Texas Audit Reports
Issue Date: July 6, 2007
Audit Report No.:
2007-FW-1012
File Size: 945.20KB
Title: Fallbrook Apartments', Houston, Texas, Owner and/or Management
Agent Made Unauthorized Distributions of the Project's Funds
We audited Fallbrook Apartments' owner and previous management
agent to determine whether they complied with the project's regulatory
agreement and U.S. Department of Housing and Urban Development (HUD)
regulations. Specifically, we wanted to determine whether the owner
and/or previous management agent (1) improperly advanced and distributed
the project's funds when the project was in a non-surplus-cash position,
(2) supported disbursements with invoices or other supporting documentation,
(3) submitted the 2005 and 2006 annual audited financial statements
as required, and (4) fully funded tenant security deposits. We selected
Fallbrook Apartments for review in accordance with our strategic
plan and regional goals. In addition, the 2004 audited financial
statements of the project indicated potential unauthorized distributions.
The owner and/or previous management agent made unauthorized distributions
of the project's funds, totaling $367,205, when the project was
in a non-surplus-cash position and could not adequately support
six disbursements totaling $31,625. However, the previous management
agent did not fully pay itself $67,943 in management fees, and the
owner repaid a total of $150,000 to the project's operating bank
account while we were conducting the audit, which reduced the amount
of funds owed to the project. Also, the owner did not submit the
2005 and 2006 annual audited financial statements as required. The
owner fully funded the tenant security deposit account in March
2006 when the current management agent took over.
We recommend the director of HUD's Multifamily Housing Program
Center require the owner to (1) repay the project $149,262 for unauthorized
distributions and put the $149,262 and the $150,000 in repaid funds
in a restricted escrow account to ensure the owner uses these funds
only for eligible project expenses, (2) provide support for $31,625
in unsupported costs or repay the project, and (3) submit the 2005
and 2006 annual audited financial statements. The acting associate
general counsel for enforcement of HUD's Office of Counsel should
pursue double damages remedies against the responsible parties.
Further, the acting director of HUD's Departmental Enforcement Center
should take administrative sanctions and pursue civil money penalties
against the owner for repeatedly violating the project's regulatory
agreement.
Issue Date: June 8, 2007
Audit Report
No.: 2007-FW-1010
File Size: 2.39MB
Title: Alethes Mortgage, LLC, and Its Dallas, Texas, Branch, Waters
Edge Mortgage, LLC, Did Not Comply with All HUD Underwriting Requirements
We reviewed the operations at an Alethes Mortgage, LLC (Alethes);
branch located at 12160 North Abrams, Dallas, Texas. The branch
operated under the name Waters Edge Mortgage, LLC (Waters Edge).
We selected Alethes' Waters Edge branch for review due to its high
default rate.
Alethes did not comply with all HUD requirements. Specifically,
it did not notify HUD about one loan that contained an irregularity,
conducted incomplete quality control reviews, and closed loans with
underwriting deficiencies. By not alerting HUD to potential fraud
or serious violations, Alethes increased the FHA insurance fund's
risk.
We recommended that HUD's assistant secretary for housing-federal
housing commissioner and chairman of the Mortgagee Review Board
require Alethes to indemnify one loan and ensure that it complies
with HUD's underwriting requirements.
Issue Date: May 10, 2007
Audit Report
No.: 2007-FW-1009
File Size: 460.96KB
Title: Countrywide Home Loans, Inc., Houston, Texas, Generally
Complied with HUD Requirements in Originating FHA-Insured Single-Family
Mortgages
We reviewed branch number 358 of Countrywide Home Loans, Inc. (branch),
a direct endorsement lender. The objective of the review was to
determine whether the branch complied with U. S. Department of Housing
and Urban Development (HUD) regulations, procedures, and instructions
in the origination of Federal Housing Administration (FHA)-insured
single-family mortgages.
The branch generally complied with HUD regulations, procedures,
and instructions in the origination of FHA-insured single-family
mortgages. Nine of the ten loan files reviewed contained minor deficiencies;
however, one of the files contained significant deficiencies, which
placed the FHA insurance fund at unnecessary risk.
We recommend the assistant secretary for single family housing
require the branch to indemnify HUD for one loan with an original
mortgage amount of $112,237 that contained significant deficiencies.
We also recommend the assistant secretary require the branch to
improve its policies, procedures, and controls to ensure that FHA-insured
loans are originated, processed, and underwritten according to HUD
requirements.
Issue Date: April 19, 2007
Audit Report
No.: 2007-FW-1008
File Size: 1.81MB
Title: The San Antonio Housing Authority, San Antonio, Texas,
Overhoused Tenants and Paid Excessive Housing Assistance Payments
in its Section 8 Housing Choice Voucher Program
As part of the Office of Inspector General's (OIG's) annual audit
plan, we audited the San Antonio Housing Authority's (Authority)
Section 8 Housing Choice Voucher program to determine whether the
Authority overhoused residents and whether it computed rent correctly
for tenants identified as potentially overhoused.
In most cases, the Authority applied the correct voucher size.
However, our review of 213 (out of 428) files identified 32 tenants
who lived in units larger than the Authority's policies allowed,
causing the Authority to pay excessive Housing Assistance Payments
totaling $46,304. This problem occurred because the Authority had
inadequate internal controls. Further, it may have overhoused 215
other tenants whose files we did not review. Additionally, some
of the overpayments cause HUD to overfund the Authority's 2005 and
2006 Section 8 budgets by a total of $10,848 and may cause HUD to
overfund the 2007 budget.
The Authority also applied the incorrect payment standard in 108
of the 213 cases reviewed because it misinterpreted HUD's requirements.
As a result, the Authority and/or the tenants overpaid their share
of the rent by $29,019. Further, the Authority may have misapplied
its payment standards throughout its Section 8 program.
We recommend that you require the Authority to repay HUD and tenants
for excessive or incorrect assistance payments and for the related
budget overfunding. We further recommend that you require the Authority
to implement policies and procedures that will ensure compliance
with its subsidy standards and help prevent future overhousing,
and recalculate assistance for the audit period on all annual recertifications
performed over the next 12 months. Finally, we recommend you reduce
the Authority's 2007 budget for overfunding, and impose sanctions
against the Authority for its failure to comply with program requirements
regarding payment standards.
Issue Date: February 22, 2007
Audit Report No.: 2007-FW-1005
File Size: 733KB
Title: The Housing Authority of Bexar County, Texas, Overhoused
Tenants and Paid Excessive Housing Assistance Payments in the Section
8 Housing Choice Voucher Program
As part of the Office of Inspector General's annual audit plan,
we audited the Housing Authority of Bexar County's (Authority's)
Section 8 Housing Choice Voucher Program (Program). The audit objective
was to determine if the Authority accurately calculated assistance
payments and applied subsidy standards in accordance with its administrative
plan as required by the U.S. Department of Housing and Urban Development
(HUD) regulations.
The Authority accurately calculated assistance and correctly applied
its subsidy standards in 151 of 224 (67 percent) vouchers we reviewed.
However, the Authority paid excessive assistance of $107,658 on
61 vouchers because they did not implement adequate file review
procedures to ensure compliance with subsidy standards. For the
remaining 12 vouchers, the Authority incorrectly applied its subsidy
standards but did not pay excessive assistance because the contract
rent was below the payment standard applied. We estimate the Authority
could avoid additional overpayments of up to $132,778 during the
next 3.7 years by implementing file review procedures to ensure
compliance with subsidy standards. In addition, due to excessive
assistance payments during three months in 2004 that were used as
the baseline for calculating the 2006 budget and maximum funding,
HUD over-funded the Authority's fiscal year 2006 Program budget
by $34,050.
