New York Audit Reports

Issue Date: September 28, 2007
Audit Report No.: 2007-NY-1013
File Size:277.39KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant, Disaster Recovery Assistance Funds, New York, New York

This is the ninth report in our ongoing audits of the Lower Manhattan Development Corporation's (the auditee) administration of the Community Development Block Grant Disaster Recovery Assistance funds provided to the State of New York in the aftermath of the September 11, 2001, terrorist attacks on the World Trade Center in New York City. During our audit period, October 1, 2006, through March 31, 2007, the auditee disbursed approximately $98.7 million of the $2.783 billion funds appropriated. The objectives of this audit were to determine whether the auditee (1) disbursed Disaster Recovery Assistance funds in accordance with the guidelines established under U.S. Department of Housing and Urban Development (HUD)-approved partial action plans, (2) expended Disaster Recovery Assistance funds for eligible administration and planning expenses in accordance with applicable laws and regulations, and (3) had a financial management system in place that adequately safeguarded funds and prevented misuse.

The auditee generally disbursed the $98.7 million in Disaster Recovery Assistance funds in accordance with HUD-approved action plans, expended funds for eligible administration and planning expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded funds and prevented misuse. However, our audit disclosed an internal control weakness that resulted in the drawdown of more than $1.2 million in Utility Restoration and Infrastructure Rebuilding program funds by a subrecipient without the auditee's written approval as required. We recommend that HUD's General Deputy Assistant Secretary for Community Planning and Development require the auditee to strengthen its drawdown controls in the Utility Restoration and Infrastructure Rebuilding program to ensure that its subrecipient complies with the subrecipient agreement.

Issue Date: July 5, 2007
Audit Report No.: 2007-NY-1010
File Size: 255.16KB

Title: Amistad Management's Administration of Grace Houses, Jamaica, New York, Generally Complied with HUD Regulations

We completed an audit of the activity of Amistad Management Corporation in its function as management agent for Grace Houses located in Jamaica, New York in response to a complaint about administrative and financial issues at Grace Houses. Our objective was to assess the merits of the complaint and determine whether the agent complied with U.S. Department of Housing and Urban Development (HUD) regulations while administering the project. The review generally covered the period from January 1, 2004 through September 30, 2006, and was extended when necessary.

Our audit found that the management agent generally complied with HUD regulations; however, our work disclosed various issues that warrant your attention. Specifically, utility bills were not always paid in a timely manner and two restricted cash accounts have been dormant for many years. As a result, late payment penalties were incurred on utility bills and restricted cash has not been disbursed for intended purposes.

We recommend that the acting director of HUD's New York Multifamily Housing Hub request the management agent to strengthen internal controls to ensure that bills are paid in a timely manner to avoid unnecessary late payment charges, and take action to properly liquidate the dormant restricted cash accounts.

Issue Date: June 29, 2007
Audit Report No.: 2007-NY-1009
File Size: 616.53

Title: The Town of Alexandria, New York's Small Cities Community Development Block Grant Program Did Not Meet Its Program Objective of Job Creation

We completed an audit of the operations of the Town of Alexandria, New York (grantee), regarding its administration of a Small Cities Community Development Block Grant (Block Grant) obtained in September 1999 under the U. S. Department of Housing and Urban Development's (HUD) Canal Corridor Initiative. The purpose of the examination was to determine whether the grantee ensured that (1) grant funds were disbursed for project costs that were necessary, reasonable, and in accordance with federal regulations and (2) the project for which the funds were used complied with Block Grant program objectives, including the intended benefit of job creation.

The audit disclosed that the grantee disbursed Block Grant funds for project costs that were necessary, reasonable, and in accordance with federal regulations; however, it did not ensure that its use of the grant proceeds complied with program objectives. Specifically, its use of Block Grant funds did not result in job creation, the program objective for which HUD provided the funds.

We recommend that HUD follow up on the grantee's progress toward meeting its job creation goal for the project and set a specified deadline for meeting the goal. We also recommend that HUD use the $50,000 per job standard to determine how much of the $600,000 in Block Grant funds are eligible costs, and require the grantee to reimburse the program from nonfederal funds for any amounts determined to be ineligible.

Issue Date: April 17, 2007
Audit Report No.: 2007-NY-1005
File Size: 426KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant, Disaster Recovery Assistance Funds, New York, New York

This is the eighth report in our ongoing audits of the Lower Manhattan Development Corporation's (auditee) administration of the Community Development Block Grant Disaster Recovery Assistance Funds, which were provided to the State of New York as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City. The auditee disbursed approximately $76.7 million of these funds that the auditee disbursed during our audit period, April 1, 2006 through September 30, 2006. The objectives of the current review were to determine whether the auditee (1) disbursed Disaster Recovery Assistance Funds in accordance with HUD-approved action plans, (2) expended Disaster Recovery Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and (3) maintained a financial management system that adequately safeguarded the funds.

The auditee generally disbursed the $76.7 million in Disaster Recovery Assistance funds in accordance with HUD-approved action plans, expended Disaster Recovery Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded the funds. However, the auditee can take actions to strengthen is monitoring of Small Firm Attraction and Retention Grant program recipients' compliance with retention requirements, and provide greater assurance that funds disbursed in the Cultural Enhancement Fund program further program objectives.

We recommend that HUD's general deputy assistant secretary for community planning and development (1) ensure the recovery of the $6,000 in erroneous Small Firm Attraction and Retention Grant payments, (2) require the auditee to strengthen controls in the Small Firm Attraction and Retention Grant program to more effectively identify any grant recipients who do not remain at eligible business premises for the minimum five-year term, and (3) monitor and evaluate the outcome-based performance measures established for the Cultural Enhancement Fund program to ensure that funded activity will have a positive impact upon the long-term revitalization of lower Manhattan.

Issue Date: April 2, 2007
Audit Report No.: 2007-NY-1004
File Size: 877.67KB

Title: Family Self-Sufficiency and Section 8 Program Weaknesses at the City of Poughkeepsie, Poughkeepsie, New York

We completed an audit of the City of Poughkeepsie's, located in Poughkeepsie, New York, Family Self-Sufficiency and Section 8 programs. The objectives of the audit were to determine whether the City of Poughkeepsie (1) properly calculated and funded Family Self-Sufficiency program participant escrow account amounts, (2) administered the Family Self-Sufficiency program in accordance with United States Department of Housing and Urban Development (HUD) regulations, and (3) adequately accounted for, and disbursed, Family Self-Sufficiency and Section 8 program funds. The review generally covered the period between January 1, 2000 and June 30, 2006.

The audit disclosed that the City of Poughkeepsie did not establish and properly fund escrow accounts for its 29 Family Self-Sufficiency program participants as required by HUD regulations. As a result, nine current program participants are owed $81,641 plus interest. Additionally, weaknesses in the operation of its Family Self-Sufficiency Program caused the City of Poughkeepsie to not (1) comply with required program size, (2) ensure that participant contracts of participation were properly executed, and (3) establish criteria to adequately measure participant accomplishments. Weaknesses also existed in the City of Poughkeepsie's Section 8 program financial management controls because it lacked a proper plan to allocate administrative expenses to the Section 8 program, resulting in $750,000 in unsupported and $32,400 in excessive administrative costs.

We recommend that the director of the New York City Office of Public Housing instruct the City of Poughkeepsie to: (1) fund its recently established bank account for participant-earned escrow amounts with $81,641 plus interest due current participants, (2) institute controls to ensure compliance with Family Self-Sufficiency program administrative requirements, and (3) document the basis for the $750,000 in unsupported administrative expenses charged to the Section 8 program and reimburse $32,400 in excessive administrative costs.

Issue Date: March 12, 2007
Audit Report No.: 2007-NY-1003
File Size:1.73MB

Title: Peregrine Health Management Company Used Project Funds for Ineligible, Unsupported and/or Unnecessary Cost

We completed an audit of the Peregrine Health Management Company (agent) pertaining to its management of the financial operations of Peregrine's Landing Senior Community (project). The audit was initiated based on a complaint. The objectives of the audit were to determine whether the complaint allegations were valid and whether the agent was using project funds in accordance with its regulatory agreement and U.S. Department of Housing and Urban Development (HUD) requirements.

The audit disclosed merit to one of the complaint allegations and the agent did not use project funds in accordance with its regulatory agreement and HUD requirements. The agent used $116,798 in project funds for items that were ineligible, unsupported, and/or not necessary or reasonable for project operations. Further, project funds are being encumbered, as $50,000 in funds and $35,062 in a bond and associated interest are being held in addition to a $5,475 account payable to cover non-project-related legal fees. In addition, the agent collected $72,740 in excessive management fees that could have been avoided, and used project funds to pay the salary and benefits of one of its employees, resulting in ineligible costs of $39,711.

We recommend that HUD instruct the owner and agent to develop procedures to ensure compliance with its regulatory agreement and HUD rules and regulations. Also, we recommend that HUD require the owner and agent to (1) reimburse the project for the ineligible and/or unnecessary costs; (2) submit supporting documentation to justify all unsupported costs, so that HUD can make an eligibility determination, and reimburse the project from nonproject funds all amounts determined to be ineligible; (3) unencumber the project by removing $5,475 accounts payable from the project's books and records and take appropriate action to prevent future payments of non-project-related legal expenses. HUD should determine the disposition of the escrowed funds, bond and interest set aside for the developer-related lawsuit and consider removing the funds from the project's books and records so that the encumbered funds will be available for paying operating expenses; (4) negotiate a management fee that is reasonable and commensurate with the services provided; and (5) reimburse the project from nonproject funds for the excessive supervisory salary paid.

Issue Date: January 29, 2007
Audit Report No.: 2007-NY-1801
File Size: 83.70KB

Title: Management Agent Fees Claimed by P.J. Alizio Realty, Inc.

We completed a limited review of the management fees claimed by the management agent, P.J. Alizio Realty, Inc. pertaining to six multifamily properties. The objective was to determine if the management agent fees were calculated in accordance with the Project Owner's and Management Agent's Certifications and other Department of Housing and Urban Development (HUD) regulations. Because they were not deemed significant to the review objectives, we did not obtain an understanding of internal controls; consequently our work was not conducted in accordance with generally accepted government auditing standards. The review generally covered the period from January 1, 2002, through December 31, 2005.

Our review disclosed that, for the fees we tested, the Agent generally calculated the management fees in compliance with applicable HUD requirements, and did not claim payments in excess of that specified in the Project Owner's and Management Agent's Certifications. However, the Project Owner's and Management Agent's Certifications for two projects were not submitted to HUD as required.

We recommend that the Director, New York Multifamily HUB, request that the management agent submit the Project Owner's and Management Agent's Certifications for the two projects to HUD as required, and implement procedures to ensure that whenever management fees are revised a new Project Owner's and Management Agent's Certification is submitted to HUD.

Issue Date: December 20, 2006
Audit Report No.: 2007-NY-1002
File Size: 699KB

Title: The City of Amsterdam, New York, Needs to Make Improvements in Administering Its Section 108 Loan Guarantee Program

We completed an audit of the operations of the City of Amsterdam, New York (grantee), regarding its administration of a Section 108 loan obtained in May 2002 under the U.S. Department of Housing and Urban Development's (HUD) Canal Corridor Initiative. The purpose of the examination was to determine whether the grantee ensured that (1) Section 108 loan proceeds were disbursed in accordance with Community Development Block Grant (Block Grant) and Section 108 loan rules and regulations and (2) its Section 108 loan project properly complied with Block Grant program objectives. The review generally covered the period from January 1, 2002 through April 30, 2006.

The audit disclosed that the grantee did not disburse Section 108 loan proceeds in accordance with Block Grant and Section 108 loan rules and regulations. Specifically, (a) some loan proceeds were not disbursed in accordance with the loan application while other funds were disbursed without adequate support, and (b) there is no evidence of compliance with labor standards. As a result, the grantee could not demonstrate that loan proceeds totaling $535,000 were used for proper, reasonable, and eligible costs.

We recommend that HUD instruct the grantee to (1) submit supporting documentation to justify all unsupported costs, so that HUD can make an eligibility determination, and reimburse the program from nonfederal funds all amounts determined to be ineligible; and (2) develop administrative controls that will ensure compliance with all Section 108 loan guarantee regulations and requirements for all future Block Grant-related funding.

