South Carolina Audit Reports
Date: May 2, 2007
Title: The Charleston Housing Authority Needs to Improve Controls Over Credit Card Use, Travel, and Petty Cash
We reviewed the Housing Authority of the City of Charleston's (Authority) controls for credit card use, travel, petty cash, and procurement based on an anonymous hotline complaint. The objective of the review was to determine whether the Authority incurred necessary, reasonable, and allowable costs for credit card purchases, travel, and petty cash and whether it complied with procurement requirements.
The Authority's controls over credit card use, review of certain travel costs, settlement of travel advances, and petty cash were inadequate. The credit card charges inappropriately included at least $16,526 for its chief executive officer's service in a national housing organization and personal charges. The charges for the housing organization included $1,732 that was not reimbursed and $4,137 that was reimbursed but incorrectly credited to the Authority's non-U.S. Department of Housing and Urban Development (HUD)-assisted operations rather than the HUD-assisted program that paid the costs. The audit also showed inadequate review of travel incurred by certain managers, $1,500 in unsettled travel advances, and $554 in questioned petty cash disbursements. These conditions occurred because the Authority and its board of commissioners did not establish and/or follow requirements to ensure proper stewardship over Authority funds.
We recommend that the director, Office of Public Housing, require the Authority's board of commissioners to develop and implement controls and/or enforce existing controls to restrict credit card use to charges related to official Authority business; ensure proper review and approval of travel claims submitted by senior managers; ensure proper and timely reconciliation of travel advances; and ensure that petty cash disbursements are reasonable, necessary, and properly supported. We also recommend that the director require the Authority to reimburse the housing organization costs and review all trips associated with the housing organization charged to Authority accounts. The Authority should be required to reimburse its HUD-assisted programs for costs identified for the housing organization that were not reimbursed or that were reimbursed but were not credited to the HUD-assisted program charged for the expense.
Date: July 12, 2006
Title: The Housing Authority of the City of North Charleston, South Carolina, Inappropriately Pledged Assets to Secure a Loan and Caused Delays in Its Oakleaf Homeownership Program
We audited the Housing Authority of the City of North Charleston's (Authority) implementation of a U.S. Department of Housing and Urban Development (HUD) Section 5(h) homeownership program. Our audit objectives were to determine whether the Authority administered its capital funding for Oakleaf in accordance with HUD's program requirements for financial management and reasonableness and necessity of expenditures and whether the Oakleaf project was adequately progressing toward accomplishing its homeownership objective. We conducted the audit in response to a request from HUD's Columbia, South Carolina, Public Housing Program Center (HUD).
The Authority inappropriately pledged public housing program funds covered by its annual contributions contract with HUD to secure a $400,000 commercial bank loan for real estate improvements at Oakleaf. In addition, the Authority's noncompliance with program requirements and untimely planning caused delays in its Oakleaf homeownership program. The delays hampered the Authority's ability to provide homeownership opportunities to low-income individuals and families in a timely manner.
We recommend that the director of the Office of Public Housing Program Center ensure that the Authority obtains prior approval from HUD before entering into any future contract or agreement that obligates annual contributions contract funds to secure debt. We also recommend that the director require the Authority to provide a reasonable plan for completing the project and selling the units, and properly assess and document homebuyers' progress and related time extensions.
Issue Date: November 15, 2004
Title: The Housing Authority of the City of Charleston Charleston, South Carolina
As part of our audit of HUD's oversight of public housing agency development activities with related parties entities, the OIG reviewed the Housing Authority of the City of Charleston, SC. We found the Authority did not support its allocations of $8,956,361 and costs of $6,681,053 in salaries, wages, and fringe benefits that were charged to the Federal programs, as required. The Authority officials believed their allocation method complied with the requirements. However, without support to substantiate the allocations and costs of actual services performed by personnel or some type of quantifiable measures of employee effort, the Authority may not have accurately charged the Federal programs. In addition, the Authority transferred $400,000 of its Section 8 administrative fee reserves to its Housing Finance Agency fund but never expended or returned the funds to the reserve account, contrary to its Contract. When the Authority transferred the funds to its Agency account, HUD lost visibility of the funds. Therefore, HUD could not monitor the funds to ensure they were properly spent for other housing purposes, as stated in the Contract.
We recommend requiring the Authority to provide documentation to justify the $8,956,361of allocated costs and the $6,681,053 of costs without supporting certifications and ensure the Authority makes appropriate adjustments to the various programs. Also requiring the Authority to develop a reasonable method for allocating its future costs to include daily activity reports and semi-annual certifications for services performed by its personnel. Further, requiring the Authority to transfer the $400,000 of Section 8 administrative fee reserve funds back to the reserve account, along with the interest earned on the funds.