We recommend you require the Authority to correct voucher sizes
and/or payment standards on the 61 vouchers with excessive assistance
and repay HUD for the excessive assistance of $107,658 paid through
June 30, 2006. We also recommend you require the Authority to implement
procedures to ensure it correctly assigns voucher sizes and calculates
assistance using the correct payment standards on future vouchers.
Finally, we recommend you reduce the Authority's 2006 budget by
$34,050 due to the excessive payments during the months in 2004
used as the baseline in the formula for calculating its budget and
funding.
Issue Date: November 28, 2006
Audit Report
No.: 2007-FW-1003
File Size: 284.46KB
Title: The Lubbock Housing Authority's, Lubbock, Texas, Lack of
Management Controls Resulted in Overhoused Tenants and Miscalculated
Assistance Payments
We completed a limited review of the Lubbock Housing Authority's
(Authority's) Section 8 housing assistance payments as part of our
strategic plan. Our objective was to determine whether the Authority
operated its Section 8 Housing Choice Voucher program in accordance
with its annual contributions contract (contract) and the U.S. Department
of Housing and Urban Development's (HUD) requirements. We wanted
to determine whether the Authority correctly calculated housing
assistance payments and properly applied subsidy standards by ensuring
tenants were not housed in units larger than its standards allowed.
The Authority did not comply with its contract and HUD's requirements.
It overhoused tenants and miscalculated Section 8 housing assistance
payments. Our review of the files of 20 potentially overhoused tenants
showed that the Authority overhoused 13 tenants and made various
calculation errors for 16 tenants, 13 of which resulted in erroneous
payments. Due to the errors, the Authority overpaid $15,096 in assistance
and overcharged tenants $2,479. The Authority overhoused tenants
and miscalculated assistance because its Section 8 program lacked
effective policies and controls, including inadequate written policies
and procedures, no quality control system to ensure compliance with
HUD's requirements and the Section 8 Management Assessment Program
(SEMAP), and adverse staffing issues.
We recommend that HUD require the Authority to ensure the errors
in the tenant files are corrected and reimburse HUD $15,096 and
the tenants $2,479 for the identified errors that affected the assistance
payments. Further, we recommend HUD require the Authority's management
to implement procedures and controls over its administration of
the Section 8 housing program to ensure it is in accordance with
its contract and HUD's requirements.
Issue Date: November 28, 2006
Audit Report
No.: 2007-FW-1002
File Size: 590.43KB
Title: The Lubbock Housing Authority, Lubbock, Texas, Inappropriately
Advanced Federal Funds to Support Its Nonprofit Entities
We audited the Lubbock Housing Authority's (Authority) financial
relationship with its nonprofits because we found problem indicators
when reviewing the Authority's overall operations. Our audit objective
was to determine whether the Authority was operating its nonprofits
in accordance with U.S. Department of Housing and Urban Development
(HUD) requirements and if not, to determine the extent, cause, and
impact of any violations.
The Authority made $672,395 in inappropriate advances from its
low-rent fund to its two nonprofits because management did not follow
HUD's requirements and written instructions. One nonprofit has no
assets to repay the $367,907 advanced to it. The second nonprofit
still owes $304,488 to the Authority's low-rent program fund and
reportedly lacks the resources to repay the amount.
We recommend that HUD require the Authority to either repay the
$367,907 that it advanced to the first nonprofit or seek forgiveness
for it. We further recommend that HUD require the Authority to repay
its low-rent fund for the $304,488 balance due from the second nonprofit.
Finally, we recommend that HUD take applicable administrative actions
against the appropriate parties.
Issue Date: November 6, 2006
Audit Report
No.: 2007-KC-1003
File Size:3.37MB
Title: PlainsCapital McAfee Mortgage, Lubbock, Texas, Did Not
Follow HUD Underwriting Requirements and Originated Loans from Unregistered
Branch Offices
HUD-OIG audited PlainsCapital McAfee Mortgage (McAfee Mortgage)
because its two-year default rate for loans with amortization dates
between December 2003 and November 2005 exceeded HUD's national
average by 44 percent. In addition, the percentage of current defaults
and claims was 88 percent higher than HUD's national average.
McAfee Mortgage did not follow HUD regulations when underwriting
11 of the 35 loans reviewed. As a result, HUD insured 11 loans with
original mortgage amounts of more than $1 million, placing the Federal
Housing Administration insurance fund at unnecessary risk.
McAfee Mortgage submitted 821 loans from unregistered branch offices,
circumventing HUD's oversight controls and placing the Federal Housing
Administration insurance fund at unnecessary risk for nearly $75
million in loans.
We recommended that the assistant secretary for housing - federal
housing commissioner require McAfee Mortgage to indemnify HUD for
the 11 improperly underwritten loans and seek civil money penalties
for all loans originated from unregistered branches from December
1, 2004, to the present.
Issue
Date: October 16, 2006
Audit Report
No.: 2007-FW-1001
File Size: 504.62
Title:
Lubbock Housing Authority's, Lubbock, Texas, Lack of Management
Controls Resulted in Section 8 Units Not Meeting Housing Quality
Standards
We audited
the Lubbock Housing Authority's (Authority) Section 8 Housing Choice
Voucher program as part of our strategic plan. Our objective was
to determine whether the Authority's Section 8 units met housing
quality standards and if not, determine the extent, cause, and impact
of the housing quality standards unit failures on the Authority's
Section 8 Housing Choice Voucher program.
Of the
61 units we inspected, 47 (77 percent) failed inspections, and 30
(49 percent) were materially noncompliant with housing quality standards.
The failures occurred because the Authority's Section 8 program
lacked effective management and controls over the inspection process;
specifically, the program had inadequate written policies and procedures,
poor inspections, no quality control system, and negative staffing
issues. As a result, the Authority housed families in units that
did not meet the U.S. Department of Housing and Urban Development's
(HUD) standards of decent, safe, and sanitary housing. If the Authority
does not implement effective management and controls, we estimate
it will spend more than $1.2 million in the next 12 months on the
estimated 266 units expected to be materially noncompliant with
HUD's housing quality standards.
We
recommend that HUD require the Authority to ensure that all 47 units
that failed the Office of Inspector General's (OIG) inspections
meet housing quality standards. Further, we recommend that HUD require
the Authority's management to implement procedures and controls
over its Section 8 inspection process to ensure that all of its
units meet housing quality standards.
Issue Date: September 1, 2006
Audit Report No.:
2006-FW-1015
File Size: 534.97KB
Title: The Housing Authority of the City of Austin, Texas, Overhoused
Tenants and Paid excessive Housing Assistance Payments in the Section
8 Housing Choice Voucher Program
As part
of the U. S. Department of Housing and Urban Development (HUD),
Office of Inspector General's (OIG) annual audit plan, we audited
the Housing Authority of the City of Austin's (Authority) Section
8 Housing Choice Voucher program to determine whether the Authority
overhoused tenants and computed housing assistance payments correctly.
We selected the Authority based on a computer analysis of data from
HUD's Public and Indian Housing Information Center, which identified
662 tenants whose voucher size appeared to exceed the needs of the
members of the households. We limited our review to the 662 vouchers.
In
482 of the 662 vouchers reviewed, the Authority applied the correct
voucher size and correctly computed housing assistance payments.
However, it overhoused 180 tenants because it did not have effective
controls in place to ensure that staff assigned the correct voucher
size. Staff used their own discretion and sometimes misapplied the
policies for approving larger bedroom sizes because of the age/gender
or live-in aides. Authority supervisors did not adequately review
the assignment of voucher sizes to detect these staff errors. From
April 1, 2003, through January 31, 2006, the Authority paid $588,130
in excess housing assistance payments. We estimate the Authority
could avoid future losses of up to $768,000 by improving its controls
over voucher size assignments. In addition, HUD overfunded the Authority's
fiscal year 2006 Section 8 Housing Choice Voucher program budget
by $189,245 because it used costs incurred during three months in
2004 that contained overpayments of $48,603 in the formula for calculating
the budget and maximum funding.