Issue Date: November 2, 2006
Audit Report No.: 2007-NY-1001
File Size: 5.06MB

Title: Utica Municipal Housing Authority, Utica, New York, Needs to Make Improvements in Administering Its HOPE VI Revitalization Program

We completed an audit of the Utica Municipal Housing Authority, Utica, New York (Authority). The objectives of the audit were to determine whether the Authority (1) administered its HOPE VI grant program and activities effectively, efficiently, and economically in accordance with grant agreements and applicable rules and regulations; (2) complied with applicable procurement requirements; (3) implemented sufficient disbursement controls over administrative costs charged to the program; and (4) had a cost allocation plan to adequately account for and distribute costs to the program. The review generally covered the period from January 1, 2003 through December 31, 2005.

The audit disclosed that the Authority's HOPE VI program is not achieving vital revitalization objectives in a timely manner or in accordance with program goals and requirements as specified in its application, revitalization plan, and grant agreement. The Authority did not always comply with applicable procurement policies for three professional services contracts when 1) excessive fees were paid for application services, 2) a consulting contract was improperly modified, and 3) administration of a financial consulting contract was inadequate. Questionable administrative costs were also charged to the program. In addition, the Authority periodically allocated certain costs such as wages and fringe benefits but neglected to allocate other indirect costs, and its allocation plan for wages and fringe benefits was not adequately supported or detailed.

We recommend that HUD instruct the Authority to (1) implement procedures that will ensure that all collateral investments and in-kind services for the Hope VI project are documented and quantified; (2) reevaluate the scope of its revitalization plan and amend the plan accordingly so that HUD can reassess whether the Authority is able to meet its primary objective of revitalizing the project neighborhood known as Cornhill. Based on this reassessment, HUD should determine whether the amended plan is effective enough to ensure that the remaining $7.47 million will be an efficient use of funds, or if the Authority can only achieve certain objectives, HUD should consider reducing the remaining amount of grant funds proportionately; (3) establish controls to ensure compliance with all applicable federal, state, and local procurement policies and regulations; (4) submit supporting documentation to justify all unsupported costs, so that HUD can make an eligibility determination, and reimburse the program from nonfederal funds all amounts determined to be ineligible; and (5) develop and implement a cost allocation plan or establish an indirect cost rate proposal to ensure that all costs are properly allocated to the benefitting sources.

Issue Date: September 27, 2006
Audit Report No.: 2006-NY-1013
File Size: 352.89KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant, Disaster Recovery Assistance Funds, New York New York

This is the seventh report in our on-going audits of the Lower Manhattan Development Corporation's (auditee) administration of the Community Development Block Grant Disaster Recovery Assistance Funds, which were provided to the State of New York as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City. The auditee disbursed $129.7 million of these funds during our audit period of October 1, 2005 through March 31, 2006. The objectives of the current review were to determine whether the auditee (1) disbursed Disaster Recovery Assistance Funds in accordance with HUD-approved action plans, (2) expended Disaster Recovery Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and (3) maintained a financial management system that adequately safeguarded the Funds.

The results of our review disclosed that the auditee generally disbursed Disaster Recovery Assistance Funds in accordance with the HUD-approved action plans. The auditee also expended Disaster Recovery Assistance Funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded the funds. However, our review disclosed weaknesses in the auditee's control procedures that permitted $186,749 to be misclassified in HUD's Line of Credit Control System resulting in charges to the wrong programs. In addition, and a consultant was reimbursed at incorrect rates resulting in a $3,053 overpayment.

We recommend that the general deputy assistant secretary for community planning and development require the auditee to (1) reclassify costs totaling $186,749 to the appropriate HUD Line of Credit Control System budget line item, (2) reimburse $3,053 to the World Trade Center Memorial and Cultural program, and (3) strengthen controls to ensure consultants are reimbursed in accordance with the terms of agreements. These issues are discussed in detail in the finding included in the report.

Issue Date: June 30, 2006
Audit Report No.: 2006-NY-1008
File Size: 682.78KB

Title: The Freeport Housing Authority, Freeport, New York Has Financial and Management Control Weaknesses

We completed an audit of the Freeport Housing Authority (the Authority) located in Freeport, New York. The audit objectives were to determine whether the Authority (1) implemented admission policies that complied with U.S. Department of Housing and Urban Development (HUD) requirements, (2) ensured Section 8 program units met housing quality standards, (3) maintained a financial management system that adequately safeguarded funds, and (4) operated its not-for-profit entity in accordance with HUD regulations. The review generally covered the period from January 1, 2004, through October 31, 2005, and was expanded as deemed necessary.

We found that the Authority generally implemented admissions policies in accordance with HUD requirements; however, it improperly issued housing choice vouchers to 22 tenants and erroneously disbursed $49,483 in housing assistance payments. In addition, the Authority lacked a system to monitor the results of housing quality standard inspections to ensure that housing assistance payments were abated when needed, and to document that it conducted quality control inspections as required by HUD regulations. While the Authority's financial management system generally safeguarded funds, weaknesses in the system allowed the disbursement of $588,166 for questionable and ineligible costs, and caused the incorrect calculation of Section 8 administrative fees. Further, although the Authority generally operated the activities of its not-for-profit entity in accordance with HUD regulations, it did not obtain a partial release of declaration of trust from HUD to transfer properties to the not-for-profit entity as required by HUD regulations.

We recommend that the director, Office of Public Housing, New York Hub, reallocate the Authority's unused housing choice vouchers and require the Authority to (1) seek a HUD waiver to allow tenants who were improperly issued vouchers to retain them, (2) seek reimbursement of ineligible housing assistance payments, (3) establish a system to track housing quality inspection activities, (4) develop and implement financial controls to ensure proper allocation and disbursement of funds, and (5) obtain properly approved partial release of declaration of trust documents for property transferred for sale under the homeownership program.

Issue Date: June 19, 2006
Audit Report No.: 2006-NY-1007
File Size: 1.67MB

Title: First Suffolk Mortgage Corporation, North Babylon, Did Not Always Comply with HUD Underwriting Requirements

We completed an audit of First Suffolk Mortgage Corporation (First Suffolk), a non-supervised direct endorsement lender located in North Babylon, New York. The objectives of the audit were to determine whether First Suffolk: (1) approved insured loans in accordance with United States Department of Housing and Urban Development (HUD)/Federal Housing Administration requirements, which require adherence to prudent lending practices, and (2) developed and implemented a quality control plan that complied with HUD/Federal Housing Administration requirements. The review generally covered the period between June 1, 2003 and July 31, 2005, and involved a review of eight HUD/Federal Housing Administration insured loans.

The audit disclosed that First Suffolk did not always comply with HUD regulations in its loan origination and underwriting processes. Consequently, three of eight loans we reviewed exhibited significant underwriting deficiencies, such as failure to ensure that the minimum cash investment was made, and that employment, other assets, and debt were properly verified. The remaining five loans contained technical violations. As a result, the HUD/Federal Housing Administration insurance fund paid claims associated with two loans and continues to assume a risk with the one other loan. In addition, did not always comply with HUD's and its own quality control requirements to (1) ensure that all HUD-insured loans that went into default within the first six payments were reviewed and (2) document that corrective action was taken on all material findings identified in quality control reviews. Consequently, the effectiveness of First Suffolk's quality control plan, which is designed to ensure accuracy, validity, and completeness in its loan origination process, was lessened.

We recommend that the assistant secretary for housing - federal housing commissioner require First Suffolk to (1) reimburse HUD for the amount of claims and associated fees paid on two loans with significant underwriting deficiencies, (2) indemnify HUD against future losses on the one currently insured loan with significant underwriting deficiencies, (3) establish procedures to ensure that HUD underwriting requirements are properly implemented and documented, and (4) implement procedures to ensure compliance with HUD's and its own quality control requirements.

Issue Date: May 19, 2006
Audit Memorandum No.: 2006-NY-1801
File Size: 35.23KB

Title: Rochester Housing Authority's Section 8 Housing Choice Voucher Program, Rochester, New York

We completed an audit survey of the Rochester Housing Authority's (Authority) Section 8 Housing Choice Voucher program. The review focused on the Authority's management controls and procedures regarding the administration of its Section 8 program. The objectives of our review were to determine whether the Authority's (1) admission policies complied with U.S. Department of Housing and Urban Development (HUD) requirements, (2) initial application and recertification information was properly verified, (3) rental assistance payments were calculated properly, and (4) units met housing quality standards.

The results of our review show that the Authority is generally administering its Section 8 Housing Choice Voucher program in accordance with program requirements. We found that for the items tested, the Authority's admission policies complied with HUD requirements, its initial application and recertification information was properly verified, rental assistance payment calculations were accurate and supported by the information in the files, and units tested met HUD's housing quality standards.

Issue Date: March 31, 2006
Audit Report No.: 2006-NY-1006
File Size: 516KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant, Disaster Recovery Assistance Funds, New York, New York

This is the sixth report in our on-going audits of the Lower Manhattan Development Corporation's (auditee) administration of the Community Development Block Grant Disaster Recovery Assistance Funds, which were provided to the State of New York as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City. The auditee disbursed $64 million of these funds during our audit period of April 1, 2005 through September 30, 2005. The objectives of the current review were to determine whether the auditee (1) disbursed Disaster Recovery Assistance Funds in accordance with HUD-approved action plans, (2) expended Disaster Recovery Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and (3) maintained a financial management system that adequately safeguarded the Funds.

The results of our review disclosed that the auditee generally disbursed Disaster Recovery Assistance Funds in accordance with the HUD-approved action plans. The auditee also expended Disaster Recovery Assistance Funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded the funds. Our review disclosed weaknesses in the auditee's control procedures that permitted funds to be disbursed contrary to the terms of its subrecipient agreements and charged to the wrong program. Specifically, $259,712 was disbursed contrary to a subrecipient agreement, $7.5 million was disbursed for eligible costs, but without auditee approval as required by a subrecipient agreement, and $7,090 was charged to the wrong program.

We recommend that the general deputy assistant secretary for community planning and development require the auditee to (1) obtain reimbursement for the $259,712 disbursed contrary to the subreciepient agreement; (2) strengthen its controls over the Disaster Recovery Assistance funds to ensure that funds are not disbursed without proper approval and/or authorization; and (3) obtain reimbursement for $7,090 incorrectly charged to the wrong program. These issues are discussed in detail in the finding included in the report.

Issue Date: February 21, 2006
Audit Report No.: 2006-NY-1005
File Size: 2.15MB

Title: Utica Municipal Housing Housing Authority, Utica, New York; Operational and Administrative Weaknesses Have Resulted in Unsupported and Ineligible Expenditures

We audited the Utica Municipal Housing Authority (Authority) pertaining to selected general operations of its low-rent housing program. Our audit objectives were to determine whether the Authority 1) had a financial management system in place to adequately account for and safeguard funds received, 2) properly disbursed operational funds for health benefits for retired employees, 3) complied with applicable procurement requirements, and 4) earned the administrative fees it was paid to perform as contract administrator for the Section 8 program.

The Authority has a financial management system in place to adequately account for and safeguard funds received, however, contrary to HUD regulations and its own board-established policy the Authority improperly disburse $511,480 in operating funds for health benefits for retired employees. Since the costs were not authorized, they are considered to be ineligible. In addition, the Authority did not properly comply with applicable procurement and contracting requirements when it (a) procured legal services without executing a contract, (b) made contract payments without adequate supporting documentation, (c) failed to enforce contract provisions for elevator construction services, and (d) did not ensure that all procurements were conducted in a manner allowing for full and open competition. As such, the Authority has incurred questionable costs of $140,116. Furthermore, the Authority did not completely earn the administrative fees it was paid as a contract administrator for the Section 8 program since it failed to conduct required oversight and on-site management reviews, or monitoring responsibilities.

We recommend that HUD require the Authority to establish controls and procedures to ensure compliance with all applicable board, procurement, and contract administration policies and procedures. We also recommend that the Authority be required to submit supporting documentation to justify all unsupported costs so that HUD can make an eligibility determination, and reimburse the program from nonfederal funds all amounts classified and determined to be ineligible. In addition, the Authority should enforce the damage clause of its elevator contract and put all penalty income received to better use.

