Rhode Island Audit Reports
Issue Date: March 22, 2007
Audit
Report No.: 2007-BO-1004
File Size: 447.97KB
Title: Harris Health Center, East Providence, Rhode Island, Did
Not Ensure That Renovations Were Properly Completed, Paid $21,729
for Unnecessary and Nonproject Costs, and Did Not Calculate Management
Fees Properly
We reviewed operations at Harris Health Center (Center), 016-43106,
a 34-bed nursing home located in East Providence, Rhode Island,
because the mortgage was delinquent and final endorsement of the
U.S. Department of Housing and Urban Development (HUD)-insured loan
was delayed. We examined whether project renovations were completed
properly, only necessary interest and credit card fees were paid,
and management agent fees were properly calculated and paid.
The Center did not ensure that renovations were completed properly.
It also paid unnecessary interest and non-project-related costs
and did not properly calculate and pay fees to its related management
agent. These conditions were caused by inconsistent supervision
of the renovations and a misunderstanding of the HUD regulatory
requirements. As a result, the Center did not receive the full benefits
of its renovations and spent money on unnecessary expenses, all
of which contributed to operating losses and cash flow shortfalls.
We recommend that the director of HUD's Boston Multifamily Hub
require the Center's owner to correct the renovation deficiencies,
develop a repayment plan to reimburse the project $21,729 for unnecessary
and non-project-related costs, and establish a consistent management
agent structure and method for computing and paying management agent
fees.
Issue Date: December 1, 2006
Audit Report No.: 2007-BO-1002
File Size: 407.22KB
Title: Mortgage Amenities Corporation, Lincoln, Rhode Island,
Did Not Comply with Certain HUD Requirements in Administering Its
Federal Housing Administration Insured Loan Programs
We audited Mortgage Amenities Corporation (Mortgage Amenities),
a nonsupervised mortgage company approved by the U.S. Department
of Housing and Urban Development (HUD) to originate, underwrite,
and service Federal Housing Administration (FHA) single-family insured
loans. We selected Mortgage Amenities based on a lender risk analysis,
which showed that the loans it originated or sponsored had a higher
default percentage than the nationwide average. Our objectives were
to determine whether Mortgage Amenities acted in a prudent manner
and complied with HUD regulations, procedures, and instructions
in the origination of the FHA-insured single-family mortgages selected
for review and whether its quality control plan as implemented met
HUD requirements. We also assessed other general aspects of the
mortgagee's operations as they relate to continued mortgagee approval.
Mortgage Amenities did not comply with certain HUD requirements
concerning the origination and servicing of FHA-insured loans. Mortgage
Amenities approved one loan that was not eligible for FHA insurance
because of questionable citizenship and/or immigration status. However,
this approval was not an indication of a pattern of noncompliance,
but the loan represents a higher risk of loss to the FHA insurance
fund. Mortgage Amenities also charged ineligible document preparation
fees to borrowers, and did not establish or operate its branches
in accordance with HUD requirements. This resulted in borrowers
paying excessive and/or unreasonable fees, and any loans originated
by branches that do not comply with HUD requirements increase the
risk to the FHA insurance fund and the American public. We also
found a significant amount of mortgage records in HUD's Single Family
Insurance System were not accurate for loans originated or sponsored
by Mortgage Amenities. Inaccurate or untimely reporting of mortgage
record changes can delay the payment of claims for insurance benefits.
In addition, Mortgage Amenities did not establish or implement
a quality control plan that met all of HUD's requirements. As a
result, it may not identify and correct potential deficiencies in
a timely manner, resulting in an unnecessary risk to the FHA insurance
fund.
We recommend that HUD's assistant secretary for housing-federal
housing commissioner require Mortgage Amenities to (1) indemnify
HUD against future losses for the ineligible FHA-insured loan, (2)
refund the ineligible closing fees, (3) terminate its branches that
do not comply with HUD requirements, (4) review HUD's mortgage records
and update them accordingly, and (5) update and fully implement
its quality control plan. We also recommend that the assistant secretary
refer Mortgage Amenities to the Mortgagee Review Board for consideration
of administrative sanctions and/or civil money penalties for the
violations disclosed in this report.
Issue
Date: July 6, 2006
Audit
Report No.: 2006-BO-1009
File Size: 618.37
Title:
The Rhode Island Housing and Mortgage Finance Corporation, Providence,
Rhode Island, Incorrectly Made More than $1.8 Million in Section
8 Subsidy Payments and Released More Than $900,000 from Restricted
Residual Receipts Accounts
At the
request of the U.S. Department of Housing and Urban Development
(HUD), we audited the Rhode Island Housing and Mortgage Finance
Corporation (Corporation), a state housing agency located in Providence,
Rhode Island. Our audit objectives were to determine whether the
Corporation (1) correctly processed Section 8 housing assistance
payment contract renewals and (2) released residual receipts to
development owners and itself in violation of federal regulations.