We recommend
the Director of Public Housing require the Authority to correct
the voucher size for overhoused tenants and repay HUD for the housing
assistance overpayments of $588,130 that occurred from April 1,
2003, through January 31, 2006. In addition, we recommend that the
Director require the Authority to repay any overpayments for the
tenants that the Authority incurred after January 31, 2006. We also
recommend the Director to ensure that the Authority improves and
corrects its procedures to assign the correct subsidy size for all
tenants to avoid future losses of up to $768,000. Further, we recommend
that you take the necessary action to reduce the Authority's fiscal
year 2006 Section 8 budget by $189,245 due to the use of 2004 overpayments
in the formula for calculating the budget and funding.
Issue
Date: August 16, 2006
Audit Report No.:
2006-FW-1014
File Size: 139.39KB
Title:
The City of Fort Worth, Texas, Has Made Significant Improvements
in Procedures for Drawing Down Community Development Block Grant
Funds
Based
on a request from the Fort Worth U.S. Department of Housing and
Urban Development (HUD) Office of Community Planning and Development,
we performed a survey of the City of Fort Worth's (City) Community
Development Block Grant (Block Grant) program. In 2003, HUD performed
a financial monitoring review of the City's Block Grant program
and found material weaknesses in the City's administration of this
program.
Based
on HUD's request and monitoring review findings, we focused our
review on funding drawdowns made by the City from January 1 through
December 31, 2005. Our objective was to determine whether the City
was including only eligible and supported costs in its drawdowns.
We also wanted to determine whether the City had implemented sufficient
internal controls over the draw process.
The
City has made significant improvement in drawing down grant funds
since HUD's monitoring report of 2003, and has reorganized and implemented
new procedures to address its lack of controls over its draw process.
The City is now substantially following HUD requirements in drawing
down funds for its Block Grant program.
Because
the City is substantially complying with HUD requirements, we did
not recommend corrective action.
Issue
Date July 26, 2006
Audit Report No.:
2006-FW-1013
File Size: 304.23KB
Title:
The Housing Authority of the City of Denton, Texas, Made Subsidy
Calculation Errors and Overhoused Tenants
We audited
the Section 8 program administered by the Housing Authority of the
City of Denton (Authority) to determine whether the Authority followed
U.S. Department of Housing and Urban Development (HUD) regulations
when calculating subsidy amounts and the extent to which the Authority
overhoused tenants and made ineligible subsidy overpayments. The
Authority did not follow HUD regulations when calculating subsidy
amounts because it applied its decreased payment standards without
granting the required grace period. Further, the Authority did not
grant disability allowances for six eligible tenants in determining
adjusted income. As a result, the Authority underpaid an estimated
$126,180 in subsidy for 447 tenants. The Authority did not overhouse
the majority of its tenants. However, 29 tenants were overhoused
because the Authority assigned a voucher size that exceeded its
subsidy size standards with either no explanation or questionable
justification. The Authority paid $50,917 in ineligible or unsupported
subsidy payments for these tenants.
We recommend
HUD require the Authority to (1) repay tenants for subsidy underpayments
caused by decreasing payment standards too early and not granting
disability allowances, (2) repay its Section 8 account for overpayments
from overhousing tenants, (3) strengthen its quality control process,
and (4) develop and implement controls to ensure the procedural
errors identified during the audit are corrected and avoided in
the future.
Issue Date: June 23, 2006
Audit Report No.:
2006-AO-1001
File Size: 715.28KB
Title: Southwest Alliance of Asset Managers, LLC, Addison, Texas;
Did Not Effectively Enforce The Lease Terms Over Payment of Property
Utilities
The U.S. Department of Housing and Urban Development's Office of
Inspector General audited Southwest Alliance of Asset Managers,
LLC (Southwest Alliance), a management and marketing contractor
for the United States Department of Housing and Urban Development's
(HUD) real estate-owned properties held off market for disaster
victims.
The audit was initiated in conjunction with the President's Council
on Integrity and Efficiency, as part of its examination of relief
efforts provided by the Federal government in the aftermath of hurricanes
Katrina and Rita. Our objective was to determine whether Southwest
Alliance complied with HUD's regulations, procedures, and instructions
in the management of HUD's real estate-owned properties held off
market for disaster victims. Southwest Alliance generally complied
with the terms of its Management and Marketing contract, with one
exception. It did not effectively ensure that the disaster victims
transferred the billing of property utility services into their
names within seven days of occupancy, as required by the lease agreements.
As a result, after occupancy by tenants, HUD paid $79,306 in utility
costs for 636 leased properties during the period, from September
2, 2005 through April 25, 2006.
We recommend that the Director of HUD's Denver Office of Single
Family Homeownership Center instruct Southwest Alliance of Asset
Managers, LLC to take appropriate action against the tenants who
do not comply with the lease requirements over utility payments,
and require Southwest Alliance to initiate collection actions against
tenants to recover the $79,306 HUD paid for utility costs.
Issue Date: June 16, 2006
Audit Report No.:
2006-FW-1011
File Size: 5.26MB
Title: Premier Mortgage Funding, Inc., Austin, Texas, and Its
Sponsor, JPMorgan Chase, Did Not Comply With HUD Underwriting Requirements
and Did Not Meet All Quality Control Requirements
We selected Premier Mortgage Funding, Inc. (Premier), a nonsupervised
loan correspondent, for audit because it's default rate was 378
percent of the average of all lenders in the San Antonio, Texas,
U.S. Department of Housing and Urban Development (HUD) jurisdiction.
We focused on Premier's Austin branch because it originated 36 of
41 loans that defaulted within the first year of origination. Our
audit objectives were to determine whether Premier and its sponsors
acted in a prudent manner and complied with HUD requirements in
the origination of the Federal Housing Administration-insured single-family
mortgages selected for review and whether their quality control
plans, as implemented, met HUD requirements.
Premier and its sponsor, JPMorgan Chase Bank NA (JPMorgan Chase),
did not meet HUD underwriting or quality control requirements. As
a result, HUD insured 11 loans totaling $1,169,226 that the sponsor
approved with inaccurate credit information. This occurred mainly
because Premier and its sponsor did not ensure the accuracy of the
borrower's credit information. Further, Premier and its sponsors
charged borrowers $163 in ineligible closing costs and approved
31 loans with appraisals that did not meet HUD requirements. These
deficiencies increased the Federal Housing Administration insurance
fund's risk of loss. As of April 28, 2006, HUD has lost $394,110
on these loans, according to HUD's Neighborhood Watch system.
We recommend that the assistant secretary for housing - federal
housing commissioner and chairman of the Mortgagee Review Board
require JPMorgan Chase to reimburse HUD $394,110 for losses incurred
on six loans, indemnify HUD for six loans totaling $647,061, and
buy down loans or repay HUD for other deficiencies. We further recommend
that the assistant secretary require Premier and JPMorgan Chase
to take action to correct quality control deficiencies and require
JPMorgan Chase to ensure that appraisals meet HUD requirements.
Finally, we recommend that the assistant secretary take appropriate
administrative sanctions against Premier and JPMorgan Chase for
entering incorrect data into the automated underwriting system and
certifying its integrity.
Issue Date: May 11, 2006
Audit Report No.:
2006-FW-1010
File Size: 423.35KB
Title: Deer Creek Apartments', Houston, Texas, Previous Management
Agent Paid Itself Unsupported Fees
We conducted a review of Deer Creek Apartments (project), a Section
221(d)(4)-insured multifamily housing project, to determine whether
the project's owner complied with the regulatory agreement and U.S.
