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Tennessee Audit Reports
Issue Date: May 18, 2006
Audit
Report No.:2006-AT-1009
File Size: 1.19MB
Title: The Metropolitan Development and Housing Agency, Nashville,
Tennessee, Did Not Ensure Section 8-Assisted Units Were Decent,
Safe, and Sanitary
We audited the Metropolitan Development and Housing Agency's (Agency)
inspection of Section 8 units under the Section 8 Housing Choice
Voucher program. Our audit objective was to determine whether Section
8 units met housing quality standards in accordance with HUD requirements.
Our inspection of a statistical sample of 71 Section 8 units found
that 52 units (73 percent) did not meet minimum housing quality
standards. Of the 52 units, 30 were in material noncompliance. This
condition occurred because Agency management did not implement an
effective internal control plan that ensured it complied with HUD
requirements at all times or complied with the Agency's administrative
plan for inspecting units. As a result, tenants lived in units that
were not decent, safe, and sanitary, and the Agency made housing
assistance payments for units that did not meet standards. We estimate
that over the next year, the Agency will pay housing assistance
payments of more than $8.7 million for units in material noncompliance
with housing quality standards if it does not implement adequate
controls.
We recommend that the director of the Office of Public Housing
require the Agency to inspect the 52 units that did not meet minimum
housing quality standards to verify that the owners took appropriate
corrective action to make the units decent, safe, and sanitary.
If appropriate actions were not taken, the Agency should abate the
rents or terminate the housing assistance payment contracts. The
director should also require the Agency to implement internal controls
that ensure units meet housing quality standards and inspections
meet HUD requirements to prevent more than $8.7 million from being
spent on units that are in material noncompliance with standards.
Issue Date: July 7, 2005
Audit
Report No.: 2005-KC-1007
File Size: 107.22KB
Title: Union Planters Bank Did Not Follow HUD Requirments When
Processing Federal Housing Administration Loans
In connection with an audit of a Federal Housing Administration-approved
loan correspondent, we reviewed one loan sponsored by Union Planters
Bank (Union Planters) of Memphis, Tennessee, to determine if Union
Planters properly underwrote the loan according to U.S. Department
of Housing and Urban Development (HUD) regulations. We found that
Union Planters did not adequately support the monthly income used
in an automated underwriting system that approved the loan, placing
the insurance fund at risk for $74,333. In addition, the loan contained
$641 in unallowable fees charged to the borrower. We recommended
that HUD obtain indemnification for the loan and reimbursement of
the unallowable charges to the appropriate parties. Union Planters
agreed with our conclusions and to indemnify HUD for the improperly
originated loan.
Issue Date: July 6, 2005
Audit
Report No.: 2005-AT-1012
File Size: 472.06KB
Title: The Town of Crossville, TN, Housing Authority Improperly
Used Public Housing Funds for Other Activities
The Authority spent $583,800 from its public housing programs for
ineligible activities. In violation of its annual contributions
contract, the Authority used the funds to support its affordable
housing development activities, including several tax credit properties
substantially owned by other entities. As a result, the funds were
not available for operation or modernization of the Authority's
public housing units. This occurred because management mistakenly
believed it was allowed to use the funds for the development activities.
The Authority did not adequately support costs allocated to its
federal programs as required by Office of Management and Budget
Circular A-87. This occurred because the Authority was not aware
of the requirements. Without adequate support, the Authority cannot
assure that its various programs, including HUD programs, paid only
their fair share of costs.
Our recommendations include the Authority's reimbursement of $417,800
and HUD's recapture of $130,000 in capital funds. We made other
recommendations as appropriate
Issue Date: June 9, 2005
Audit
Report No.: 2005-AT-1010
File Size: 2.23MB
Title: The Chattanooga Housing Authority Chattanooga, Tennessee
We completed an audit of the Chattanooga Housing Authority's (Authority)
Section 8 Housing Choice Voucher program. Our audit objectives were
to determine whether the Authority made Section 8 subsidy payments
only for units that were decent, safe, and sanitary and whether
the Authority properly determined tenant program eligibility and
subsidy payment amounts.