The
Corporation incorrectly processed Section 8 housing assistance payment
contract renewals for eight developments. It included debt service
at incorrect levels and failed to reduce Section 8 contract rents.
The inflated contract rents resulted in more than $1.8 million in
Section 8 subsidy overpayments to the development owners. In addition,
the Corporation did not recover the overpayments due to the failure
of the owners to submit repayment plans on the advice of their legal
counsel and because it was awaiting the outcome of our audit.
The
Corporation also violated federal regulations when it incorrectly
interpreted those regulations and allowed two developments to use
more than $900,000 in restricted residual receipts to pay financing
fees to the Corporation, the Corporation's affiliated Affordability
Housing Trust, and one development owner. The Corporation believed
using residual receipts in a refinancing transaction as an incentive
to the owner to extend affordability use restrictions for another
forty years was an appropriate use of project funds. It indicated
that it had returned the funds with interest to the residual receipts
accounts of the two developments.
We recommend
that HUD require the Corporation to (1) actively pursue and recover
just under $1.2 million in Section 8 subsidy overpayments from six
development owners, (2) confirm that the Corporation returned more
than $657,000 in overpayments collected from two development owners
to the appropriate accounts, (3) develop and implement procedures
to ensure that HUD requirements governing the renewal of expiring
Section 8 housing assistance payment contracts are followed, and
(4) clarify its procedures to ensure residual receipts are restricted
to authorized uses. Further, we recommend that HUD confirm that
the Corporation returned more than $945,000 to the appropriate restricted
accounts.
Issue Date: March 28, 2006
Audit
Report No.: 2006-BO-1006
File Size: 4.98MB
Title: Coventry Health Center, Federal Housing Administration
Loan Number 016-43071, Coventry, Rhode Island
We reviewed the books and records of Coventry Health Center (project)
to determine whether Coventry Health Center Associates, L.P. (owner),
and-or Sterling Health Care Management Company, an identity-of-interest
management agent, used the project's funds in compliance with the
regulatory agreement and the U.S. Department of Housing and Urgan
Development's (HUD) requirements. The review was performed based
upon our fiscal year 2004 annual audit plan.
We found that the project's owner and/or management agent used
project funds for inappropriate and unsupported disbursements. The
inappropriate and unsupported disbursements occurred while the project
was in a non-surplus-cash position and/or in default of its HUD-insured
loan. HUD sold the project's note and lost more than $6.3 million.
We identified $1,858,100 in questionable cash disbursements made
by the project's owner and/or management agent between January 1998
and February 2001. The project's owner and/or management agent disbursed
these funds and paid for non-project-related expenses, loan repayments,
management fees, and unnecessary services while the project was
in a non-surplus-cash position and/or in default of its HUD-insured
loan.
The owner and/or management agent caused the conditions identified
above by failing to operate the project in accordance with its regulatory
agreement and other applicable laws and regulations. The owner and/or
management agent disregarded prudent business practices and exploited
weak management controls.
We recommend that the director of HUD's Boston Multifamily Housing
Hub,
Pursue the recovery of double the amount of questionable
cash disbursements to identities-of-interest as stipulated in 12
U.S.C. [United States Code] Sec. 1715z-4a.
Obtain from the owner justification supporting the cash disbursements
for unsupported costs.
Obtain from the owner adequate justification for disbursements that
were deemed unnecessary to the nursing home.
Pursue the recovery of questionable distributions to non-identities-of-interest.
Issue Date: March 3, 2006
Audit
Report No.: 2006-BO-1004
File Size: 7.68MB
Title: Mount Saint Francis Heath Center
Federal Housing Administration Loan Number 016-43077, Woonsocket,
Rhode Island
We audited Mount Saint Francis Health Center (project), located
in Woonsocket, Rhode Island, to determine whether the owner complied
with its U.S. Department of Housing and Urban Development (HUD)
regulatory agreement and other applicable laws and regulations.
We identified $4,402,305 in questionable cash disbursements and
accrued expenses made by the project. We found that (1) under the
direction of the owner and the identity-of-interest management agent,
the project made questionable cash disbursements of $1,646,669 and
accrued questionable expenses of $192,487 while in a non-surplus-cash
position, and (2) The owner and identity-of-interest management
agent billed $1,162,150 and $1,288,745, respectively, for services
not provided (unsupported). In addition, the general manager of
the management agent received a salary as the assistant administrator
of the nursing home for a total of $112,254 in unnecessary expenses.
We recommend that the director, Rhode Island Multifamily Program
Center:
Pursue the recovery of double the amount of questionable
cash disbursements to
identities-of-interest as stipulated in 12 U.S.C. [United States
Code]
Sec. 1715z-4a.