Department of Housing and Urban Development (HUD) regulations. The
project's owner generally complied with the regulatory agreement
and HUD regulations; however, the previous management agent paid
itself $24,312 for unsupported expenses due to weak procurement
procedures. We recommend that the director of HUD's Multifamily
Housing Program Center require the owner or its prior management
agent to either provide documentation to show the charges were for
actual work performed and that the fees charged were reasonable
and necessary or repay the expenses to Deer Creek Apartments. We
further recommend that HUD determine whether the prior management
agent charged other HUD-insured projects for these unsupported fees
and if so, require that the same documentation be provided or the
fees be repaid for these projects as well.
Issue Date: May 9, 2006
Audit Report No.:
2006-FW-1009
File Size: 582.10KB
Title: Dallas County Housing Agency, Dallas, Texas, Overhoused
Tenants
We audited the Dallas County Housing Agency's (Agency) Section
8 program to determine whether it overhoused tenants, computed housing
assistance payments correctly, and complied with housing quality
standards. We concluded that the Agency operated its Section 8 program
in compliance with HUD requirements. It computed housing assistance
payments correctly and had effective controls in place to ensure
that it met housing quality standards. However, it overhoused 34
tenants by granting unjustified subsidy size exceptions and unnecessarily
paid $63,311 in housing assistance payments for 23 of these tenants.
The Agency could avoid future losses of up to $298,013 by improving
its controls over voucher assignments.
We recommended that HUD require the Agency to (1) repay ineligible
housing assistance overpayments of $63,311 and (2) improve its procedures
to ensure it assigns the correct subsidy size for all tenants.
Issue Date: May 8, 2006
Audit Report No.:
2006-FW-1008
File Size: 237.36KB
Title: Brazos Valley Council of Governments, Bryan, Texas, Issued
Vouchers Larger Than Its Policy Allowed
We reviewed Brazos Valley Council of Governments' (Council's) Section
8 Housing Choice Voucher program to determine whether the Council
properly applied the subsidy size standards in its administrative
plan. We selected the Council for review based on a risk assessment
and because reducing erroneous payments in rental programs is part
of our strategic audit plan.
Of the 20 tenant files reviewed, the Council assigned a larger
voucher size than its subsidy size standards required to 11 tenants.
However, it improperly paid $552 in assistance for only two of the
overhoused tenants. The Council's assignment of an improper voucher
size for another nine tenants did not result in a material financial
impact.
We recommend that HUD's Program Center Coordinator, Office of Public
Housing, require the Council to (1) repay the ineligible housing
assistance overpayment of $552, (2) develop and implement procedures
to ensure it assigns the correct subsidy size for all tenants, and
(3) correct the voucher size of the nine tenants identified and
other incorrectly assigned vouchers to avoid future overpayments
and ensure the tenants are housed in accordance with the Council's
subsidy size standards.
Issue Date: March 31, 2006
Audit Report No.:
2006-FW-1007
File Size: 12.08MB
Title: BSM Financial LP Originated Loans on Overvalued Properties
to Less Than Creditworthy Borrowers, Putting Borrowers and HUD at
Risk
We audited BSM Financial LP (lender) because of an unusually high
ratio of defaults compared to the average default rate of lenders
in the U.S. Department of Housing and Urban Development's (HUD)
San Antonio, Texas, office jurisdiction. Forty-seven percent of
the defaults involved one lender related seller, who owned 50 percent
of the lender. We reviewed all of the defaulted loans (51 of 109)
that involved this seller in the San Antonio area that closed between
February 1, 2003, and January 31, 2005, and in the Austin, Texas,
area that closed between January 2, 2002, and June 30, 2004. Our
objective was to determine whether BSM followed HUD loan origination
requirements for the 51 loans selected for review.
The lender approved mortgages on overvalued properties for borrowers
that were less than creditworthy. This occurred because the lender
allowed an identity-of-interest seller to add ineligible and unsupported
costs to the home construction costs, and inadequately reviewed
the appraisals. Also, the lender did not adequately document analyses
of borrowers' credit. Further, the lender's processing had technical
deficiencies such as not ensuring the borrowers signed off on construction
draws and permitted the seller to process employment, bank, and
credit verification documents. Lender officials told us they were
unfamiliar with Federal Housing Administration requirements for
manufactured housing loans when they first started originating such
loans. Consequently, HUD and the borrowers unnecessarily incurred
increased risks through higher insurance exposure and higher mortgage
payments. The unqualified borrowers defaulted on their mortgage
obligations.
We recommend that the Assistant Secretary for Housing - FHA Commissioner
require the lender to reimburse the insurance fund $1,989,588 for
foreclosure losses incurred on 19 loans, buy down 28 loans by $319,267
for the amounts added to the loans, and after the buy down, re-amortize
and indemnify HUD for the $2,765,619 remaining balance on these
28 loans. In addition, we recommend that you ensure the lender implements
adequate procedures to originate construction-permanent loans in
accordance with HUD requirements.
Issue Date: January 26, 2006
Audit Report No.:
2006-FW-1004
File Size: 3.92MB
Title: K Hovnanian American Mortgage, LLC, Plano, Texas, Violated
Underwriting Requirements and Did Not Meet All Quality Control or
Branch Requirements
We audited the Plano, Texas, branch office of K Hovnanian American
Mortgage Company, LLC (K Hov), part of Hovnanian Enterprises, Inc.
We selected K Hov because of its high defaults, specifically defaults
involving loans with one underwriter and one appraiser. K Hov is
a nonsupervised mortgage company. Our audit objectives were to determine
whether K Hov: (1) followed U.S. Department of Housing and Urban
Development (HUD) origination requirements; (2) complied with HUD
branch requirements in its Plano office; and (3) implemented a quality
control plan according to HUD requirements.
K Hov violated HUD underwriting, quality control, and branch requirements.
As a result, K Hov increased the risk to the insurance fund by more
than $1.3 million and overcharged borrowers $31,711. This occurred
because K Hov ignored or misunderstood HUD regulations including
meeting all quality control and branch requirements.
We recommended that HUD's assistant secretary for housing - federal
housing commissioner and chairman of the Mortgagee Review Board
require K Hov to: (1) indemnify the five loans that had significant
underwriting deficiencies; (2) reimburse HUD for the four loans
with significant underwriting deficiencies that HUD paid off due
to default; (3) reimburse borrowers or HUD, as appropriate, for
unallowable closing costs; and (4) meet HUD's quality control and
branch requirements.
Issue Date: December 22, 2005
Audit Report No.:
2006-FW-1003
File Size: 332.78KB
Title: The Palacios Housing Authority, Palacios, Texas, Did Not
Fully Comply with HUD's Standards
We conducted a review of the Palacios Housing Authority's (Authority)
low-rent and Section 8 programs to determine whether the Authority
operates the programs in accordance with U.S. Department of Housing
and Urban Development (HUD) requirements. The Authority did not
comply with HUD regulations because it could not fully support fund
transfers between its Section 8 and its low-rent housing programs,
made minor errors in its tenant files, and needed to improve its
inspection process. However, the Authority's lack of compliance
did not materially affect the Authority's housing programs, and
it can easily correct its lack of compliance. We recommend HUD require
the Authority to implement a budget-based approach in its operations,
including using an approved documented cost allocation plan, which
will result in the Authority supporting an estimated $44,657 in
future fund transfers. Further, HUD should require the Authority
to implement a quality control program to review all new tenant
rent calculations, obtain additional inspection training, and include
an exterior conditions assessment when it conducts unit inspections.
Issue Date: December 13, 2005
Audit Report No.:
2006-FW-1002
File Size: 548.59
Title: Baytown Housing Authority, Baytown, TX, Improperly Advanced,
Transferred and Encumbered Its Public Housing Funds
We audited Baytown Housing Authority (Authority) due to concerns
expressed by the Houston Office of Public Housing. Our objectives
were to determine whether the Authority (1) advanced, transferred,
or encumbered resources subject to the annual contributions contract
(contract) to the benefit of other entities without U.S. Department
of Housing and Urban Development (HUD) approval and (2) equitably
distributed salary costs between the Authority's HUD and non-HUD
activities in accordance with federal requirements.