Issue Date: February 16, 2006
Audit Report No.: 2006-NY-1004
File Size: 179.64KB

Title: Mount Vernon Urban Renewal Agency, Section 8 Housing Choice Voucher Program, Mount Vernon, New York

We completed an audit of the Mount Vernon Urban Renewal Agency's (the auditee) administration of its Section 8 Housing Choice Voucher program. The audit objectives were to determine whether the auditee (1) correctly billed HUD for housing choice vouchers used, (2) complied with HUD program requirements for tenant admission, rental subsidy calculations and housing quality standards, and (3) implemented financial management controls to ensure that Housing Choice Voucher program funds were adequately safeguarded. The review generally covered the period between January 1, 2004 and February 28, 2005.

The audit disclosed that the auditee over-requisitioned housing assistance payments and administrative fees from HUD resulting in a $1,165,138 overpayment during calendar years 2003 and 2004. In addition, the auditee received $615,781 in unearned administrative fees because it erroneously billed HUD for vouchers it administered under the portability feature. The auditee did not properly use or maintain its waiting list, conduct recertifications timely, or document that all units met housing quality standards. Further, the auditee made duplicate and ineligible housing assistance payments, inadequately supported expenditures, and used Housing Choice Voucher program funds for other programs.

We recommend that the director of HUD's New York Office of Public Housing recoup through offset against future payments the overpaid housing assistance payments and administrative fees received due to incorrect billing and reporting to HUD, instruct the auditee to implement controls and procedures to properly maintain its waiting list, and ensure the auditee develops and implements financial controls to adequately support expenditures, use Housing Choice Voucher program funds only for that program, and allocate vouchers to project-based units in accordance with an approved allocation plan.

Issue Date: November 18, 2005
Audit Report No.: 2006-NY-1001
File Size: 8.4MB

Title: United Mortgage Corporation, Non-Supervised Mortgagee, Hauppauge, New York

We completed an audit of United Mortgage Corporation, a non-supervised direct endorsement lender located in Hauppauge, New York. The objectives of the audit were to determine whether United Mortgage: (1) complied with the U.S. Department of Housing and Urban Development (HUD) regulations in the origination of Federal Housing Administration loans, and (2) developed and implemented a quality control plan that complied with HUD requirements. The review generally covered the period between November 1, 2002 and October 31, 2004, and involved a review of 33 HUD/Federal Housing Administration insured loans.

The audit disclosed that United Mortgage did not follow HUD/Federal Housing Administration requirements in the approval of 13 loans valued at $1,751,300, resulting in an unnecessary risk to the Federal Housing Administration insurance fund. United Mortgage also did not follow HUD requirements pertaining to supporting significant compensating factors as they relate to an additional 7 loans reviewed. As a result, mortgages amounting to $1,060,100 were approved for unqualified borrowers, causing HUD to assume an unnecessary insurance risk.

We recommend that the assistant secretary for housing - federal housing commissioner require United Mortgage to: (1) reimburse HUD for the loss incurred resulting from claims and fees paid on one loan amounting to $154,921; and (2) indemnify HUD in the amount of $1,605,950 against future losses on the 12 loans currently insured with material underwriting deficiencies. We further recommend that HUD exam the 7 active loans valued at $1,060,100 that lacked support for compensating factors to determine if they should have been approved and if they should be indemnified.

Issue Date: September 29, 2005
Audit Report No.: 2005-NY-1009
File Size: 1.84MB

Title: Golden First Mortgage Corporation, Nonsupervised Direct Endorsement Lender, Great Neck, New York

We completed an audit of Golden First Mortgage Corporation (Golden First), a non-supervised direct endorsement lender located in Great Neck, New York. The objectives of the audit were to determine whether Golden First: (1) approved insured loans in accordance with United States Department of Housing and Urban Development (HUD)/Federal Housing Administration requirements, which require adherence to prudent lending practices, and (2) developed and implemented a quality control plan that complied with HUD/Federal Housing Administration requirements. The review generally covered the period between November 1, 2002 and October 31, 2004, and involved a review of 20 HUD/Federal Housing Administration insured loans.

The audit disclosed that Golden First did not always follow prudent lending practices and HUD regulations in its loan origination and underwriting processes. In five of the 20 loans reviewed, we found that Golden First did not adequately verify employment, income, and/or assets. As a result, the HUD/Federal Housing Administration insurance fund incurred a loss associated with one loan and continues to assume a risk with the other four loans. Golden First also did not ensure that (1) loans defaulting within the first six months were reviewed, (2) quality control reviews were conducted in a timely manner, and (3) management responses and planned corrective action were adequately documented. Consequently, the effectiveness of Golden First's quality control plan was impaired.

We recommend that the assistant secretary for housing - federal housing commissioner require Golden First to: (1) indemnify HUD in the amount of $1,118,717 against future losses on the four loans currently insured with material underwriting deficiencies; (2) reimburse HUD $259,154 for the amount of claims and associated fees paid on one loan with a material underwriting deficiency; (3) establish and implement underwriting processing procedures that comply with HUD requirements, and (4) develop and implement quality control, loan documentation and retention procedures in compliance with HUD/Federal Housing Administration requirements.

Issue Date: September 27, 2005
Audit Report No.: 2005-NY-1008
File Size: 971.53KB

Title: Lower Manhattan Development Corporation's Administration of Community Development Block Grant, Disaster Assistance Funds, New York, New York

This is the fifth report in our on-going audits of the Lower Manhattan Development Corporation's (auditee) administration of the Community Development Block Grant Disaster Assistance Funds, which were provided to the State of New York as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City. The auditee disbursed $47 million of these funds during our audit period of October 1, 2004, through March 31, 2005. The objectives of the current review were to determine whether the auditee (1) disbursed Disaster Assistance Funds in accordance with HUD-approved action plans, (2) expended Disaster Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, (3) maintained a financial management system that adequately safeguarded the Funds, and (4) developed and implemented procedures to recover funds owed to the Residential Grant Program.

The results of our review disclosed that the auditee generally disbursed Disaster Assistance Funds in accordance with the HUD-approved action plans. The auditee also expended Disaster Assistance Funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and maintained a financial management system that adequately safeguarded the funds. However, the auditee disbursed $2,028,282 for items either not included in the budget of the subrecipient agreement for the Hudson River Park Improvements Program, or for costs incurred before the time of performance specified in the agreement. Additionally, the auditee developed and implemented collection procedures to recover funds owed to the Residential Grant Program. However, its collection efforts were not always fully documented, and there is a need to consider additional actions to recover amounts owed.

We recommend that the general deputy assistant secretary for community planning and development require the auditee to reimburse the $2,028,282 disbursed and to maintain complete documentation of its efforts to collect amounts owed to the Residential Grant Program. We also recommend that additional actions to collect amounts owed to the Residential Grant program be considered. These issues are discussed in detail in the two findings included in the report.

Issue Date: September 15, 2005
Audit Report No.: 2005-FW-1015
File Size:187.48KB

Title: MortgageIT Incorporated, New York, New York

We reviewed three Federal Housing Administration loans sponsored by MortgageIT Incorporated (MortgageIT) of New York, New York, that were identified during our audit of a Federal Housing Administration-approved loan correspondent as not properly originated according to U. S. Department of Housing and Urban Development (HUD) regulations. Because the sponsor of the loans is ultimately responsible for loan processing deficiencies, we addressed these deficiencies to MortgageIT to determine whether it complied with HUD requirements.

MortgageIT did not comply with HUD regulations, procedures, and instructions in the processing of two of the three Federal Housing Administration-insured single-family mortgages we reviewed. For one loan, the lender charged the borrower $1,407 in loan discount points without reducing the borrower's interest rate. For another loan, the lender did not ensure the appraisal met HUD standards. As a result, the risk to HUD's insurance fund was increased, and a borrower incurred excessive costs for a loan.

We recommend that the Assistant Secretary for Housing - Federal Housing Commissioner and Chairman, Mortgage Review Board, require MortgageIT to reimburse the appropriate parties for $1,407 in unearned fees and ensure MortgageIT's controls over appraisals are adequate.

Issue Date: August 10, 2005
Audit Report No. 2005-NY-1006
File Size: 808.26KB

Title: Syracuse Housing Authority, Section 8 Housing Choice Voucher Program, Syracuse, New York

We completed an audit of the Syracuse Housing Authority in the City of Syracuse, New York (the Authority). The objectives of the audit were to determine whether the Authority is effectively administering its Section 8 Housing Choice Voucher program. Specifically, we determined whether the Authority (1) implemented Section 8 admission policies that are consistent with U.S. Department of Housing and Urban Development (HUD) requirements, (2) verified the accuracy of the information on Section 8 applicants' applications, as well as Section 8 participants' recertification forms, (3) properly calculated participants' housing assistance payments, (4) accurately reported information to HUD, and (5) ensured that units provided to participants met HUD's housing quality standards. The review generally covered the period from January 2004 through January 31, 2005.

The audit disclosed that the Authority is in general compliance with applicable laws and regulations as they relate to its Section 8 Housing Choice Voucher program. However, the Authority's controls over certain administrative matters and program operations need improvement. Specifically, (1) the waiting list was not maintained in accordance with HUD requirements, (2) recertifications were not conducted in a timely manner, (3) inaccurate occupancy information was reported to HUD, and (4) housing units contained minor deficiencies pertaining to housing quality standards.

We recommend that HUD require the Authority to (1) implement procedures to purge its waiting list, (2) implement procedures and controls to ensure that the Section 8 recertification process is conducted in a timely manner, (3) develop and implement a quality control plan to ensure that the information that is reported to HUD is current and accurate, and (4) ensure that the minor housing quality standard deficiencies identified are corrected within the required timeframes.

Issue Date: March 23, 2005
Audit Report No.: 2005-NY-1003
File Size: 837.53KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant Disaster Assistance Funds, New York, New York

We completed the fourth of our on-going audits of the Lower Manhattan Development Corporation's (the Auditee) administration of the Community Development Block Grant (CDBG) Disaster Assistance funds, which were provided to the State of New York following the September 11, 2001, terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the auditee: (1) disbursed CDBG Disaster Assistance Funds to eligible grant applicants in accordance with the guidelines established under the HUD-approved Action Plans, (2) has an adequate procurement system in place for soliciting and awarding contracts and/or sub-recipient agreements, (3) expended CDBG funds for eligible planning and administrative costs under the applicable laws and regulations, (4) has a financial management system in place that adequately safeguards funds, and (5) implemented adequate procedures for monitoring the programs financed with CDBG funds. The current review covered the period from April 1, 2004 through September 30, 2004. The auditee received $2.783 billion in CDBG Disaster Assistance funds from the U.S. Department of Housing and Urban Development (HUD), and it disbursed $276.7 million of these funds for activities related to the rebuilding of lower Manhattan during our audit period.

The results of our review disclosed that the auditee generally disbursed CDBG Disaster Assistance funds to eligible grant applicants in accordance with the HUD-approved Action Plans, and has an adequate procurement system for soliciting and awarding contracts and/or subrecipient agreements. However, the auditee did not always expend CDBG funds for eligible planning and administrative expenses and its financial management system did not adequately safeguard funds. The auditee implemented procedures for monitoring programs financed with CDBG funds; however, its Project Managers did not always maintain written documentation of their monitoring efforts. These issues are discussed in detail in the two findings included in the report.

Issue Date: December 14, 2004
Audit Memorandum No.: 2005-NY-1801
File Size: 26.1KB

Title: Section 8 Housing Choice Voucher Program, City of Niagra Falls, NY404, Niagra Falls, NY

We completed an audit survey of the City of Niagara Falls' Section 8 Housing Choice Voucher program. The primary objective of our survey was to assess the City of Niagara Falls' management controls and procedures over the administration of its Section 8 program to determine whether any areas need additional audit coverage. The purpose of the assessments was to determine whether the City of Niagara Falls (1) verified the accuracy of the information on Section 8 applicants' applications, as well as Section 8 participants' recertification forms; (2) properly calculated the amount of participants' housing assistance payments; (3) ensured that participants were provided decent, safe, and sanitary housing; and (4) ensured that it is accurately reporting information to the U. S. Department of Housing and Urban Development (HUD).

Our survey results show that the City of Niagara Falls is generally administering its Section 8 program in accordance with the program's requirements. However, the survey results disclosed weaknesses over the controls relating to HUD's reporting requirements. Specifically, we found that incorrect Social Security numbers were entered into, and participants' actions were not recorded in HUD's Multifamily Tenant Characteristic System. The survey report contains a recommendation that will strengthen the City of Niagara Falls' reporting controls over information entered into HUD's Multifamily Tenant Characteristic System, when implemented.