Obtain from the owner justification supporting the cash disbursements
for unsupported costs.
Obtain from the owner adequate justification for disbursements
that were deemed unnecessary to the nursing home.
Pursue the recovery of questionable distributions to non-identities-of-interest.
Take appropriate action to prevent payment of ineligible and
unnecessary cash disbursements after our audit period, including
the payment of questionable accrued payables.
Develop and implement procedures that ensure only eligible
expenses are paid from project funds and that documentation is maintained
to support the eligibility and the amount of operating funds expended.
Remove the management agent in accordance with the management
certification and HUD regulations.
Pursue all applicable administrative sanctions against the
owner, management agent, and identity-of-interest companies, specifically
debarment.
Issue Date: March 31, 2003
Audit
Report No.: 2003-BO-1002
File Size: 3.67MB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grant Awarded to the People to End Homelessness Providence,
Rhode Island
Grant Number: FFoT00034RI
We completed an audit of the Outreach and Training Assistance Grant
(OTAG) awarded to the People to End Homelessness (Grantee). The
review was performed at the request of Congress. The audit objective
was to determine if the Grantee used Section 514 grant funds for
only eligible activities as identified in the Multifamily Assisted
Housing Reform and Affordability Act of 1997 (MAHRA), Notice of
Funds Availability (NOFA) and the OTAG agreement between HUD and
the Grantee to further the Mark-to-Market Program. We also determined
if the Grantee expended Section 514 funds for any lobbying activities.
Congress specifically identified lobbying as an ineligible activity
under MAHRA.
Date Issued: September 30, 2002
Audit
Memorandum No.: 2002-BO-1006
File Size 1,701KB
Title: INTERIM REPORT - Congressionally Requested Audit of the
Outreach and Training Assistance Grant Awarded to the People to
End Homelessness, Providence, Rhode Island Grant Number: FFOT00034ri
We have issued an Interim Report on the People to End Homelessness.
Because of the condition of their internal controls and financial
records, we have not yet completed our evaluation of grant expenditures.
We will issue a final report covering that area after we finish
evaluating the accounting records. We have determined that the Grantee
does not have adequate internal controls to ensure grant funds are
properly used. Our interim report contains two recommendations to
correct the conditions found to date.
Section 1303 of the 2002 Defense Appropriation Act (Public Law
107-117) requires the HUD Office of Inspector General to audit all
activities funded by Section 514 of the Multifamily Assisted Housing
Reform and Affordability Act of 1997 (MAHRA). The directive would
include the Outreach and Training Assistance Grants (OTAG) and Intermediary
Technical Assistance Grants (ITAG) administered by the Office of
Multifamily Housing Assistance Restructuring (OMHAR). Consistent
with the Congressional directive, we reviewed the eligibility of
costs with particular emphasis on identifying ineligible lobbying
activities.
Date Issued: April 30, 2002
Audit
Report No.: 02-BO-1003
File Size 858KB
Title: Newport Resident Council, Inc. Newport, Rhode Island
We performed an audit of the Newport Resident Council, Inc. (NRC).
The overall objective of our audit was to determine if the NRC was
administering all federal funds it received in an efficient, effective
and economical manner and in compliance with the terms of its federal
contracts and regulations. The NRC received funds from the Housing
Authority of the City of Newport, Rhode Island (Authority) through
the Comprehensive Grant Program and Tenant Services Program. The
NRC also received funds from the City of Newport, Rhode Island (City)
through the Rhode Island Small Cities Community Development Block
Grant for the Employment Readiness Program.
Our audit disclosed the NRC did not establish accountability over
all federal funds it received from the Authority and City, including
Comprehensive Grant Program (CGP), Tenant Services Program and Employment
Readiness Program funds, which as of January 31, 2001 totaled $265,275.
Specifically, the NRC failed to maintain adequate accounting and
monitoring records over Comprehensive Grant Program, Tenant Services
Program and Employment Readiness Program funds provided by the Authority
and City. We also noted $42,887 in questionable costs. The deficiencies
occurred because the NRC Board of Directors did not effectively
manage and account for its federal funds.
Date Issued: December 20, 2001
Audit
Memorandum No.: 02-BO-1801
File Size 246KB
Title: South Kingstown Housing Authority South Kingstown, Rhode
Island
We performed a review of the South Kingstown Housing Authority
(Authority). The overall objective of our review was to determine
if the Authority was administering its Public Housing and Section
8 Programs in an efficient, effective and economical manner. Specifically,
our objective was to evaluate the allegations regarding the misuse
of Authority funds by the former Executive Director and the misuse
of the Authority's credit cards.
