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.