrectly recorded the $161,331 as an account receivable in the Turnkey III Program. To be credited as the Authority's local match, the funds should be recorded as an account receivable and equity contribution in the HOPE 3 Program.

Issue Date: January 24, 1996
Audit-Related Memorandum No.: 96-AT-212-1806
File Size: 16KB

Title: Morningside Associates, Ltd., Burlington, NC

We found no evidence project income was used for ineligible purposes. However, the Mortgagor did not follow effective financial management control procedures. The Mortgagor (1) did not maintain required accounting records, (2) did not provide annual audited financial statements to HUD, and (3) had weaknesses in cash receipts and disbursements procedures. As a result, the Mortgagor did not have proper controls over project assets and did not have sufficient financial information for effective project management or HUD monitoring.

Issue Date: October 26, 1995
Audit-Related Memorandum No.: 96-AT-214-1804
File Size: 28KB

Title: Essential Housing Management, Inc., Winston-Salem, NC

EHM charged an estimated $317,245 in excessive front-line expense fees to 41 HUD projects. The fees were excessive because EHM duplicated costs for bookkeeping services in fees charged to the projects, reducing money available to the projects to pay operating expenses and mortgage payments. Eight of the projects defaulted on their HUD-insured mortgages, and the mortgages were assigned to HUD.

Issue Date: October 16, 1995
Audit Report No.: 96-AT-203-1001
File Size: 22KB

Title: Pender County HA, Burgaw, NC

Our tests showed that the payments made for administrative costs were for eligible costs. However, the Authority's administrative expenses exceeded its income for the past several years. The Authority had a cumulative operating deficit of $35,331 and was able to continue operations only because it: (1) borrowed $13,100 from a bank, and (2) did not pay $17,385 it owed to HUD. The operating losses were caused by ineffective budgeting, improper allocation of costs, and loss of potential income. These management problems jeopardize the Authority's ability to continue its Section 8 Program. In addition, the Authority permitted a member of the Board of Commissioners to have two units in the Section 8 Program in violation of the Annual Contributions Contract (ACC). This represented a conflict of interest.


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