Issue Date: October 11, 2002
Title: South Carolina Regional Housing Authority No. 3 Barnwell, South Carolina
The Authority's Executive Director (ED) and Director of Management (DM) took advantage of their positions, and inadequate oversight by the Housing Authority Board and a related non-profit Foundation Board, to financially benefit themselves, their families, and friends at the expense of both entities. The ED and DM violated the Annual Contribution Contract with HUD by executing an illegal agreement between the Authority and the Foundation that provided financial and administrative support to the Foundation, including the use of Authority funds to finance the Foundation's operation. The Foundation owed the Authority $210,524 for operating costs as of January 31, 2002. Furthermore, the ED and DM collected over $958,738 in development and other fees on Foundation property purchases. As a result, the financial positions of the Authority and Foundation were materially weakened. We also identified inadequately documented costs, procurement deficiencies and an unrecognized liability. Authority salary payments totaling $161,000, consulting fees totaling $65,357, and credit card purchases totaling $71,049 were not adequately supported. The Authority executed contracts totaling $341,835 and purchased a luxury automobile for approximately $38,000 without obtaining required bids or price quotes. Lastly, the Foundation owed the State of South Carolina $185,459 in excess funds that it received from the State's Housing Trust Funds grant program but did not spend as agreed.
Issue Date: September 30, 2002
Title: Ridgeview Manor Apartments, Hopkins, South Carolina
This report presents the results of our audit of Ridgeview Manor, FHA project number 054-43072. Our objectives were to determine if funds provided under a Section 232 HUD insured mortgage were properly expended for authorized activities, and if cost certification statements for the mortgage were valid.
Ridgeview Manor's project cost certification overstated project costs by $223,138 due to the inclusion of non-existent, ineligible and unsupported costs. Additionally, Ridgeview owners disbursed $212,714 of construction funds and $61,815 of operating funds for ineligible uses. An additional $30,414 of construction expenditures and $20,419 of operating expenditures were unsupported. Improper draws of construction (mortgage) funds totaling $209,119 and unauthorized loans facilitated the ineligible expenditures. The improper draws were also based on non-existent, and ineligible costs, and on accounts payables that Ridgeview did not pay in full.
Ridgeview's internal controls were not adequate to ensure proper accounting, timely submission of financial reports to HUD, and to safeguard assets against theft, loss, and misuse. Lastly, A&R Enterprises, a former management company, improperly retained $19,571 of rental income belonging to Ridgeview Manor and inflated prices for goods it provided to Ridgeview by $12,580.
Issue Date: June 5, 2002
Title: Magnolia Lane Apartments, Project Management Operations, Conway, South Carolina
We conducted the audit of Magnolia Lane Apartments in response to a request by HUD�s Columbia State Office to determine if the owner used project-operating funds in compliance with the requirements related to the distributions of earnings. The owner caused a mortgage default by misusing project funds. The owner disbursed $185,129 in project operating and trust funds for ineligible distributions ($166,364), unreasonable and unnecessary costs ($15,558), and unsupported costs ($3,207.) The distributions included $148,625 paid after the mortgage default, constituting an equity skimming violation. The owner improperly encumbered a project escrow account for $100,000 to secure unspecified notes, and spent $43,225 in tenant security deposits and prepaid rent. Throughout the period of default, the owner ignored HUD�s repeated requests for monthly accounting reports and did not remit net project cash (funds remaining after payment operating expenses) to HUD�s lock box as HUD requested. We recommended that HUD obtain mortgagee-in-possession (MIP) of the project, debar the mortgagor principals and recover the questioned costs. HUD obtained MIP on April 25, 2002.
Issue Date: June 15, 1999
Title: Citizen Complaints - HA of the City of Charleston - Charleston, SC
In response to a citizen's complaints, we reviewed activities of the Housing Authority of the City of Charleston (Authority) as they relate to the Authority's selection and acquisition of four sites for new scattered site public housing projects. The purpose of our review was to determine whether the Authority complied with applicable laws, regulations and the Department of Housing and Urban Development (HUD) requirements. We determined that the four sites met HUD site selection requirements. However, we determined that the Authority did not follow HUD land acquisition requirements. The Authority used $288,000 of HUD funds to purchase and begin development of three properties without the required HUD authorization.
Issue Date: April 30, 1996
Title: City of North Charleston, North Charleston, SC
We found that:
- The City's senior construction advisor had controlled contractor selection for HOME homeowner-occupied rehab projects, resulting in apparent favoritism and restricted competition.
- Some construction work was not properly inspected, and as a result the rehab was not satisfactory for 7 of 10 inspected homes.
- Better eligibility criterion were needed for HOME loans, resulting in six HOME loans wasting taxpayer-provided funds and creating windfalls to one former owner.
Issue Date: March 28, 1996
Title: Limited Review of Bentley Court, Columbia, SC
We found that:
- The GP made unauthorized distributions of $305,551,
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