Issue Date: November 10, 2004
Audit Report No.: 2005-NY-1001
File Size: 1.50MB

Title: Glens Fall Housing Authority, Low-Rent Public Housing and Section 8 Housing Choice Voucher Program, Glens Falls, New York

We completed an audit of the Section 8 Housing Choice Voucher and Low-Rent Public Housing Programs of the Glens Falls Housing Authority (hereafter also called the Housing Authority). Our review focused on tenant selection and continued occupancy activities, and whether such activities are being carried out in accordance with requirements and regulations of the U. S. Department of Housing and Urban Development (HUD). Specifically, for the Section 8 Housing Choice Voucher Program, the audit objectives were to determine whether the Housing Authority calculated rental assistance payments properly, and ensured that units under the Section 8 program met Housing Quality Standards (HQS). For both the Section 8 Housing Choice Voucher and Low-Rent Public Housing Programs, the audit objectives were to determine whether the Housing Authority implemented admission policies consistent with HUD requirements and verified information on program participants' applications and recertification forms properly. The review covered the period between January 1, 2003, and March 31, 2004.

Under the Section 8 Housing Choice Voucher Program, the review disclosed instances where rental assistance payments were not calculated properly, and where HQS violations in units of the Section 8 program were either not detected or detected but not reported properly by inspectors of Housing Authority. Also, we found, for both the Section 8 Housing Choice Voucher and Low-Rent Public Housing Programs that the Housing Authority's admission policies are not consistent with certain HUD requirements; that information on applications and recertification forms was not properly verified; and that program participants' annual income was not properly determined. We attribute these deficiencies to weaknesses in the Housing Authority's procedures for (1) verifying and documenting information on program participants' applications and recertification forms including annual income; (2) calculating rental assistance payments under the Section 8 program; and (3) inspecting units under the Section 8 program. We recommend that HUD require the Housing Authority to implement procedures and controls to correct the deficiencies and weaknesses cited in the audit report.

Issue Date: September 28, 2004
Audit Report No.: 2004-NY-1006
File Size: 438.8KB

Title: Hartford Funding, Ltd., Non-Supervised Mortgagee, Ronkonkoma, New York

We completed an audit of Hartford Funding, Ltd. (Hartford), a non-supervised mortgagee located in Ronkonkoma, New York. The objectives of the audit were to determine whether Hartford: (1) approved insured loans in accordance with the requirements of the United States Department of Housing and Urban Development/Federal Housing Administration (HUD/FHA), which require adherence to prudent lending practices; and (2) implemented and followed a quality control plan that meets HUD/FHA requirements. The review generally covered the period between January 1, 2002, and December 31, 2003, and involved a review of 15 HUD/FHA insured loans with mortgage amounts totaling $2,521,500.

Issue Date: September 15, 2004
Memorandum No.: 2004-NY-1804
File Size: 25.4KB

Title: Micro Loan Program, Buffalo Municipal Housing Authority, Buffalo, New York

We completed a limited review of the Buffalo Municipal Housing Authority's (BMHA) Micro Loan Program, which was administered by the Temple Community Development Corporation (TCDC). The review was initiated from complaints filed with the Office of Inspector General 's Hotline. We found deficiencies pertaining to BMHA's monitoring and TCDC's administration of the Micro Loan Program. Specifically, we found that the BMHA (1) did not adequately monitor the contract performance of TCDC, (2) paid administration fees that were unreasonable, (3) overpaid the TCDC for loan-servicing fees, and (4) did not ensure that the TCDC had an adequate system in place to track the status and repayment of loans.

Issue Date: September 15, 2004
Memorandum No.: 2004-NY-1803
File Size: 19.3KB

Title: Hotline Complaint, Buffalo Municipal Housing Authority, Buffalo, New York

We completed a limited review of two programs sponsored by the Buffalo Municipal Housing Authority (BMHA). The review was initiated from complaints filed with the Office of Inspector's Hotline. In general, the complainants alleged embezzlement of funds from the Buffalo Public Housing Resident Council Corporation, and misappropriation of funds in the Micro Loan Programs. The results of review did not substantiate any of the allegations in the complaints.

Issue Date: September 15, 2004
Audit Report No.: 2004-NY-1004
File Size: 313.1KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant Disaster Assistance Funds, New York, New York

We are performing an on-going audit of the operations of the Lower Manhattan Development Corporation (LMDC) pertaining to its administration of the Community Development Block Grant (CDBG) Disaster Assistance Funds, which were provided to the State of New York as a result of the terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the LMDC (1) disbursed CDBG Disaster Assistance Funds to eligible grant recipients in accordance with the guidelines established under HUD approved Action Plans, (2) implemented adequate procedures for monitoring the programs financed with CDBG funds; and (3) has a financial management system in place that adequately safeguards funds. The current review covered the period from October 1, 2003 to March 31, 2004. This review is the third in a series of reviews that the Office of Inspector General plans to conduct of LMDC's administration of the CDBG Disaster Assistance Funds. We plan to issue an audit report every six months and include the results of each review in the Inspector General's Semi-Annual Report to Congress.

The results of our review disclosed that LMDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with the HUD approved Action Plans, adequately monitored the programs included in the HUD approved Action Plans, and has a financial management system capable of adequately safeguarding the funds. The review only disclosed deficiencies pertaining to the Employment Training Assistance Program. During our review of this program, we noted processing deficiencies in its grant program that need to be resolved to enhance the efficiency of LMDC's administration of the funds and prevent other related administrative deficiencies from occurring. This issue is discussed in detail in the one findings included in the report.

Issue Date: July 23, 2004
Audit Memorandum No.: 2004-NY-1802
File Size: 25.7KB

Title: Groton Community Health Care Center, Inc., FHA Project Number 013-43055 and 014-10010, Groton, New York

We completed a limited review of the Groton Community Health Care Center, Inc. (GCHCC) as part of an Office of Inspector General (OIG) inquiry into the default of Section 232 insured projects. GCHCC, a not-for-profit organization operating an eighty bed skilled nursing facility, had a Section 232 and a Section 241 HUD-insured mortgage, which went into default in November 2001, and was subsequently sold by HUD. Our specific objective was to determine whether GCHCC operated in accordance with its regulatory agreement. We found that GCHCC disbursements were generally necessary and reasonable, and in accordance with the regulatory agreement. However, GCHCC converted accounts payable to a promissory note without prior HUD approval. This note represented an encumbrance of the project and, had HUD been notified of its execution, HUD would have been made aware of the deteriorating financial condition of the project that led to the loan defaults. Recommendations were made to recover unallowed interest payments to mitigate the loss on the defaulted note sale, and ensure that the mortgagor is aware of all regulatory agreement provisions prior to approving participation in any future mortgage insurance programs.

Issue Date: July 19, 2004
Audit Report No.: 2004-NY-1003
File Size: 621KB

Title: Cambridge Home Capital, LLC Non-Supervised Mortgagee, Great Neck, NY

We completed an audit of Cambridge Home Capital, LLC (Cambridge), a non-supervised mortgagee. The objectives of the audit were to determine whether Cambridge: (1) approved insured loans in accordance with the requirements of the U.S. Department of Housing and Urban Development/Federal Housing Administration (HUD/FHA), which require adherence to prudent lending practices; and, (2) developed and implemented a Quality Control Plan that meets HUD/FHA requirements.

The review covered the period between September 1, 2001 and August 31, 2003 and consisted of a review of 18 HUD/FHA insured loans that totaled $4,190,050. The review disclosed that 11 of the 18 loans had at least one significant underwriting deficiency. Some of the underwriting deficiencies include: 1) debt/income ratios exceeded HUD/FHA standards, (2) inadequate property valuation, (3) inadequate asset verification, (4) inadequate income verification, (5) insufficient gift information, (6) inadequate debt verification, (7) minimum investment not provided, and (8) bankruptcy discharge less than two years. In addition, we found that Cambridge did not document, nor provide adequate justification for variations in its mortgage charge rates. Also, Cambridge has not implemented procedures or established controls to ensure that all loans defaulting within six months of closing undergo a quality control review. These deficiencies could cause loans to go into default and subsequently result in mortgage assignments to HUD/FHA. Therefore, we recommend that HUD/FHA take appropriate action against Cambridge for not adhering to HUD's underwriting requirements, and require Cambridge to reimburse HUD/FHA for losses on four of the loans that have gone to claim/partial claims and indemnify HUD/FHA against future losses on 10 of the 11 loans.

Issue Date: June 21, 2004
Audit Report No.: 2004-SE-1005
File Size: 1.04MB

Title: Quality Controls and Underwriter Accuracy under Multifamily Accelerated Processing at Continental Securities LLC, Syracuse, NY

We completed an audit of Continental Securities, LLC's performance under the Multifamily Accelerated Processing (MAP) program. Our objective was to determine the accuracy of Continental Securities' underwriter estimates, and if there are adequate management and quality control procedures in place to ensure that loans processed under the MAP program comply with Departmental requirements.

Continental Securities' underwriter estimates of project occupancy, revenue, and expenses were essentially accurate in four of the six loans we reviewed; one loan had inaccurate estimates (Hudson Valley Care) and one project had no actual data for comparison since it did not achieve operational status (Amber Court Apartments). However, Continental Securities did not have adequate management and quality control procedures in place to ensure that loans processed under the MAP program complied with Departmental requirements. Continental Securities did not correctly analyze a construction contractor's financial capability, and allowed financing in excess of HUD's limits. Consequently, Continental Securities submitted at least two loans for FHA insurance that resulted in multi-million dollar losses to the Department. By authorizing a MAP Lender to prepare much of the documentation for a loan submission for mortgage insurance, HUD places confidence in the Lender's integrity and competence. However, in the process of performing this work, Continental Securities placed HUD at risk.

We recommend that HUD seek indemnification of loans for Amber Court Apartments and Hudson Valley Care, and determine whether the Lender and Underwriters should retain the authority to use the MAP process.

Issue Date: March 25, 2004
Audit Report No. 2004-NY-1002
File Size: 684.2KB

Title: Lower Manhattan Development Corporation, Community Development Block Grant Disaster Assistance Funds
New York, New York

We are performing an on-going audit of the operations of the Lower Manhattan Development Corporation (LMDC) pertaining to its administration of the Community Development Block Grant (CDBG) Disaster Assistance Funds, which were provided to the State of New York as a result of the terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the LMDC (1) disbursed CDBG funds to eligible applicants in accordance with the HUD Approved Action Plans, (2) implemented adequate monitoring efforts over the Residential Grant Program (RGP); and (3) has a financial management system that adequately safeguards CDBG funds. In addition, we determined whether LMDC adhered to its established policies and procedures while recertifying participants of the RGP.

The results of our review disclosed that LMDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with the HUD Approved Action Plans, implemented adequate monitoring efforts over the RGP, has a financial management system that is capable of adequately safeguarding the funds, and complied with its established recertification policies and procedures while recertifying participants of the RGP. However, we noted processing deficiencies in its Residential Grant Program (RGP) that still needs to be resolved to further enhance the efficiency of LMDC's administration of the funds, and to prevent duplicate payments and other related administrative deficiencies from occurring. In addition, LMDC needs to strengthen its accounting controls by establishing and maintaining a receivable account in its General Ledger to track and control collectible amounts owed to the RGP by grant recipients. Furthermore, our review disclosed that HUD management should evaluate the reasonableness of LMDC's personnel practices that allow CDBG Disaster Assistance Funds to be used to pay employees for leave earned and transferred from New York State Agencies, and the salary and fringe benefits of a part time employee who does not report to an individual employed within the LMDC organizational structure. These issues are discussed in detail in the three findings, as well as in the Issues Needing Further Study and Consideration section of this report.

Issue Date: March 25, 2004
Audit Report No.: 2004-NY-1001
File Size: 489.1KB

Title: Empire State Development Corporation, Community Development Block Grant Disaster Assistance Funds
New York, New York

We have completed an audit of the operations of the Empire State Development Corporation (ESDC) pertaining to its administration of the Community Development Block Grant Disaster Assistance Funds, which were provided to the State of New York as a result of the September 11, 2001 terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the ESDC: (1) disbursed the CDBG Disaster Assistance Funds to eligible Small Firm Attraction and Retention Grant (SFARG) and Business Recovery Loan Fund (BRLF) program applicants in accordance with HUD Approved Action Plans; (2) developed and implemented adequate procedures for monitoring the programs funded with CDBG Disaster Assistance Funds; and (3) has a financial management system that adequately safeguards the funds. This is the third review in a series of reviews that the Office of Inspector General (OIG) conducted during its on-going audit of the CDBG Disaster Assistance Funds administered by ESDC. We have issued an audit report every six months and included the results of each review in the Inspector General's Semi-Annual Reports to Congress. The prior reports on the ESDC were issued March 25, 2003 and September 30, 2003, and are discussed in the Follow Up On Prior Audits section of this report. The current review covered the period from April 1, 2003 to September 30, 2003. This report contains two findings with recommendations for corrective actions.