The Authority violated its contract with HUD by inappropriately
advancing, transferring, and encumbering public housing funds to
support its nonprofit and related entities. For some of the transfers,
the Authority's executive director knowingly altered transfer documentation.
As of March 31, 2005, the Authority owed the low-rent and Section
8 programs $792,360, and it could not support an additional $134,831
in transfers and encumbrances. The improper conveyances occurred
because the Authority ignored its contract requirements and its
board of Commissioners did not establish sufficient controls. Further,
the Authority cannot demonstrate that it equitably distributed salary
costs between its HUD and non-HUD activities because it did not
support salary payments with required activity reports or equivalent
documentation. The Authority lacked support because its management
was not aware of the federal requirements. As a result, the Authority
cannot support $1.1 million in salary costs allocated to its HUD
programs from April 2002 to March 2005.
We recommend that the program center coordinator, Houston Office
of Public Housing (HUD), require the Authority to (1) repay its
HUD programs at least $792,360 for improper advances, transfers,
and encumbrances; (2) repay or provide support for $134,831 in transfers
and encumbrances; (3) repay or provide documentation to support
$1.1 million in salary costs allocated to its HUD programs from
April 2002 to March 2005; and (4) implement procedures and controls
to correct the weaknesses cited in this report. Proper procedures
and controls should help ensure that the Authority puts to better
use the $5,956,761 in HUD funding it will receive next year.
Issue Date: October 21, 2005
Audit Report No.:
2006-FW-1001
File Size: 1032KB
Title: Fort Worth Housing Authority, Fort Worth, TX, Did Not Properly
Apply Its Section 8 Subsidy Size Standards for Existing Tenants
We audited the Fort Worth Housing Authority's (Authority) Section
8 program to determine whether the Authority properly applied the
subsidy size standards in its administrative plan. We concluded
the Authority had sound policies regarding assignment of tenant
subsidy size. However, the Authority did not follow its policy when
it neglected to change voucher sizes for as many as 382 tenants
between January 2003 and March 2005. This resulted in $180,618 in
ineligible and unsupported payments and potential overpayments of
$521,744 over the next 3.7 years. Further, the Authority's Section
8 department enacted policy changes without approval from its board
of commissioners. The Authority could better use its Section 8 funding
and avoid future overpayments by strictly applying the subsidy size
standards in its administrative plan, as required by U.S. Department
of Housing and Urban Development (HUD) regulations.
We recommended that HUD require the Authority to repay ineligible
and unsupported housing assistance overpayments of $180,618, develop
and implement procedures to ensure it assigns the correct subsidy
size for all tenants to better use $521,744 in Section 8 funding,
and institute controls to ensure that the board of commissioners
approves any program changes before being implemented.
Issue Date: September 27, 2005
Audit Report No.:
2005-FW-1018
File Size: 1.27MB
Title: Housing Authority of the City of Houston, Housing Choice
Voucher Tenants and Units, Houston, TX
As part of our strategic audit plan, we audited the Section 8
Housing Choice Voucher program administered by the Housing Authority
of the City of Houston (Authority). We performed the audit to determine
whether the Authority complied with U.S. Department of Housing and
Urban Development (HUD) regulations concerning the overhousing of
tenants, correctly calculating housing assistance payments, and
ensuring that tenants resided in decent, safe, and sanitary housing.
The Authority did not comply with HUD regulations because it did
not effectively monitor the contractor it hired to manage its Section
8 programs. The Authority overhoused tenants, incorrectly calculated
housing assistance payments, and paid assistance for tenants to
reside in units that did not meet minimal decent, safe, and sanitary
standards for at least one year.
The Authority terminated its contract with the contractor in October
2004 and resumed operating its Section 8 programs. It took some
steps to correct weaknesses in its inspections and assistance calculation
processes. However, it must implement effective controls and a monitoring
system to ensure that it complies with HUD's regulations.
We recommend that HUD require the Authority to repay $7.44 million,
including $2.4 million that it retained from its administrative
fees and $5.04 million that it paid to the contractor for which
it did not receive adequate service. We also recommend HUD require
the Authority to implement internal controls and establish monitoring
systems to ensure compliance with its contributions contract, which
will result in more than $7.9 million in funds being put to better
use.
Issue Date: September 22, 2005
Audit Report No.:
2005-FW-1017
File Size: 1.67MB
Title: Allied Home Mortgage Corporation, Houston, TX
We reviewed Federal Housing Administration loans sponsored by Allied
Home Mortgage Corporation (Allied) of Houston, Texas. During an
audit of a Federal Housing Administration-approved loan correspondent,
we identified four loans sponsored by Allied that did not appear
to be 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 Allied to determine whether it
complied with HUD requirements. Allied did not comply with HUD regulations,
procedures, and instructions in the processing of four Federal Housing
Administration-insured single-family mortgages.
Allied overstated the borrower's income for two loans and understated
the borrower's liabilities for one loan. For all four loans, Allied
did not ensure that the appraisal met HUD requirements. In addition,
Allied allowed the loan correspondent to charge three borrowers
a total of $1,919 in loan discount points without reducing their
interest rates. As a result, the risk to the insurance fund was
increased, and three borrowers incurred excessive costs for their
loans.
We recommend that the Assistant Secretary for Housing - Federal
Housing Commissioner take appropriate administrative action against
Allied for not complying with HUD requirements. At a minimum, this
should include indemnifying HUD $123,028 for one of the loans and
reimbursement of the $1,919 in unearned fees. We further recommend
that Allied be required to take action to improve the quality of
its appraisals.
Issue Date: September 16, 2005
Audit Report No.:
2005-FW-1016
File Size: 952.03KB
Title:
Aegis Wholesale Corporation, Houston, Texas
We reviewed a Federal Housing Administration loan sponsored by
Aegis Wholesale Corporation (Aegis) of Houston, Texas. During an
audit of a Federal Housing Administration-approved loan correspondent,
we identified a loan sponsored by Aegis that was not properly originated
according to U.S. Department of Housing and Urban Development (HUD)
regulations. Because the sponsor of the loan is ultimately responsible
for loan processing deficiencies, we addressed these deficiencies
to Aegis to determine whether it complied with HUD requirements.
Aegis did not comply with HUD regulations, procedures, and instructions
in the processing of a Federal Housing Administration-insured single-family
mortgage. The lender did not adequately support the borrower's income,
the borrower's creditworthiness or the legitimacy of the appraised
value of the property. The lender also charged the borrower $581
in loan discount points without reducing the borrower's interest
rate. As a result, HUD insured a loan that placed the insurance
fund at risk for $58,088 and the borrower incurred excessive costs
for the loan.
We recommend that the Assistant Secretary for Housing - Federal
Housing Commissioner take appropriate administrative action against
Aegis. This action, at a minimum, should include requiring indemnification
for the $58,088 loan and reimbursement of the $581 in unearned fees
to the appropriate parties.
Issue Date: July 20, 2005
Audit Report No.:
2005-FW-1012
File Size: 1.02MB
Title: Housing Authority of the City of Houston Section 8 Abatement
and Termination Policies and Procedures
Because the results of our housing quality standards audit of the
Housing Authority of the City of Houston (Authority) indicated the
Authority's Contractor may not have been following its abatement
and termination policy, we initiated an additional audit. Our objective
was to determine whether the Authority enforced its policy to deduct
(abate) rental payments to owners and/or terminate tenants whose
Section 8-assisted units repeatedly failed HQS inspections.
Neither the Housing Authority of the City of Houston, (Authority)
nor its Contractor ensured that staff followed its abatement and
termination policies and procedures in eight of the ten cases reviewed.