Our statistical sample of 60 Section 8 units found that 40 units
did not meet minimum housing quality standards. Of the 40 units,
28 were in material noncompliance with housing quality standards.
Projecting the results of the statistical sample to the population
indicates at least 1,486 of the Authority's 2,778 units did not
meet minimum housing quality standards. Further, 939 units were
in material noncompliance with housing quality standards. We also
found that the Authority did not consistently determine or verify
family incomes, calculate utility allowances, perform timely recertifications,
or correctly calculate Section 8 housing assistance payment amounts.
Our recommendations include requiring the Authority to correct
the deficiencies identified in our unit inspections, inspect all
of its Section 8 housing choice voucher-assisted units within the
next 12 months, develop and implement an internal control plan to
ensure units meet housing quality standards and inspections meet
HUD requirements to prevent an estimated $4,710,024 from being spent
on units that are in material noncompliance with standards, and
repay $9,201 for housing assistance payments it made for ineligible
units. Further, since the Authority failed to correct deficiencies
identified by HUD in September 2002, HUD should reduce the Authority's
administrative fees by 10 percent retroactively to August 2004,
or about $125,000. HUD should continue to monitor the Authority
and withhold 10 percent of the administrative fee until the Authority
has complied with requirements.
Issue Date: May 3, 2004
Audit
Report No.: 2004-AT-1008
File Size: 825.2KB
Title: American Mortgage Services, Inc., Non-supervised Loan Correspondent,
Millington, Tennessee
Our review showed American Mortgage did not always follow prudent
lending practices or always demonstrate responsibility when it originated
FHA-insured loans. For 5 of the 15 cases we reviewed, American Mortgage
did not exercise due diligence or fully consider all factors in
its review of borrowers' liabilities, credit, assets, and income.
While the borrowers may have met minimum requirements to qualify
for loan approval, we question whether American Mortgage originated
the loans with the same care that it would have exercised if the
loans were entirely dependent on the properties as security. This
occurred because American Mortgage's quality control plan did not
meet HUD requirements and its quality control review process was
ineffective. Further, by American Mortgage's own admission, it was
concerned that applicants would file suits if their applications
were denied and subsequently approved by another mortgagee. As a
result, American Mortgage originated loans for borrowers who were,
at best, marginally qualified for FHA?insured loans. American Mortgage's
questionable loan origination practices resulted in its high loan
default rate of 12.88 percent, well above the national average of
2.99 percent for the 2-year period ending December 31, 2002. Further,
HUD paid claims totaling $170,636 for three of the five loans. We
recommend you uphold the American Mortgage's suspension under Credit
Watch until such time as your office performs a quality assurance
review to assess American Mortgage's ability to properly originate
loans in accordance with all HUD requirements.
Issue Date: April 8, 2004
Audit
Report No.: 2004-AT-1004
File Size: 1.48MB
Title: Cookeville Housing Authority
Cookeville, Tennessee
As part of our audit of the HUD's oversight of Public Housing Agency
activities with related nonprofit entities, we performed a narrow
focus review of the Cookeville Housing Authority. We found that
Authority management violated its Annual Contributions Contract
with HUD by inappropriately guaranteeing performance by its related
nonprofit corporation, Holladay Homes, Inc. Also in violation of
its Annual Contributions Contract, the Authority advanced $392,861
to Judge O.K. Holladay Homes, L.P. prior to obtaining approval of
its mixed-finance proposal from HUD Headquarters. Further, the Authority
incurred questionable costs of $367,067, $42,772 for the LP's operating
costs and $324,295 for development costs in excess of HUD approved
expenditures. Additionally, the Authority's Executive Director,
who was also the Executive Director and Secretary/Treasurer of Holladay
Homes, Inc., violated conflict of interest restrictions. These actions
occurred because the Board of Commissioners did not establish sufficient
controls to monitor the nonprofit and ensure transactions adhered
to Federal regulations.