The results of our review disclosed that the ESDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with HUD Approved Action Plans, and has a financial management system that is capable of adequately safeguarding the funds. However, we noted processing deficiencies in its grant programs that need to be resolved to enhance the efficiency of ESDC's administration of the funds. Also, we noted monitoring controls that need to be strengthened so HUD can readily make compliance determinations regarding the administration of the grant programs by ESDC. These issues are discussed in detail in the two findings in this report.

Issue Date: November 19, 2003
Audit Memorandum No.: 2004-NY-1801
File Size: 32.3KB

Title: Citizen Complaints, City of Oneida Housing Authority
Oneida, New York

We completed a review of complaints involving the City of Oneida Housing Authority (OHA) and its former Executive Director. The review was initiated based on complaints filed with Congressman John M. McHugh's office by the employees and tenants (complainants) of the OHA. In general, the complainants' alleged that the OHA is being inadequately managed; lacks an acceptable work environment for OHA employees; has health and safety issues; and is imposing excessive administrative requirements on OHA tenants. Additionally, the Congressman asked the Office of Inspector General (OIG) to clarify why two adjacent OHA projects (Tower I and Tower II) are being operated under two different sets of rules and regulations. Therefore, the objectives of our review were to determine the veracity of the complainants' allegations, and to clarify why Tower I and Tower II are being operated under two different sets of rules and regulations.

The results of the review disclosed that all but one of the complainants' allegations that had merits have been addressed and /or resolved. The complaint that needs further action pertains to the tenants' concerns about certain information being requested on OHA's Occupancy Entrance Form. A recommendation is being made to require the Buffalo Field Office of the U. S. Department of Housing and Urban Development (HUD) to obtain the form, evaluate OHA's use of it, and take all necessary actions to address the tenants' concerns about the form. Our evaluations of the complaints are discussed in the Results of Review section of this memorandum while the issue pertaining to why Tower I and Tower II are operating under two different sets of rules and regulations is addressed in the Background section. In this regard, the review disclosed that the two towers are operating under two different sets of rules and regulations because they are receiving Federal assistance from two different Federal programs.

Issue Date: September 30, 2003
Audit Memorandum Report: 2003-NY-1006
File Size: 524KB

Title: Community Development Block Grant Disaster Assistance Funds, Lower Manhattan Development Corporation
New York, New York

We are performing an on-going audit of the operations of the Lower Manhattan Development Corporation (LMDC) pertaining to its administration of the Community Development Block Grant (CDBG) Disaster Assistance Funds, which were provided to the State of New York as a result of the terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the LMDC (1) disbursed the CDBG funds to eligible applicants in accordance with the HUD Approved Action Plan, (2) disbursed the CDBG Disaster Assistance Funds to applicants in a timely manner, and (3) has a financial management system that adequately safeguards the funds. This is the first of a series of reviews that the Office of Inspector General plans to conduct on LMDC's administration of CDBG Disaster Assistance Funds. Presently, we plan to issue audit reports every six months and include the results of each review in the Inspector General's Semiannual Report to Congress.

The results of our review disclosed that LMDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with the HUD Approved Action Plan in a timely manner; and has a financial management system that is capable of adequately safeguarding the funds. However, we noted processing deficiencies in its Residential Grant Program (RGP) that need to be resolved to enhance the efficiency of LMDC's administration of the funds, and to prevent duplicate payments and other related administrative deficiencies from reoccurring. These issues are discussed in detail in the two findings and the Issues Needing Further Study and Consideration section of this audit report.

Issue Date: September 30, 2003
Audit Report No.: 2003-NY-1005
File Size: 908.8KB

Title: Empire State Development Corporation, Community Development Block Grant Disaster Assistance Funds, New York, New York

We are performing an on-going audit of the operations of the Empire State Development Corporation (ESDC) pertaining to its administration of the Community Development Block Grant (CDBG) Disaster Assistance Funds, which were provided to the State of New York as a result of the terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the ESDC: (1) disbursed the CDBG disaster funds to eligible applicants in accordance with the HUD Approved Action Plan, (2) disbursed the CDBG Disaster Assistance Funds to applicants for economic loss in a timely manner, and (3) has a financial management system that adequately safeguards the funds. This review is the second in a series of reviews that the Office of Inspector General plans to conduct during our on-going audit of the CDBG Disaster Assistance Funds. Presently, we plan to issue audit reports every six months and include the results of each review in the Inspector General's Semi-Annual Reports to Congress. The first report on ESDC's administration of CDBG Disaster Assistance Funds was issued March 25, 2003, and is discussed in the Follow Up On Prior Audits section of this report.

The results of our review disclosed that the ESDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with the HUD Approved Action Plan and has a financial management system that is capable of adequately safeguarding the funds. However, we noted processing deficiencies in its grant programs that need to be resolved to enhance the efficiency of ESDC's administration of the funds. Also, we noted accounting procedures that need to be strengthened to prevent misclassification of costs and incorrect calculations of indirect costs. These issues and a matter needing further review are discussed in detail in the three findings and the Issues Needing Further Study and Consideration section of this audit report.

Issue Date: July 24, 2003
Audit Report No.: 2003-NY-1004
File Size: 513KB

Title: Colban Funding, Inc., Non-Supervised Mortgageee
Liverpool, New York

We completed an audit of Colban Funding, Inc. (Colban), a non-supervised mortgagee. The objectives of the audit were to: (1) determine whether Colban approved insured loans in accordance with the requirements of the U.S. Department of Housing and Urban Development/Federal Housing Administration (HUD/FHA), which require adherence to prudent lending practices; and (2) determine whether Colban's Quality Control Plan, as implemented, meets HUD/FHA requirements and whether provisions of the plan are being followed. The review covered the period between July 1, 2000, and June 30, 2002 and consisted of a review of 31 HUD/FHA insured loans that totaled $2,560,300.

The review disclosed that 11 of the 31 loans had at least one significant underwriting deficiency. Some of the underwriting deficiencies include: (1) minimum investment not provided, (2) not enough funds to close, (3) understated debt and underwriting ratios, (4) insufficient gift information, (5) inaccurate closing documentation, (6) earnest money not verified, and (7) inadequate property valuation. In addition, we found that Colban is improperly allowing non-FHA approved entities to perform loan origination functions of HUD/FHA insured loans. Also, Colban has not documented actions taken to correct deficiencies cited as a result of quality control reviews. These deficiencies could cause the loans to go into default and subsequently result in mortgage assignments to HUD/FHA. Therefore, we recommended that HUD/FHA take appropriate action against Colban for not adhering to HUD's underwriting requirements, and require Colban to indemnify HUD/FHA for all future losses pertaining to the 11 loans.

Issue Date: July 24, 2003
Audit Memorandum No.: 2003-NY-1802
File Size: 654.8KB

Title: Safe Space, Inc., Housing Opportunities for Persons with Aids, Grant No. NYH00-0020, and Supportive Housing Program,
Grant No. NY36B97-0025, New York, New York

We completed a review of the books and records of the above named Grantee pertaining to its Housing Opportunities for Persons with Aids (HOPWA) Program, and Supportive Housing Program (SHP). The objectives of the review were to determine whether the Grantee (1) maintained adequate books and records to account for expenditures charged to the programs, and (2) expended grant funds only for eligible program activities in an economical and efficient manner and in accordance with the grant agreements and applicable laws and regulations.

The review disclosed that the Grantee neither maintained adequate books and records to account for expenditures charged to the programs, nor adequate documentation to support that grant funds were only expended for eligible program activities in an economical and efficient manner, and in accordance with grant agreements, applicable laws and regulations. Specifically, the Grantee failed to properly maintain accounting records to document the basis for allocating costs charge to the individual grant programs. This occurred because officials of the Grantee did not comply with Federal requirements and regulations pertaining to charging of costs to grant programs, which provide that actual conditions must be taken into account when selecting a base to be used in allocating costs to each grouping of benefiting functions. Consequently, the Grantee could not provide adequate assurances that $2,213,000 ($537,201 for the HOPWA and $1,675,799 for the SHP funds) in costs either paid with grant funds or allocated to activities were actually applicable to the grant programs; as such, we designated these costs as being unsupported.

We recommend that HUD, the Director, Office of Community Planning and Development, New York Field Office Instruct the Grantee to (1) obtain an Independent Public Accounting (IPA) firm to evaluate the manner in which costs were allocated to the various HUD grant programs and other funding sources. The IPA should certify whether the method used to allocate costs produced allocated amounts that were commensurate with the benefits derived; (2) reimburse to HUD any amount of the $2,213,000 ($537,201 for the HOPWA and $1,675,799 for the SHP Programs) that the IPA does not certify to as being eligible costs that is allocable to the HUD funded grant programs. In addition, we made recommendations that will improve the Grantee's controls and enhance compliance with HUD requirements and regulations.

Issue Date: April 3, 2003
Audit Memorandum No.: 2003-CH-1801
File Size: 137KB

Title: Citizens' Complaint-Oneida Indian Nation, Oneida, New York

HUD's Office of Inspector General completed a review of the Oneida Indian Nation's HUD-funded housing programs located in Oneida, New York. Our review resulted from citizens' complaint to Senator Daniel Inouye. The objectives of our review were to determine whether the complainants' allegations were substantiated and whether HUD's rules and regulations were properly followed.

The following items were the complainants' specific allegations against the Nation: (1) did not use HUD development funds for the Nation; (2) informed housing applicants that they would own new homes but later informed them that they were rentals; (3) denied housing to applicants whose political views differed from those of the Oneida Nation Representative; (4) did not address an Oneida Council Member's theft of building materials from the White Pines construction site; (5) refused to pay one of the construction contractors for services rendered for the White Pines project; (6) conducted police background checks on housing applicants; (7) selectively approved applicants for housing; (8) paid its Representative a percentage of rental payments as personal salary; and (9) used HUD funds for expenses other than housing.

Based upon the results of our review of the complainants' allegations, the allegations were not substantiated and the Oneida Indian Nation substantially complied with HUD's requirements.

Issue Date: March 25, 2003
Audit Report No.: 2003-NY-1003
File Size: 1.13MB

Title: Empire State Development Corporation, Community Development Block Grant Disaster Assistance Funds, New York, New York

We are performing an on-going audit of the operations of the Empire State Development Corporation (ESDC) pertaining to its administration of the Community Development Block Grant (CDBG) Disaster Assistance Funds, which were provided to the State of New York as a result of the terrorist attacks on the World Trade Center in New York City. The objectives of the current review were to determine whether the ESDC (1) disbursed the CDBG disaster funds to eligible applicants in accordance with the HUD Approved Action Plan, (2) disbursed the CDBG disaster funds to applicants in a timely manner, and (3) has a financial management system that adequately safeguards the funds.

The results of our review disclosed that ESDC generally disbursed the CDBG Disaster Assistance Funds to eligible applicants in accordance with the HUD Approved Action Plan in a timely manner; and has a financial management system that is capable of adequately safeguarding the funds. However, we noted processing deficiencies and discrepancies in its grant programs that either need to be addressed, resolved, or improved to enhance the efficiency of ESDC's administration of the funds. Also, we noted administrative and accounting controls that need to be strengthened to prevent duplicate payments and other related administrative deficiencies from occurring. These issues are summarized below and discussed in detail in the four findings in this report.

Issue Date: February 12, 2003
Audit Report No.: 2003-NY-1001
File Size: 1.32MB

Title: Marion Scott Real Estate, Inc., Management Agent, New York, New York

We conducted an audit of the books and records of Marion Scott Real Estate, Inc. (the Agent). The objective of the audit was to determine whether the Agent complied with: (1) HUD regulations and requirements pertaining to the use of project funds, which can only be used for necessary and reasonable operating expenses and repairs, and (2) its Management Certifications when purchasing from or contracting for goods and services with its IOI Companies.