Although the Authority terminated the Contractor in October 2004,
similar problems could continue to occur since the Contractor's
staff are now employees of the Authority. If the Authority does
not improve its abatement and termination policies, procedures and
practices, we estimate it will expend $1 million to $6.9 million
in inappropriate Section 8 assistance. In addition, the Authority
needs to revise some of its abatement and termination policies and
procedures to address ambiguous and contradictory provisions, or
a lack of policies and procedures.
We recommend that the program center coordinator of the Houston
Office of Public and Indian Housing require the Authority to ensure
that its employees follow its abatement and termination policies
and procedures and impose penalties on employees if they do not.
In addition, the Authority should be required to revise its abatement
policies and procedures to address deficiencies.
Issue Date: May 26, 2005
Audit Report No.:
2005-FW-1010
File Size: 7.48MB
Title: Broad Street Mortgage Company, A Subsidiary of Fieldstone
Mortgage Company San Antonio, TX
We audited Broad Street Mortgage Company's (Broad Street) San Antonio,
Texas, branch office because of an unusually high loan default rate
and as part of our 2004 Annual Audit Plan. Our objective was to
determine whether Broad Street followed U.S. Department of Housing
and Urban Development (HUD) loan origination requirements for the
30 loans selected for review.
Broad Street did not follow HUD loan origination requirements for
minimum investment in approving 24 of the 26 loans that involved
nonprofit gifts. The lender and the sellers used a gift program
to circumvent the minimum investment requirements. The sellers marked
up the sales prices of the homes and increased the sales contracts
to cover their contribution to nonprofit downpayment assistance
programs. Broad Street then approved the mortgages based on the
marked up prices and questionable appraised values. This increased
the borrowers' homeownership costs and risk of default, as well
as HUD's risk of insurance loss.
Broad Street's quality control plan needed improvement and was
not fully implemented. Broad Street stated it was behind in completing
quality control reviews of delinquent loans because staff was auditing
other loans in addition to those that defaulted in the first 6 months
of the loan term.
We recommended that the General Deputy Assistant Secretary for
Housing require Broad Street to indemnify HUD for 24 loans, reimburse
the insurance fund for any of the loans reviewed that have been
foreclosed, and amend and fully implement its quality control plan.
Broad Street generally disagreed with our findings and said HUD
approved of its practice.
Issue Date: May 24, 2005
Audit Report No.:
2005-FW-1009
File Size: 1.59MB
Title: Allied's Quality Control Process Did Not Comply with HUD
Requirements, Houston, TX
We audited Allied Home Mortgage Capital Corporation (Allied), a
nonsupervised loan correspondent, because of its high loan default
rate. Our audit objectives were to determine whether Allied: (1)
implemented a quality control plan according to HUD requirements
and (2) complied with HUD regulations, procedures, and instructions
in the origination of Federal Housing Administration insured single
family mortgages.
Although Allied had a quality control plan that complied with
HUD requirements, it did not fully implement the plan. Allied did
not always review early payment defaults, perform reviews of its
offices, or complete its monthly quality control reviews in a timely
manner. In addition, Allied's monthly quality reviews were vague
and failed to adequately address corrective actions. This occurred
because Allied did not dedicate the resources necessary to operate
an effective quality control program. As a result, Allied was unable
to ensure the accuracy, validity, and completeness of its loan origination
process.
We also found Allied did not follow HUD requirements when originating
the 20 Federal Housing Administration mortgages reviewed. Because
Allied's Federal Housing Administration sponsors are ultimately
responsible to HUD for these deficiencies, we will address them
to the appropriate sponsors in separate reports. We recommended
that HUD's general deputy assistant secretary for housing ensures
that Allied fully implements its quality control program and takes
appropriate administrative actions to include civil money penalties.
Issue Date: March 29, 2005
Audit Report No.:
2005-FW-1007
File Size: 1.42MB
Title: Housing Authority of the City of Houston's Contractor,
Houston, TX, Did Not Ensure Section 8 Assisted Units were Decent,
Safe, and Sanitary
As part of the Office of Inspector General's (OIG) Annual Audit
Plan focus on Section 8 Rental Assistance Programs, we audited the
Housing Authority of the City of Houston (Authority's) Section 8
Housing Choice Voucher Program. Our audit objective was to determine
whether the Authority's Contractor was performing inspections to
ensure Section 8 Housing Choice Voucher assisted units were decent,
safe, and sanitary before tenants moved in and annually thereafter
as U.S. Department of Housing and Urban Development (HUD) and Authority
policies required.
In most cases, the Authority's Contractor performed annual and
initial inspections as required. However, since a majority, 88 out
of 118 units, failed our Housing Quality Standards inspections,
the Contractor's inspections did not ensure the units were decent,
safe, and sanitary. The significant failure rate occurred because
the Contractor appeared to be more focused on performing a large
quantity of inspections than on the quality of those inspections.
Projecting the results of the statistical sample to the population
indicates at least 9,088 of the Authority's 13,524 units do not
meet standards. In addition, our inspections showed that 39 of the
88 units had either uncorrected items from previous inspections
or conditions that had existed for more than a year. Thus, our results
indicate the Authority expended $26.1 million on 3,503 units, which
have failed items that have existed for a year or more. Further,
since the Authority's Contractor did not ensure the units met standards,
its tenants lived in units that were not decent, safe, or sanitary.
We recommend that the Program Center Coordinator, Houston Office
of Public Housing (HUD) require the Authority to ensure all 88 failed
units we identified meet standards. Further, the Authority needs
to inspect all of its remaining units within the next 12 months
to ensure those units also meet standards since our results indicated
at least 67 percent will not. If the units cannot be made decent,
safe, and sanitary, the Authority should either abate the rent or
terminate the tenant's voucher. If the Authority corrects its inspection
program, it will avoid paying an estimated $26.1 million on indecent,
unsafe, and unsanitary units in the next year.
Issue Date: March 29, 2005
Audit Report No.:
2005-CH-1007
File Size: 635.06KB
Title: RBC Mortgage Company, Non-supervised Mortgagee; Houston,
TX; Improper Submission of Late Requests for Endorsement Increased
the Risk to Insurance Fund
The U.S. Department Housing and Urban Development's (HUD) Office
of Inspector General audited RBC Mortgage Company (also known as
Prism Mortgage), a non-supervised mortgagee approved to originate,
underwrite, and submit insurance endorsement requests under HUD's
Single Family Direct Endorsement program. The audit was part of
the activities in our fiscal year 2004 Annual Audit Plan. We selected
RBC Mortgage Company for audit because of its high late endorsement
rate. Our audit objective was to determine whether RBC Mortgage
Company complied with HUD's regulations, procedures, and instructions
in the submission of insurance endorsement requests.
RBC Mortgage Company did not always comply with HUD's requirements
on late requests for insurance endorsement. RBC Mortgage Company
and its contractor submitted 170 late requests for insurance endorsement
out of 5,123 loans tested. The loans were either delinquent or otherwise
did not meet HUD's timely payment requirements. RBC Mortgage Company
and/or its contractor also incorrectly certified that mortgage and/or
escrow accounts were current. RBC Mortgage Company lacked adequate
procedures and controls to ensure that it and the contractor's employees
followed HUD's requirements regarding late requests for insurance
endorsement. These improperly submitted loans increased the risk
to the Federal Housing Administration insurance fund.
We recommend that HUD's Assistant Secretary for Housing-Federal
Housing Commissioner and Chairman of the Mortgagee Review Board
Require RBC Mortgage Company to indemnify HUD for any future
losses on 138 loans with a total mortgage value of $16,282,212 and
take other appropriate administrative actions up to and including
civil money penalties.
Require RBC Mortgage Company to reimburse HUD $26,066 for the actual
loss on FHA Case 137-1967877 since the associated property was already
sold.
Require RBC Mortgage Company to reimburse HUD for any future losses
from a $24,510 claim paid on one insured loan (FHA Case 137-1850047)
with a total mortgage value of $227,930 once the associated property
is sold.