Issue Date: January 16, 2002
Audit
Report No. 2002-AT-1806
File Size 183KB
Title: Citizen's Complaint Chattanooga Neighborhood Enterprise,
Inc. (CNE), Chattanooga, TN
In response to a citizen's complaint, the Office of Inspector
General (OIG) conducted a survey of Chattanooga Neighborhood Enterprise,
Inc. (CNE) in Chattanooga, Tennessee. The allegations centered around
CNE or its affiliates or the City of Chattanooga purchasing properties,
rehabilitating them, and reselling them at much higher prices in
an isolated area of North Chattanooga. The complainant alleged that
CNE and City officials improperly forced homeowners, primarily elderly
homeowners, to sell their properties to CNE or other entities. The
complainant also alleged that an employee of CNE used his position
as a City housing board member to harass a citizen into selling
properties.
Our review focused primarily on CNE's administration of HOME and
Community Development Block Grant (CDBG) Programs as they related
to the complainant's allegations. The evidence and interviews indicated
that the allegations were not valid. In addition, we found that
CNE generally administered its affordable housing programs in compliance
with HUD requirements.
Issue Date: December 17, 2001
Audit
Report No. 2002-AT-1804
File Size: 953KB
Title: Waverly Housing Authority, Waverly, Tennessee
The report presents the results of our Waverly Housing Authority
audit. Our primary objective was to determine the extent of funds
diverted by the former Executive Director and identify any other
potential fraud.
Between May 2000 and December 2000 the former ED diverted $165,630
to himself, his wife, and Authority staff through excessive salary
and bonus payments. The diversions remained undetected over an extended
period due to ineffective Board oversight and a lack of management
controls. We also found poor property conditions; inappropriate,
inefficient, and undocumented expenditures; and missing, incomplete
or falsified records. As a result, the Authority is financially
troubled and tenants are living in housing that is not decent, safe,
and sanitary.
Issue Date: June 28, 1999
Audit
Report No. 99-AT-211-1809
File Size: 57KB
Title: Sec. 8 Service Coordinator Funds, Overlook Senior Housing,
Knoxville, TN
We found no evidence that OSCH used the service coordinator funds
improperly. OSCH, however, did not account for the receipt and disbursement
of the service coordinator funds on the projects' records. Instead,
OSCH accounted for the funds through its accounting system. OSCH
paid the service coordinator's salary and expenses with its funds
and sought reimbursement from the Department of Housing and Urban
Development (HUD) annually. When OSCH received the reimbursement
from HUD it would deposit the funds in its accounts and credit the
coordinator's expenses. By not accounting for the receipt and disbursement
on the projects' records, OSCH understated the projects' income
and expenses. Since the projects' records were not posted, the financial
statements would not reflect the coordinator funds.
Issue Date: October 28 , 1998
Audit
Report No. 99-AT-202-1801
File Size: 65KB
Title: Hotline Complaints Demolition of College Homes Knoxville's
CDC, Knoxville, TN
We have completed a review of hotline complaints pertaining to
a HOPE VI grant and related demolition application HUD approved
for Knoxville's Community Development Corporation's (KCDC) 320-unit
College Homes development in Knoxville, Tennessee. The complainants
alleged that (1) HUD approved the demolition application based on
inaccurate information, (2) College Homes does not meet HUD's criteria
for demolition and HOPE VI funding, (3) KCDC deprived College Homes'
residents of the opportunity to purchase the development, (4) funding
was provided and KCDC began relocating tenants prior to the approval
of the demolition application, (5) HUD acted inappropriately to
bolster KCDC's public relations efforts against the residents, and
(6) KCDC misrepresented College Homes' crime and drug activity.
We reviewed pertinent HUD regulations, examined relevant records
at KCDC and HUD, met with the complainants and other supporters
at College Homes, interviewed HUD and KCDC officials, and toured
the development.
We found no evidence to support the contentions that College Homes
should not have received HOPE VI and demolition funding, or that
the project should not proceed as planned.