We concluded that the Agent did not always comply with HUD regulations and requirements pertaining to the use of project funds nor did it always comply with its management certification when purchasing from or contracting with its IOI Companies. Specifically, we found that the Agent: (1) used project funds to pay for ineligible, unsupported, and unnecessary/unreasonable expenses, (2) collected unauthorized and excessive management fees and improperly charged front-line expenses to projects, (3) allowed its IOI Company employees to occupy rent free apartment units in the projects, (4) allowed its IOI Company to mark-up subcontractor's invoices prior to billing the projects, (5) entered into a questionable arrangement for legal services to the HUD projects, and (6) did not comply with the terms of the Drug Elimination Grant Agreement.

Issue Date: September 23, 2002
Audit Memorandum No.: 2002-NY-1803
File Size: 68KB

Title: New York State Tenant and Neighborhood Information Service, Outreach and Technical Assistance and Public Entity Grants, New York, New York

The results of our review disclosed that the Grantee generally administered the OTAG/PEG Programs in accordance with HUD requirements, and used grant funds only for eligible activities to further the Mark-to-Market Program. In addition, we did not find any instances were the Grantee expended grant funds on lobbying activities.

Issue Date: September 23, 2002
Audit Report No.: 2002-NY-1005
File Size: 194KB

Title: The Legal Aid Society, Outreach and Technical Assistance Grants and Public Entity Grant New York, New York

Our review disclosed that the Grantee charged ineligible and unsupported costs to its OTAGs. More specifically, the Grantee: a) charged excessive salaries, fringe benefits and administrative costs totaling $12,060.45 to OTAG II; and b) failed to provide us with documentation to support costs of $7,822, which were charged to its Other Than Personal Service (OTPS) account under OTAG I. In this regard, the Grantee did not comply with the provisions of OMB Circular A-122, which require costs to be reasonable and adequately documented. This occurred because the Grantee erroneously charged expenses related to several employees to the grant even though they did not work on grant activities; and because the Grantee failed to retrieve supporting documentation from a storage facility for costs charged to OTAG I. Thus, we recommend that the Grantee be instructed to reimburse HUD for the amount of the ineligible costs, and to retrieve and submit supporting documentation for the unsupported OTPS costs to HUD, so that HUD can make an eligibility determination on these costs.

Issue Date: September 05, 2002
Audit Report No.: 2002-NY-1003
File Size: 515KB

Title: City of Utica, Community Planning and Development Programs, Utica, New York

We completed an audit of two development projects administered by the City of Utica, New York (Grantee): the Utica Historic Marina Project and the Parkway Recreation Center Project. The purpose of our audit was to determine whether: (1) the two projects were eligible activities that met a national objective of the CDBG Program; (2) the costs charged for the projects were necessary, reasonable, and in accordance with Federal regulations; and (3) the City of Utica (Grantee) had proper budgetary and accounting control. Our review raised concerns regarding the two projects.

We are recommending that HUD ensure that the Grantee repays the $902,799 of ineligible costs to the CDBG Program from non-Federal funds. We also recommend that HUD make eligibility determinations regarding the unsupported costs involving both the Marina and Parkway Recreation Center Projects. Finally, we recommend that HUD should not provide final approval to the Section 108 Loan Guarantee until assurances are provided that an acceptable number of jobs will be created.

Issue Date: May 22, 2002
Audit Memorandum No.: 2002-NY-1802
File Size: 52KB

Title: Interim Report on Community Development Block Grant Disaster Assistance Funds, New York, New York

The Congress tasked the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG) to audit the Community Development Block Grant (CDBG) Disaster Assistance Funds provided to the State of New York resulting from the September 11, 2001, terrorist attack on New York City. The Governor of the State of New York authorized Empire State Development Corporation (Empire State) to administer the Disaster Assistance funds. We recently started our audit of those funds and expect to issue a report in November 2002. However, we quickly realized that this is a fast moving operation. Each week, hundreds of applications are processed and millions of dollars are disbursed. Also, Empire State changes its processing procedures as needed. With this in mind, we noted two concerns that we believe warrant immediate attention. These concerns pertain to: (1) duplication of grants and loans from various sources, and (2) the applicants' economic loss amount. Therefore, we issued an interim report (Memorandum No. 2002-NY-1802).

In summary, we found that:

A. Empire State may be awarding CDBG disaster grants to applicants that have already received Small Business Administration (SBA) Disaster Loans. In some instances, applicants may not be eligible to receive both a CDBG grant and a SBA loan.

B. Empire State was not requiring applicants to provide any details showing or describing how they determined their estimated economic loss. This estimate is a key component of the calculation that is used to determine whether an applicant is eligible for a grant. It should be noted that in some instances, the amount of the estimated loss is in the millions of dollars.

After our discussions with HUD and Empire State officials, Empire State changed the application process and now requires applicants to provide details as to how they calculated their estimated loss. However, to ensure that the application process is consistent, we believe that Empire State should request the same data from the previous applicants (4100) who have already received a grant.

We recommended that HUD should consult with appropriate SBA officials and determine whether duplication of benefits could exist. This may necessitate a legal opinion. Also HUD must ensure that Empire State is complying with the intent of Congress regarding the reduction of CDBG disaster grants by any other public benefits that an applicant may have received. Finally, HUD should require Empire State to obtain from the applicants who have already received a grant, the details as to how they calculated their estimated loss.

Issue Date: March 21, 2002
Audit Report No.: 2002-NY-1001
File Size: 556KB

Title: City of Ithaca, Community Planning and Development Programs, Ithaca, New York

We examined the operations of the City of Ithaca's (Grantee) Community Planning and Development Programs. Specifically, we reviewed its CDBG Small Cities Program, Section 108 Loan and Grant Program and Brownfield Economic Development Initiative (BEDI) Grant. In addition, we reviewed the use of program income from completed Urban Development Action Grant (UDAG) and Housing Development Grant Program (HODAG) projects. The purpose of the examination was to determine whether the Grantee carried out activities as shown in its applications in an economical, efficient, and effective manner and complied with applicable requirements, laws and regulations that pertain to the Community Planning and Development Programs. The review covered the period from July 1, 1999, to December 31, 2000.

Our review disclosed that the Grantee generally complied with HUD program requirements when administering its Community Planning and Development Programs. However, our review disclosed that for certain areas the Grantee did not always carry out its activities in an efficient and effective manner, comply with the HUD regulations and charge costs to the Programs that are necessary and reasonable.

Issue Date: December 3, 2001
Audit Report No.: 2002-NY-1801
File Size: 135KB

Title: City of Utica, New York Community Development Block Grant, Home, and Section 8 Existing Housing Program Utica, New York

We conducted a review of the City of Utica, New York (Grantee) operations to determine the current status of issues raised in draft findings prepared by our office in 1999. Our review disclosed that deficiencies continue to exist within each of the program areas that we examined in 1999. As such, this memorandum contains four findings that are similar to those drafted by our office in 1999; however, the findings have been updated and modified as appropriate to include current conditions and to incorporate corrective actions taken by the Grantee to date.

Issue Date: August 23, 2001
Audit Report No.: 2001-NY-1004
File Size: 284KB

Title: National City Mortgage Company, Non-Supervised Mortgagee, Buffalo, New York

We completed an audit of the books and records of the Buffalo Branch Office of National City Mortgage Company, (National) a non-supervised mortgagee. The objective of the audit was to determine whether National originated loans in accordance with regulations and requirements of the U.S. Department of Housing and Urban Development/Federal Housing Administration (HUD/FHA), which require adherence to prudent lending practices. The review covered the period between December 1, 1998 and November 30, 2000, and consisted of a review of 33 HUD/FHA insured loans. A summary of the results of our review is provided below.

Issue Date: April 24, 2001
Audit Report No.: 2001-NY-1003
File Size: 387KB

Title: Saratoga Springs Housing Authority, Low-Rent Housing Program, Saratoga Springs, New York

We performed an audit of the Saratoga Springs Housing Authority, herein referred to as the Public Housing Authority (PHA), pertaining to its Federal Low-Rent Housing (LRH) Program. The primary objectives of the audit were to evaluate the PHA's internal controls for safeguarding cash and other assets, and to determine whether it complied with the terms and conditions of the Annual Contributions Contract (ACC) regarding procurement, compensation to employees, leave records and travel costs.

The audit disclosed that the PHA is generally providing decent, safe and sanitary housing to its tenants. However, the PHA did not always comply with program requirements and regulations pertaining to various activities of its LRH program.

The noncompliances were generally caused by inadequate controls, which led to the ineligible and unsupported use of funds, as discussed in the findings.

Issue Date: April 17, 2001
Audit Report No.: 2001-NY-1002
File Size: 533KB

Title: Belmax Management Corp., Management Agent, Brooklyn, New York

In response to a request by the Director of the New York Multifamily HUB, the New York/New Jersey Office of the Inspector General for Audit completed an audit of the books and records of Belmax Management Corp., (Agent). The Agent manages eight HUD related projects located in Brooklyn, New York. The objective of the audit was to determine whether the Agent complied with HUD regulations and requirements pertaining to the use of project funds only for necessary and reasonable operating expenses and repairs.

We concluded that the Agent did not always comply with HUD regulations and requirements when using project funds. Consequently, the Agent paid for: (1) ineligible and questionable services and items totaling $189,068.19; (2) $156,840.78, in questionable exterminating services and repair contracts; and (3) excessive management fees totaling $45,827.53.

As a result, we recommended that HUD instruct the Agent/owners to reimburse the projects for those items considered to be ineligible and submit supporting documentation for those disbursements considered to be unsupported and/or questionable, so that HUD can determine the eligibility of these expenses. All items that are deemed ineligible are to be repaid to the projects from non-project funds.

Issue Date: December 7, 2000
Audit Report No.: 2001-NY-1001
File Size: 407KB

Title: Bay Towers Multifamily Mortgagor Operations Project Number 012-11031, Far Rockaway, NY

We conducted an audit of the books and records of the multifamily project, Bay Towers. The objective of our review was to determine whether the Owners and Management Agent complied with requirements of the Regulatory Agreement.

We concluded that the Management Agent generally complied with regulations and requirements of the U.S. Department of Housing and Urban Development (HUD), including those regarding the use of project funds for reasonable operating expenses and necessary repairs. However, our review disclosed that the Agent did not comply with the provisions of the Regulatory Agreement and other HUD requirements that pertain to: (1) computing and remitting Section 236 excess income to HUD; (2) using project funds to pay legal fees relating to the filing of bankruptcy petitions by the Owners; (3) maintaining documentation on an account receivable and a loan payable; and (4) the writing off of an account receivable and a loan payable. Specifically, we found that contrary to HUD requirements, the Management Agent did not properly compute excess income due HUD; as a result, excess income due HUD in the amount of $199,205 was not remitted. Furthermore, we noted that the HUD New York State Office (NYSO) may have inadvertently given approval to the Project to retain future excess income amounts collected. We also found that the Management Agent charged ineligible legal fees that pertain to the filing of petitions of bankruptcy by the Owners of the Project. As a result, the Project has been deprived of $77,000, which should have been used for reasonable project operating expenses. In addition, the Management Agent wrote-off a $201,312 account receivable, due from the Project's Owners; and a $174,677 loan payable, without obtaining HUD's written approval. Consequently, we believe that the Project could be deprived of funds from a collectible receivable, and that its loans payable balance may be understated. As a result, we recommend that the HUD NYSO make a determination on whether (a) the $199,205 in excess income collected and retained by the Agent during the period March 31, 1998 through March 31, 2000 should be remitted to HUD; and (b) the NYSO's April 10, 2000 approval to allow Bay Towers to retain future excess income collected should be rescinded. We also recommend that the Owners be required to immediately reimburse the Project's operating account for the $77,000 in legal fees charged to the Project. In addition, we recommend that the amounts for the account receivable and the loan payable be put back on the Project's books until HUD makes a determination on their authenticity. On November 8, 2000, we held an exit conference with officials of the Agent to discuss the results of our draft findings and recommendations. The Officials provided us with written responses to the findings, which we included in its entirety as Appendix B of this report. We also provided a summary and an evaluation of their responses at the end of each finding.