Require RBC Mortgage Company to establish and implement an adequate
quality control plan.
We recommend that HUD's Director of Departmental Enforcement Center,
in consultation with the Assistant Secretary for Housing-Federal
Housing Commissioner and Chairman of the Mortgagee Review Board,
take appropriate administrative action against the principals of
RBC Mortgage Company based on the information in this report.
We recommend that HUD's Associate General Counsel for Program Enforcement
determine legal sufficiency, and, if legally sufficient, pursue
remedies under the Program Fraud Civil Remedies Act against RBC
Mortgage Company's employees and/or its contractor (Financial Dimensions,
Incorporated), and/or their principals for incorrectly certifying
that the mortgage accounts for 2 loans were current and no late
charges were assessed, and the escrow accounts for taxes, hazard
insurance premiums, and mortgage insurance premiums were current
for 37 loans submitted for Federal Housing Administration insurance
endorsement when, in fact, the mortgage and escrow accounts were
not current at submission.
Issue Date: March 25, 2005
Audit Report No.:
2005-FW-1006
File Size: 992.57KB
Title: Housing Authority of the City of Houston Section 8 Housing
Assistance Payments Houston, TX
As part of our Strategic Audit Plan, we audited the Section 8 Housing
Choice Voucher Program, administered by the Housing Authority of
the City of Houston (Authority). We designed the audit to determine
whether the Authority's Contractor correctly calculated housing
assistance payments and to determine the effect if the Contractor
calculated the payments incorrectly.
The Authority's Contractor did not correctly calculate or support
its calculations of Section 8 housing assistance payments. Our projection
of the results of a statistical sample showed the Authority's Contractor
made errors in at least 7,168 of its 13,732 Housing Choice Voucher
files over a 13-month period. Due to the Contractor's errors, the
Authority overpaid at least $1.1 million and underpaid at least
$115,000 in Section 8 assistance. The Authority did not detect or
prevent the errors because it did not properly monitor its Contractor
and relied on the Contractor to police itself. The Authority terminated
its contract with the Contractor in October 2004. However, if the
Authority does not implement controls and procedures to prevent
similar errors, it will overpay and underpay at least an additional
$1 million in incorrectly calculated housing assistance payments
over the next 12 months.
We recommend that the U.S. Department of Housing and Urban Development
(HUD) require the Authority to review all of its Section 8 Housing
Choice Voucher files and correct any errors that have occurred.
HUD should require the Authority to repay the $13,227 that we identified
as ineligible payments and pay the tenants the $1,680 that we identified
as underpaid assistance based on our sample file reviews. Also,
HUD should require the Authority, based on its file reviews, to
either support the projected $1,140,915 that we identified as unsupported
payments or repay those Section 8 funds to HUD and support the projected
$113,680 that we identified as assistance underpayments or pay those
Section 8 funds to the tenants. Finally, HUD should require the
Authority to implement controls to prevent future housing assistance
payment errors, which we project to be at least $1 million per year.
Issue Date: January 28, 2005
Audit Report No.:
2005-FW-1004
File Size: 1.65MB
Title: American Property Financial, Nonsupervised Loan Correspondent,
San Antonio, TX
We audited American Property Financial (American), a nonsupervised
loan correspondent approved to originate Federal Housing Administration
mortgage loans under the U.S. Department of Housing and Urban Development's
(HUD) Single Family Direct Endorsement Program. American originated
83 Federal Housing Administration loans between February 1, 2002,
and January 31, 2004. As of February 23, 2004, 14 of the 83 loans
were in default status. Synergy Mortgage, Inc. had underwritten
the 14 loans. We reviewed 39 loans originated by American and underwritten
by Synergy Mortgage, Inc. Our audit objectives were to determine
whether American: (1) complied with HUD's regulations, procedures,
and instructions in the origination of Federal Housing Administration-insured
mortgages and (2) implemented a quality control plan according to
HUD's requirements.
American failed to originate Federal Housing Administration-insured
loans in accordance with HUD requirements. American used gift funds
to pay delinquent debts, rolled delinquent debts into mortgage loans,
and submitted loans for unqualified applicants. American used inflated
or poor appraisals to increase the sales price to accommodate the
incentives to purchase. As of February 23, 2004, 14 of the loans
totaling $1,368,257 were in default status. The deficiencies resulted
from American's failure to follow HUD's requirements, its failure
to implement an adequate quality control plan, and its lack of supervision
over its loan officers. These deficiencies contributed to the high
default rate, putting at risk 34 loans totaling more than $3.3 million
in insured loans.
We recommended HUD's Assistant Secretary for Housing-Federal Housing
Commissioner and Chairman of the Mortgagee Review Board require
Synergy Mortgage, Inc., American's sponsor on the loans, to indemnify
HUD against losses on the 34 loans and reduce the loans that received
incentives to buy disguised as gift funds. American needs to establish
controls to ensure that personnel are knowledgeable of HUD procedures
and supervision is adequate to maintain an effective operation.
Additionally, HUD should take appropriate administrative action(s)
against parties involved.
Issue Date: November 19, 2004
Audit Report No.:
2005-FW-1002
File Size: 1.17MB
Title: Domicile Property Management, Inc. Multifamily Management
Agent
San Antonio, TX
In violation of the properties' regulatory agreements, Domicile
diverted property income totaling $771,103 to pay its own expenses
and paid $1,469,926 from property accounts without documentation
to show the payments were for necessary and reasonable operating
costs. Further, Domicile did not abide by the 1995 settlement agreement
for a previous HUD claim, involving project overcharges during 1992
and 1993. Under that agreement, Domicile paid $272,113 but did not
report and pay an additional $49,262 for self-funded health insurance.
Because of Domicile's current diversions and failure to pay the
previous settlement obligation, they deprived the properties of
operating funds reducing HUD's security interests and increasing
HUD's risks.
Issue Date: November 2, 2004
Audit Report Memorandum No.: 2005-FW-1801
File Size: 228.3KB
Title: Audit of Highland Meadows Apartments, Federal Housing Administration
112-11106
Dallas, TX
We performed an audit survey at Highland Meadows Apartments, a
HUD insured multifamily complex. Based upon the results of the survey,
we determined there was not a need to perform further audit work.
HUD's Departmental Enforcement Center recommended the audit due
to the problems with another HUD insured multifamily owned by this
owner.
Our audit survey objectives were to determine the owner's performance
relating to (1) Appropriate use of project funds and (2) Maintaining
the property in a satisfactory physical condition in accordance
with the Department of Housing and Urban Development's (HUD) Uniform
Physical Condition Standards. We did not complete all audit procedures
associated with the objectives.
We concluded the following reportable conditions. The owner (1)
paid $68,000 to an unapproved identity-of-interest management company;
(2) took $45,000 in distributions when the property was not in good
repair and in a non-surplus cash position; (3) paid $10,556 to other
identity-of-interest entities; (4) paid $870 in ineligible expenses;
and (5) maintained the property in poor condition.
We recommended HUD's Director, Multifamily Program Center in Fort
Worth seek reimbursement from the owner for the $124,426 in ineligible
disbursements and payments. Also, we recommended HUD's Director
of Departmental Enforcement Center impose sanctions against the
owner as appropriate, including debarment and civil and/or criminal
money penalties.
Issue Date: September 29, 2004
Audit Report No.:
2004-FW-1010
File Size: 1.97MB
Title: Housing Choice Voucher Subsidy Standards, Housing Authority
of the City of Houston, Houston, TX
The Housing Authority of the City of Houston (the Authority) paid
Section 8 Housing Choice Voucher funds for tenants to live in larger
units than the Authority's policy allowed. Testing showed the Authority
overpaid at least $797,280 to improperly house at least 352 Section
8 tenants between January 2002 and May 2004. Statistical testing
identified $172,193 in actual ineligible overpayments and a minimum
of $625,087 in projected overpayments. In addition, the Authority
could overpay more than $3.2 million over the next 3.7 years if
it does not implement controls to stop the overpayments. The Authority
made the overpayments because its Contractor chose not to follow
the Authority's policies to avoid increasing its already backlogged
workload. The Authority's monitoring, which should have detected
and prevented the improper payments, was not sufficient to do so.