Our review disclosed that the Authority does not administer its
Public Housing and Section 8 Programs in an efficient, effective
and economical manner. Specifically, the Authority lacks the proper
internal controls contributing to the improper use of the Authority's
credit cards; the poor safeguarding of assets; and the failure to
enforce their own travel policies. Further, the Authority has been
unable to adequately recover outstanding tenants' accounts receivables.
Date Issued: August 20, 1999
Audit
Report No.: 99-BO-203-1004
File Size: 146KB
Title: Central Fall Housing Authority Section 8 Program, Central
Falls, RI
We conducted an audit of the Central Falls Housing Authority's
(PHA) Section 8 Program. The purpose of our review was to determine
if the PHA was administering its Section 8 Program efficiently and
effectively. The specific objectives were to determine whether:
* PHA's Family Self-Sufficiency (FSS) program was operating in
an effective and efficient manner and in compliance with applicable
regulations.
* PHA's procedures established to administer the Section 8 Program
were adequate.
The PHA is in compliance with program requirements over its FSS
Program. However, we found that the Chairman of the Board of Commissioners
violated the conflict of interest provisions. The PHA also needs
to improve its administration of the Section 8 Program by strengthening
the procedures used in its Housing Quality Standards (HQS) inspection
process and determinations of contract rent reasonableness.
Date Issued: July 1, 1999
Audit Report No.: 99-BO-202-1003
File Size: 1429KB
Title: HA Low-Income Housing Program Newport, RI
We completed an audit of the Newport Public Housing Authority
(PHA). The PHA was selected for audit based on tenant complaints
of substandard living conditions at the Tonomy Hill property.
Our audit objectives were to evaluate a tenant complaint to determine
if substandard living conditions existed at Tonomy Hill, and to
determine whether the PHA repairs and rents vacant units in a timely
manner.
This report contains two findings: 1) the PHA is not adequately
maintaining the Tonomy Hill property, and 2) the PHA is not repairing
vacant units in a timely manner. This resulted in substandard and
dangerous living conditions for tenants; lack of available housing
for low-income families; and lost rental income of approximately
$705,000.
Date Issued: January 29, 1999
Audit
Report No.: 99-BO-207-1001
File Size: 106KB
Title: Narragansett Indian Wetuomuck Housing Authority Housing
Development Grant Charlestown, RI
We performed an audit of the Narragansett Indian Wetuomuck Housing
Authority's (Authority) administration of its Housing Development
Grant for the production of 50 low rent housing units. The objective
of our audit was to determine the disposition of development funds;
whether the Authority had proper accountability over the HUD development
funds; and whether the Authority operated in accordance with the
terms and conditions of its Annual Contribution Contract, HUD regulations,
and other directives.
This report contains one finding concerning the expenditure of
$3.2 million without producing any habitable low rent housing units
because the Authority lacked the administrative capability to carry
out its development program. HUD needs to decide whether to work
with the Narragansett Indian Wetuomuck Housing Committee, who replaced
the Authority in 1998 as the entity responsible for carrying out
the housing program, to develop a viable plan to complete the uninhabitable
units or whether to terminate the grant.
Date Issued: January 21, 1999
Audit
Related Memorandum No.: 99-BO-219-1802
File Size: 35KB
Title: Review of Service Coordinator Grants Davenport Associates
Ltd. Providence, Rhode Island
We performed a limited review of the Service Coordinator Grants
awarded to Davenport Associates, Ltd. Our objective was to determine
whether funds were properly drawn down by Davenport Associates,
Ltd. (the Owner) under its Service Coordinator Contracts with HUD
and whether the funds were properly expended in accordance with
HUD requirements. This report contains a finding indicating the
need for you to: (1) recover excess funds of $48,161 requisitioned
by Davenport Associates, Ltd.; and (2) assure all Service Coordinator
recipients are aware of HUD financial requirements for the draw-down
of these funds.
Issue Date: April 24, 1998
Audit
Report No.: 98-BO-209-1003
File Size: 95KB
Title: City of Woonsocket HA, Woonsocket, RI
We determined that the PHA needs to improve administration of
the Program and reimburse the Program for $74,455 of ineligible
costs.
Issue Date: October 26, 1995
Audit
Report No.: 96-BO-214-1001
File Size: 21KB
Title: National Investments, Ltd., Johnston, RI
Due to a shortage of available funds, the projects need more than
$3.5 million in substantial repairs. Rents at both projects are
well under the Fair Market Rent for existing housing and market
rents in the locality. The Rhode Island State Office is currently
processing project rent increases and Section 241(a) loans to address
the physical and economic health of these projects. Such approach
will protect HUD's interests, while aiding in the restoration and
maintenance of the physical condition of the projects. Based on
your office's actions, no recommendations are needed at this time.