Issue Date: September 25, 2000
Audit Report No.: 00-NY-202-1005
File Size: 383KB

Title: Poughkeepsie Housing Authority, Low-Rent Housing Program, Poughkeepsie, New York

We completed an audit of the Poughkeepsie Housing Authority, herein referred to as the Public Housing Authority (PHA), pertaining to its Federal Low-Rent Housing (LRH) Program. The audit followed a survey conducted on the PHA's operations. The survey and audit work show that the PHA needs to improve operating controls to ensure that assets are safeguarded against waste and loss, and to increase assurance that its programs are operated in a way that achieves full compliance with the terms and conditions of the Annual Contribution Contract (ACC) and other applicable U.S. Department of Housing and Urban Development (HUD) regulations and requirements.

Issue Date: January 27, 2000
Audit Report No.: 00-NY-255-1004
File Size: 394KB

Title: City of Troy Homebuyers Incentive (HOME) Program Troy, New York

We completed an audit the City of Troy's HOME program. The primary objective of the audit was to determine whether the City of Troy's Department of Planning and Community Development managed its program efficiently and in accordance with the applicable requirements and regulations that pertain to the HOME program.

Our audit disclosed that the City generally complied with HUD regulations and requirements in administering its HOME program. However, we found that the City did not have adequate controls over the approval and processing of all grants. Specifically, we found that the City did not disclose all relevant facts to HUD in awarding a $27,500 HOME grant to the brother of the Deputy Mayor. In addition, the City did not seek HUD approval in the award of a $10,000 grant to the Mayor's secretary.

Issue Date: December 8, 1999
Audit Report No.: 00-NY-212-1002
File Size: 57KB

Title: Target V Phase I Development Associates, Multifamily Housing Program, Project No. 012-57301, Bronx, New York

We conducted an examination of the books and records of Target V Phase I Development Associates, pertaining to the multifamily project Target V Phase I for the period January 1, 1997 through March 31, 1999. The primary purpose of the audit was to determine whether costs charged to the project were necessary and reasonable for the project's operation and repair, and whether the project was maintained in accordance with the U. S. Department of Housing and Urban Development (HUD) regulations and requirements.

Our audit disclosed instances of non-compliance with HUD regulations and policies that caused ineligible, unnecessary and unsupported costs to be paid with project funds. Specifically, the Agent: (1) charged managerial costs of $234,423 in excess of the limit established by the New York State Office on management fees; (2) made payments totalling $26,524 for services and items that were either unnecessary or unsupported; and (3) maintained weak internal controls and administrative/accounting procedures that exposed the project's assets and income to possible waste and misuse.

Issue Date: November 10, 1999
Audit Report No. 00-NY-202-1001
File Size: 72KB

Title: City of Glens Falls Housing Authority, Low-Rent Housing Program, Glens Falls, New York

We completed an audit of the City of Glens Falls Housing Authority, referred to herein as the Public Housing Authority (PHA) pertaining to its Federal Low-Rent Housing (LRH) Program. The audit followed a survey conducted on the PHA's operations. The survey and audit work show that the PHA needs to improve operating controls to ensure that assets are safeguarded against waste and loss, and to increase assurance that its programs are operated in a way that achieves full compliance with the terms and conditions of the Annual Contribution Contract (ACC) and other applicable U.S. Department of Housing and Urban Development (HUD) regulations and requirements.

Issue Date: September 27, 1999
Audit Report No. 99-NY-221-1007
File Size: 1099KB

Title: Alliance Mortgage Banking Corp. Non-Supervised Mortgagee Rochester, New York

We completed an audit of the books and records of Alliance Mortgage Banking Corporation (Alliance), Rochester Branch Office, Rochester, New York. We selected this Branch Office because 62 of 65 Section 203 (k) loans that were made to one investor (borrower) were in default as of April 1998. Our audit consisted of a detailed review of 22 of the 62 loans. We found that Alliance's Rochester Branch Office did not comply with all of the U.S. Department of Housing and Urban Development/Federal Housing Administration HUD/FHA requirements pertaining to Section 203 (k) loans.

Issue Date: April 22, 1999
Audit Memoranda No. 99-NY-219-1803
File Size: 56KB

Title: Greystone Servicing Corporation

It is our opinion that there is not sufficient cause to warrant Mortgagee Review Board action against Greystone. While Greystone could have been more diligent in the maintenance of its mortgage files, we do not believe that the violations contained in HUD's monitoring report are as serious as inferred. In many instances, the HUD monitoring report to the Board did not give sufficient weight to mitigating factors including HUD Field Office involvement in the matters, and that several of the projects were experiencing financial difficulties when the servicing rights were acquired by Greystone. However, we should mention that during this review we noticed an outstanding surety bond issued in 1991 (Waters Edge Apartments, FHA No. 023-35302) involving over $354,000. Although the issue is getting old, we recommend that HUD seek recovery from the insurance company that issued the surety bond. This matter and the others are discussed in detail on a project by project basis in the subsections that follow.

Issue Date: March 11, 1999
Audit Report No. 99-NY-206-1005
File Size: 7KB

Title: Cohoes Housing Authority Low-Rent Housing Program Cohoes, NY

We completed an audit of the Cohoes Housing Authority, referred to herein as the Public Housing Authority (PHA) pertaining to its Federal Low-Rent Housing (LRH) Program. The purpose of the audit was to determine the adequacy of internal controls over the safeguarding of cash and other assets, and to determine whether the PHA has complied with the terms and conditions of the Annual Contributions Contract (ACC) and other applicable U.S. Department of Housing and Urban Development (HUD) regulations and requirements. The audit covered the period October 1, 1995 to March 31, 1998 and was extended, where appropriate, to include other periods. We performed the audit field work between April 1, 1998 and January 14, 1999.

The audit showed that the PHA generally has complied with program requirements and regulations pertaining to its LRH program, and that decent, safe and sanitary housing has been provided to tenants. However, the audit also showed that the PHA needs to improve operating controls to ensure that assets are properly safeguarded against waste and loss, and to increase assurance that its programs are operated in a way that achieves full compliance with the terms and conditions of the ACC and other applicable HUD regulations and requirements.

Issue Date: February 17, 1999
Audit Report No. 99-NY-221-1004
File Size: 74KB

Title: Homestead Financial Services, Inc. Non-Supervised Mortgagee Syracuse, New York

We completed an audit of the books and records of Homestead Financial Services, Inc., (Homestead) a non-supervised mortgagee. The objective of the audit was to determine whether Homestead originated loans in accordance with the requirements of the U.S. Department Housing and Urban Development/Federal Housing Administration (HUD/FHA) which requires adherence to prudent lending practices. The review covered the period between June 1, 1996 and June 30, 1998.

Our review disclosed that contrary to HUD/FHA requirements, Homestead split the attorney fees with the various attorneys that participated in the HUD/FHA loan closings. In addition, we found that Homestead did not always comply with HUD/FHA's requirements regarding the Section 203(k) rehabilitation loan program. Also, Homestead's Quality Control Plan was not complete and in some instances Homestead personnel did not adhere to the requirements identified in its Quality Control Plan.

Issue Date: January 15, 1999
Audit Memorandum No. 99-NY-212-1802
File Size: 62KB

Title: Tenant Complaints Stanley Park Houses, Glen Cove, NY

Our reviewed disclosed that the tenants' complaints are essentially valid. While the complaints were levied against the former manager, the Mortgagor is responsible for ensuring that the project is operated in accordance with HUD regulations. We found that during the period from June 1, 1992 through November 30, 1997, the Mortgagor: charged excessive management related costs to the project; did not maintain the project in good repair and condition; charged tenants an extra fee for utility usage; and did not ensure that a sound and responsive relationship existed between the former management and a tenant organization (which represents less than 20 percent of the tenants). While we confirmed that the Mortgagor did remit to HUD Section 236 excess income, because of errors in calculating the monthly excess income and the lack of proper collection records, we could not ascertain if all the excess income actually collected was remitted during our audit period.

Similar tenant complaints were evaluated and reported by the HUD NYSO in its 1993 and 1996 management reviews. As evidenced by our current review, the complaints were not adequately addressed by the Mortgagor and remain unresolved.

Issue Date: December 9, 1998
Audit Memorandum 99-NY-214-1801
File Size: 21KB

Title: Affordable Housing, LLC, d/b/a Aries Management, New York, NY

Our review disclosed that the projects were in need of substantial repairs when the Agent took over management of the projects in 1996. However, the Agent was slow in taking corrective actions in response to HUD's physical inspections conducted in April 1997, which rated both projects "below average". On April 1, 1998, after two follow-up visits by representatives of the HUD NYSO, the Vice President of the Managing General Partner was notified that the projects were not maintained in good repair and condition which is a violation of the Regulatory Agreement ( e.g roofs, balconies, elevators, exterior walls and foundations, etc. were found to be deficient). The NYSO directed the Managing General Partner to terminate its agreement with the Agent and to provide new management acceptable to HUD. After an April 20, 1998 meeting with HUD, the Agent was granted temporary permission to manage the projects contingent on compliance with numerous conditions, including the submission to HUD of a revised Management Improvement and Operating (MIO) Plan and the satisfactory completion of roof and elevator repairs.

A revised MIO Plan was approved by HUD in July 1998. We noted that the Agent is proceeding to make the required repairs, which will be funded 50 percent by replacement reserves (until depleted) and 50 percent by owner advances. At the time of our review, the roof and elevator repairs were progressing in accordance with the revised MIO Plan, and a bid package had been prepared for the procurement of the required foundation and balcony repair work. We also noted that apartment unit repairs were ongoing, and that the projects' building superintendents had established a positive rapport with the tenants.

Regarding the financial management of the projects, our review disclosed that the Agent charged both HUD-insured projects for the prorated salaries of its tenant certification clerks, contrary to NYSO policy. As a result, $28,065.97 ($17,423.25 for Columbus Manor, and $10,642.72 for Westwood House) are ineligible project costs. When we discussed this deficiency with the Vice President of the Managing General Partner, he immediately instructed his bookkeeper to repay the amounts in question to the projects. Details are provided in the Results of Review section of this memorandum.

We are recommending that your office verify that Columbus Manor and Westwood House were appropriately reimbursed for the excessive management costs incurred. Since the salaries for the tenant certification clerks were allocated to two other HUD-insured projects managed by the Agent (Townhouse West and Highbridge House), we are also recommending that the Agent submit evidence to HUD showing that all excessive charges to these projects have been reimbursed.

Our review also disclosed an issue that requires further study and evaluation by your office. The general ledger for Columbus Manor shows that a total of $198,571 is owed to the project by former partners. We believe that a legal determination should be made as to whether the current owners are liable to the project for theses amounts or whether the receivables should be discharged and removed from the project's books and records.

Issue Date: November 25, 1998
Audit Report No. 99-NY-212-1003
File Size: 55KB

Title: Seaview Arms Associates, Staten Island, New York

Our review disclosed that the Mortgagor generally complied with HUD regulations and requirements regarding the use of Project funds for reasonable operating expenses and necessary repairs. However, our review disclosed that the Mortgagor did not comply with HUD's regulations and requirements relating to the physical condition of the Project. Specifically, our inspections of the units at the Project indicated that the Mortgagor was not maintaining the units in a decent, safe and sanitary condition, and we estimate that it will cost $533,500 to make the necessary repairs to meet HUD's requirements.

Issue Date: November 20, 1998
Audit Report No. 99-NY-241-1002
File Size: 89KB

Title: Utica Community Action, Inc., Utica, New York

This report contains two findings that show that UCAI did not always comply with applicable Federal requirements. Specifically, we found that UCAI did not implement effective financial and management controls over its operations. Furthermore, we found questionable practices involving UCAI's operation of its for-profit corporation.

Issued Date: October 27, 1998
Audit Report No.: 99-NY-209-1001
File Size: 116KB

Title: Buffalo HA, Public Housing Drug Elimination Program, Buffalo, NY

Our audit disclosed that the BMHA has not established adequate controls to properly account for funds expended under its PHDEP. It also disclosed that all reported expenditures were not reasonable or eligible. Specifically, we found that the BMHA charged its Fiscal Year (FY) 1995 and 1996 PHDEP grants with ineligible and questionable salary costs and with drug prevention costs that were not reasonable, necessary or justified. We further found that the BMHA did not have adequate controls over executed contracts. Additionally, the BMHA has not developed a process to properly monitor and evaluate activities carried out under its PHDEP. In view of the deficiencies discussed in this report, the BMHA must take corrective actions to assure that future funds of its PHDEP are properly controlled, accounted for, and used only for eligible activities in an economical and effective manner.