Issue Date: July 31 , 1998
Audit
Report No. 98-AT-212-1810
File Size: 54KB
Title: Report of Illegal Acts Greeneville Manor Apts., Greeneville,
TN
The complaint was made verbally to the OIG Office of Investigation
in October 1996, and generally pertained to incidences in 1993 and
1994 when the complainant worked at the project. The Office of Investigation
re-contacted the complainant and reviewed the complaint in early
1998, and in June 1998, referred the matter to our office. The management
agent fired the project manager in March 1998 when they discovered
a tenant who had not gone through the application process. Shortly
thereafter, a new resident manager determined that at least four
residents had been paying the former manager rent in cash even though
the residents had been re-certified as zero rent payers. The four
residents provided the resident manager 12 rent receipts totaling
$999 signed either by the former resident manager or his wife, none
of which had been recorded in project records or deposited into
the project's bank account.
During our review, we asked six additional tenants encountered
at random about improper payments. Two claimed to have paid the
former manager rent even though certified at zero rent. We did not
ask the tenants to provide copies of receipts as they were outside
their apartments, and the management agent's documentation of theft
was sufficient. However, it is likely additional theft occurred
and could be documented.
We did not attempt to document the other allegations because of
their age and, since the two individuals no longer work at the project,
the lack of a compelling reason to do so.
Issue Date: July 28, 1998
Audit
Report No 98-AT-212-1809
File Size: 52KB
Title: Independent Auditor Report of Illegal Acts Marina Manor
East Apartments Nashville, TN
The theft was discovered when a former tenant complained to the
management agent that the manager denied his request for a security
deposit refund. The manager said he had not paid the deposit, but
the tenant had a receipt supporting the payment. Based on the incident,
the management agent requested the IA to perform a special review
of cash receipts. The IA reviewed cash receipts for the 18 months
ended March 31, 1997, and determined $1,967 was unaccounted for
(Attachment 1). Subsequently, the management agent and new property
manager determined additional amounts were missing. The IA's audit
report and audit working papers for the year ended September 30,
1997, reflected a theft loss of $5,453 (Attachment 2). A letter
from the management agent dated December 16, 1997, fixed the total
loss at $5,561, including $299 taken by the assistant manager (Attachment
3). The management agent allowed both employees to resign.
The former property manager was responsible for the majority of
the theft. The assistant manager reportedly took only $299, and
repaid it the same month. The former manager was also repaying funds
taken. The management agent applied $1,452 of unpaid salary to the
debt (Attachment 3), and the former manager made three payments
of $100 each (see Attachment 4 for copies of two), reducing the
amount owed to $3,510 as of the date of our review.
Title 24 CFR 24.700 authorizes HUD officials designated by the
Secretary to order a limited denial of participation (LDP) for any
program participant based on adequate evidence of, among other things,
irregularities in a participant's past performance in a HUD program.
We believe there is need and adequate evidence of irregularities
to issue LDP's against the former employees.
Issue Date: January 13, 1997
Audit
Case Number 97-AT-201-1001
File Size: 156KB
Title: Memphis Housing Authority, Memphis, Tennessee
MHA is not fulfilling its primary mission of providing decent,
safe and sanitary housing for low-income families. MHA's housing
stock and grounds are in poor condition due to age, lack of maintenance
and ineffective use of modernization funds, and have been for many
years. We are recommending that HUD declare MHA in default of its
Annual Contributions Contract (ACC), and initiate steps to obtain
new management of MHA's maintenance and modernization operations.
Issue Date: November 6, 1996
Audit-Related
Memorandum 97-AT-214-1804
File Size: 15KB
Title: Cherokee Health Systems, Talbott, TN
CHS corrective actions were generally adequate, as was IA audit
coverage, and we plan no additional audit work pertaining to either
CHS or the IA.
Issue Date: October 15, 1996
Audit-Related
Memorandum No. 97-AT-212-1803
File Size: 18KB
Title: Wesley Homes of Lake County, Inc., Tiptonville, TN
WHLCI's corrective actions were generally adequate, as was IA
audit coverage, and we plan no additional audit work pertaining
to either WHLCI or the IA.
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