Issue Date: June 11, 1998
Audit Related Memorandum No.: 98-NY-202-1804
File Size: 15KB

Title: Rochester HA Lead Based Paint Prevention Program, Rochester, NY

We found that the RHA procured lead based paint services from contractors without requesting proposals from other contractors and without always issuing written contracts. As a result, the RHA cannot be ensured that the best quality services were obtained in the most economical manner. RHA staff told us that an error was made by not following the HUD procurement requirements. In our opinion, this is a serious error. The RHA's lead based paint program was funded through HUD's Comprehensive Grant Program (CGP). Although, the RHA has essentially completed its lead based paint program, we are concerned that the RHA may not be following the HUD procurement requirements regarding other activities funded through the CGP. Therefore, we recommend that HUD should not release any further CGP funds, until the RHA establishes procedures that will ensure that the RHA complies with HUD procurement requirements. Also, we recommend that you advise the RHA that if future lead based paint contracts are not procured in accordance with HUD's requirements that the Buffalo Field Office will take administrative actions against the RHA. Our review also disclosed that the RHA did not properly notify all of its Spanish speaking tenants of the hazards of lead based paint. As a result, some tenants may not have been fully informed of the risks associated with lead based paint. RHA staff told us that the RHA was not aware that the applicable notifications were in Spanish.

Issue Date: June 11, 1998
Audit-Related Memorandum No.:98-NY-202-1805
File Size:16KB

Title: Harrietstown HA Low-Rent Housing Program, Saranac Lake, NY

We found that although the HHA initiated some actions to correct the deficiencies disclosed in the five findings and the three observations contained in the Buffalo Field Office fact finding report, the HHA has not completely implemented the recommendations cited in this fact finding report. In addition, during our review, we identified two other issues and we made appropriate recommendations. One of these issues involves the HHA's personnel policy and the other involves the HHA's modernization coordinator. We request that you forward this memorandum to the HHA and require it to implement all recommendations by August 31, 1998. We plan to conduct a follow up visit to the HHA during the month of October 1998, to verify implementation of the recommendations.

Issue Date: June 8, 1998
Audit Report No. 98-NY-206-1004
File Size: 147KB

Title: Watervliet HA, Watervliet, NY

The audit showed that the PHA generally has complied with program requirements and regulations pertaining to its LRH program, and that decent, safe and sanitary housing has been provided to tenants. However, the audit also showed that the PHA needs to improve operating controls to ensure that assets are properly safeguarded against waste and loss, and to increase assurance that its programs are operated in a way that achieves full compliance with the terms and conditions of the ACC and other applicable HUD regulations and requirements. The report contains nine findings. The findings show that the PHA lacked sound internal controls over its operations and that its administrative policies and procedures did not always comply with applicable HUD regulations and requirements. These weaknesses caused the PHA to incur ineligible costs of $2,420.20; unsupported costs of $181,048.86 and a cost efficiency of $139,675 has also been realized. To ensure compliance, the PHA needs to: (a) improve its system for procurement and contracting; (b) ensure that costs will be eligible, necessary and supported prior to incurrence; (c ) ensure that travel and conference costs are economical and in accordance with requirements; (d) control the use of gasoline by employees; (e) ensure that its personnel practices conform with established policies; and (f) improve its administrative and accounting controls.

Issue Date: May 18, 1998
Audit Related Memorandum No. 98-NY-209-1803
File Size: 44KB

Title: HA of the City of Utica, Utica, NY

We found that the PHA has developed, implemented, and administered the PHDEP grant in an economical, efficient and effective manner. We also found that the PHA has made adequate efforts in reducing drug related crime, and that the residents of the PHA are satisfied with the results of the program. Consequently, our review did not disclose any reportable deficiencies.

Issue Date: April 30, 1998
Audit Report Number 98-NY-221-1003
File Size: 55KB

Title: Countrywide Home Loans, Inc., Buffalo, NY

Our review concluded that for six of the 20 loans we reviewed, Countrywide did not adhere to prudent lending practices when it underwrote the loans. Specifically, we found processing deficiencies that resulted from insufficient assets to close loans, discrepancies in the amount of earnest money on deposit, and income ratios that exceeded HUD/FHA standards. We believe these deficiencies occurred because Countrywide personnel did not assure that those loans were processed in accordance with HUD/FHA requirements. As a result, mortgages were approved for unqualified mortgagors causing HUD/FHA to assume unnecessary insurance risk.

Issue Date: March 30, 1998
Audit Report Number 98-NY-222-1002
File Size: 101KB

Title: Aberte Realty, Inc., Buffalo, NY

Our review disclosed that the REAM did not always comply with the terms of its contract. Specifically, the REAM did not assure that subcontractors performed all of the work reflected on assigned work orders, and that the quality of their work was always adequate. Consequently, HUD paid for work that was either not performed or not performed in an acceptable manner.

Issue Date: January 22, 1998
Audit Report No. 98-NY-250-1802
File Size: 27KB

Title: CDBG, Village of Fort Plain, NY

The review showed that the programs were administered by the Consultant and its subcontractor without any monitoring or oversight by the Grantee. This has allowed significant weaknesses in the system of administrative and internal controls to remain undetected. Accordingly, certain costs charged to the programs are not reasonable, eligible, and in conformity with applicable regulations. Despite the weaknesses in the administration of the programs, our review found that the books and records maintained by the Village Clerk/Treasurer were in conformance with HUD requirements.

Issue Date: January 21, 1998
Audit-Related Memorandum 98-NY-221-1801
File Size: 10KB

Title: Subject: Real Estate Brokers/Sellers Circumventing the FHA Requirement Regarding Gifts to Borrowers

Our review of 20 loans at Countrywide Home Loans Inc., disclosed four cases where Franklin Enterprises Inc., and/or Erie Development Inc., (real estate brokers/sellers)2 provided funds to relatives/fiancee of Borrowers. In turn, those individuals gave the same amount of money as gifts to Borrowers, who used them to financially qualify for FHA-insured mortgages. It is important to note that three of those four mortgages are in default and that 23 percent of the 53 loans where Franklin Enterprise, Inc. and Erie Development, Inc. were the real estate brokers/sellers are in default. Because the real estate brokers/sellers provided relatives/fiancee of Borrowers with the same amount of funds that relatives/fiancee gave Borrowers in the form of gifts, we believe that the real estate brokers/sellers circumvented the FHA requirement that prohibits real estate brokers/sellers from being donors of gifts to Borrowers applying for FHA-insured mortgages. As a result, ineligible Borrowers may have qualified and received FHA-insured mortgages that are now in default.

Issue Date: October 24, 1997
Audit Case Number 98-NY-214-1001
File Size: 60KB

Title: Limited Review of BRACO I, Buffalo, NY

This report contains two findings which disclose that the Mortgagor did not comply with provisions of the Regulatory Agreement and/or HUD regulations and requirements dealing with the establishment of life insurance and pension plans and incurring related costs; and that the Mortgagor violated a provision of the Regulatory Agreement by transferring project funds to an investment account to establish a trust fund. Specifically, our review disclosed that between 1993 and 1995 the Mortgagor spent $478,488 of project funds to establish life insurance and pension plans for its employees. However, we determined that $463,757 of that costs were excessive and unreasonable and therefore ineligible for inclusion in project costs. Our review also disclosed that in 1991 the Mortgagor transferred $140,901 of project funds to an investment account to establish a trust fund without obtaining HUD approval. The trust fund was established to earn money to eventually pay off a $300,000 Residual Receipt Note executed with HUD when the project received a $300,000 Flexible Subsidy Loan under HUD's Flexible Subsidy Program. Nonetheless, such a transfer of project funds required HUD approval pursuant to Paragraph 6b of the Regulatory Agreement.

Issue Date: March 14, 1997
Audit Case Number 97-NY-250-1002
File Size: 89KB

Title: Montgomery County, Fonda, NY

The report contains three findings that show that the Grantee and its subrecipient, the Montgomery County Economic Development Corporation, did not always comply with program requirements, laws and regulations. Specifically, we found that the Grantee did not properly monitor its subrecipient and that the Grantee and its subrecipient made imprudent loan decisions, obligated and disbursed funds to recipients without adequate support, failed to address potential conflicts of interest, and jeopardized the effectiveness of the Grantee's economic development program. Also, we found unallowable costs of $415,000 and unsupported costs of $1,353,270.

Issue Date: January 31, 1997
Audit Case Number 97-NY-212-1001
File Size: 85KB

Title: Pilgrim Village Associates, Buffalo, NY

Our review disclosed that the Mortgagor/Management Agent did not comply with provisions of the Regulatory Agreement pertaining to making distributions with only surplus cash and using project funds to pay only reasonable operating expenses. Specifically, the audit disclosed that: (1) distributions of $41,900 were computed and made to the General Partner for periods when the project was not in a surplus cash position; (2) unauthorized withdrawals of $14,100 have not been repaid to the project; (3) a $12,250 loan from the Reserve for Replacement Account was not used properly nor repaid; (4) loan origination fees of $7,276 were charged to project costs even though the loan was not obtained; (5) Bond Debt Service Reserve funds were used improperly to write-off loans and advances; (6) questionable administrative fees, totaling $34,578.72 were charged to the project; and (8) payroll costs of $308,320 are considered unsupported because the Management Agent's payroll allocation method is unsupported. In conclusion, the audit identified $124,018.84 of ineligible distributions and unauthorized withdrawals of project funds, $56,276 of ineligible costs, and $342,898.72 of unsupported costs.

Issue Date: November 15, 1996
Audit Related Memorandum No. 97-NY-243-1801
File Size: 23KB

Title: UDAG and Small Cities Programs, City of Hudson, NY

Our review disclosed that the proposed UDAG prepayment terms conflict with the UDAG agreement. Further, the Grantee entered into agreements with the recipient that are not allowed, or specified in the UDAG agreement, or approved by HUD. Additionally, the review disclosed weaknesses in the Grantee's internal controls and procedures related to the procurement of services and possible conflicts of interest. We are bringing these matters to your attention so that effective administrative actions can be taken to address and correct the weaknesses.

Issue Date: August 16, 1996
Audit Related Memorandum 96-NY-212-1802
File Size: 25KB

Title: Unauthorized Loans, Beaveridge & Roslyn Plaza Housing

At least $4,194,595 of unauthorized loans were made to an affiliate of the Owners. As limited distribution projects the monies should have been deposited into a separate Residual Receipts account with the Mortgagee and only disbursed with the approval of HUD. The IPA raised these issues as findings in its 1994 and 1995 financial audits, but the Owners simply did not comply.

Issue Date: August 16, 1996
Audit Related Memorandum 96-NY-202-1801
File Size: 34KB

Title: City of Lockport HA, Lockport, NY

Overall, we found that the housing stock of the CLHA is being well maintained and that tenants are being provided decent, safe, and sanitary units. We also found that the CLHA is generally complying with applicable requirements, laws, and regulations governing the administration of its operations. However, we noted six weaknesses in the CLHA's operations that we are bringing to your attention for required corrective action.

Issue Date: June 28, 1996
Audit Report Number 96-NY-214-1003
File Size: 89KB

Title: New England Management CO., Inc., Brooklyn, NY

Our review disclosed that the Agent generally complied with HUD regulations; however, the Agent did not always document that project funds were used in the most economical manner. Specifically, the Agent: (1) made distributions at Owners' requests and repaid a loan when surplus cash was not available; 2) could not show that it was to the projects' advantage to use an identity-of-interest (IOI) maintenance company to perform general repairs and janitorial work; and (3) needs to strengthen its controls over the maintenance of financial records.

Issue Date: June 21, 1996
Audit Report Number 96-NY-201-1002
File Size: 278KB

Title: Buffalo Municipal HA, Buffalo, NY

Our audit disclosed that the BMHA is generally providing tenants with decent, safe and sanitary units; and is generally complying with the terms and conditions of its ACC. However, the review also disclosed that various improvements are needed in its operations to enhance effectiveness, increase efficiency, and promote better economy. Specifically, our audit results disclosed that the BMHA should improve its: management information systems, maintenance operations, controls over inventories, unit vacancy rate, cash management procedures and investment practices, controls over staffing levels, travel and personnel practices, and the system used to process purchase orders. Also, the BMHA should improve the accuracy of its Public Housing Management Assessment Program (PHMAP) Certification, and execute an employment contract with each employee appointed by the Board of Commissioners to reduce the possibility of litigation if termination occurs.