We recommend that HUD require the Authority to comply with the
unit size limitations in its Administrative Plan. We also recommend
that HUD require the Authority to:
- Repay $172,193 in identified Section 8 overpayments;
- Review other identified tenants potentially living in units
larger than the Authority's policy allows and repay any ineligible
Section 8 assistance, which we project to be at least $625,087;
and
- Implement controls to avoid future estimated overpayments of
$3.2 million over the next 3.7 years.
Issue
Date: June 4, 2004
Audit Memorandum
No.: 2004-FW-1802
File Size: 404KB
Title: Austin Loan Corporation, Non-Supervised Loan Correspondent,
Austin, TX
Austin Loan did not implement its Quality Control Plan in compliance
with HUD regulations. Austin Loan was either unfamiliar with or
ignored HUD's requirements regarding the implementation of Quality
Control Plans. As a result, HUD has no assurance that Austin Loan's
quality control process ensured compliance with HUD/FHA regulations.
Our audit work also disclosed possible conflict of interest situations
and faulty and deficient appraisals. We have referred these issues
for possible further review. We recommended that HUD take steps
to ensure that the current operation of Premier Mortgage Funding,
Inc. (dba, Austinloan.com) is in compliance with HUD regulations
concerning Quality Control Plans
.Issue Date: April 26, 2004
Audit Report No.:
2004-FW-1006
File Size: 1.59MB
Title: San Antonio Housing Authority,
HOPE VI Program,
San Antonio, Texas
In response to a Congressional request to review allegations concerning
the Mirasol and Springview HOPE VI projects, we conducted a review
to determine: (1) whether inferior workmanship and substandard materials
were used in construction of Mirasol single family homes; (2) whether
the land on which Mirasol is built contains pollutants and caused
residents' illnesses; (3) how the Authority awarded the single family
contract for Mirasol; and (4) whether the Authority properly accounted
for Mirasol and Springview expenditures.
We found that although some construction methods sounded substandard,
they met San Antonio building codes and were consistent with acceptable
industry practice in the area. We also found the Authority had planned
to build on a former landfill but after testing the site the Authority
officials decided to change the plans. The Authority has entered
into a cleanup agreement with the State of Texas. The Texas Commission
on Environmental Quality (Commission) has investigated the site,
and based on tests to date, the residents of the project are not
threatened as long as they use City water and do not use ground
water. Our audit did disclose that Authority limited competition
when awarding the contract for the Mirasol development. Further,
the Authority inappropriately incurred $1,861,852 in HOPE VI funds
to design part of the Mirasol development on land that had previously
been used as a public landfill; cannot support $2,022,977 in payroll
expenses; and overpaid the Joint Venture $10,612 in overhead and
profit on change orders.
Issue Date: March 26, 2004
Audit Report No.:
2004-FW-1004
File Size: 2.26MB
Title: Financial Management of HUD Programs, Housing Authority
of the City
of Corpus Christi,
Corpus Christi, Texas
At the request of the Director of Public Housing, we conducted
an audit of the Housing Authority of Corpus Christi, Texas (the
Authority). The objectives of the audit were to determine whether
the Authority used funds in accordance with HUD requirements under
the Low Rent, Section 8, Drug Elimination, and Resident Opportunity
and Self Sufficiency (ROSS) Programs. In addition, our objectives
were to determine if the Authority allocated common costs equitably
among its federal and non-federal programs and if they complied
with its new procurement policy adopted in February 2003. The Authority
had implemented and complied with its new procurement policy and
HUD procurement requirements. However, the Authority violated HUD
program requirements by spending $4,052,302 in HUD funds for ineligible
and questionable purposes. The Authority management used $1,031,872
in HUD program funds for unauthorized purposes and cannot support
$3,020,430 in arbitrary payroll allocations and other program costs.
The unauthorized and unsupported costs charged to HUD programs included
costs to develop a housing project of an affiliated nonprofit entity
and arbitrary allocations of administrative costs.
During the audit, the Authority officials indicated they took action
to address our concerns by implementing cost allocation plans and
timekeeping procedures to properly allocate salaries and benefits.
In addition, the Authority paid back to HUD programs or recorded
interfund payables for $488,810 of the unallowable costs we identified
for nonprofit activities and common cost allocations. The Authority
still needs to repay HUD programs any remaining ineligible costs
and provide satisfactory support to HUD for all questioned costs.
Issue Date: February 26, 2004
Audit Report No.:
2004-FW-1002
File Size: 976.2
Title: Jester Trails Apartments,
Project Number FW 03 0014, Houston, Texas
We completed an audit of Jester Trails Apartments, a Section 221(d)(4)
insured multifamily housing project. The objective of our audit
was to review the operations of the owner-managed project and determine
whether the project's owner complied with the Regulatory Agreement
and HUD regulations.
Although the owner maintained the property in satisfactory condition,
it did not comply with several provisions of the Regulatory Agreement
and other HUD regulations. Specifically, the owner failed to maintain
the books and records of the project. Thus, the owner cannot show
it deposited rental receipts intact. In addition, the owner paid
$55,475 for ineligible and unsupported personal expenses with the
project's operating funds. The owner also improperly obtained and
used project funds to pay $42,431 for a personal promissory note.
Further, the owner received $32,254 in excess of the allowed management
fee. Finally, the owner misused $24,127 in tenant security deposit
funds. All of these violations occurred because the owner disregarded
HUD's requirements.
The owner's payments of ineligible and unsupported expenses depleted
the project's operating funds. Currently, the project is in default.
However, the lender has indicated it wishes to prepay the mortgage
to avoid a claim.
We recommend HUD allow the lender to prepay the mortgage freeing
the $2.13 million loan balance for better use. Further, HUD should
require the owner to reimburse the project for the ineligible use
of project funds totaling $140,073. HUD should also obtain documentation
for the unsupported expenses of $14,214 and recover from the owner
for the project any costs determined to be unallowable. If the owner
does not repay the project for improper diversions of property funds,
HUD should take civil action and other prescribed remedies. In addition,
HUD should take administrative action against the owner and its
members to prevent them from managing this or another HUD property.
Issue Date: July 3, 2003
Audit Memorandum
No.: 2003-FW-1806
File Size: 774KB
Title: Colonial Oaks,
Project Number 114-11132,
Houston, Texas
Based on a recommendation from Houston Multifamily staff, we conducted
a review of Colonial Oaks Apartments (Colonial Oaks). The objective
of the review was to determine whether Colonial Oaks' owners operated
the project in accordance with HUD requirements. Specifically, we
determined whether the owners (1) established and maintained adequate
written policies, procedures, financial books and records; (2) used
project funds appropriately; and (3) maintained the property in
a satisfactory physical condition.
Issue Date: May 23, 2003
Audit Memorandum
No.: 2003-FW-1804
File Size: 1.89MB
Title: Congressional Request Housing Authority of the City of
San Angelo,
San Angelo, Texas
In response to a Congressional request, we performed a limited
review of the Housing Authority of the City of San Angelo (Housing
Authority). Specifically, our objectives were to determine: (1)
whether a conflict of interest existed between the Housing Authority's
rental of apartments to San Angelo Colt Baseball players; (2) whether
the Assistant Executive Director had a conflict of interest with
a vendor, Hard Drive Caf�; (3) whether the Housing Authority took
appropriate steps to remediate mold at the Cedar Crest Knickerbocker
(Knickerbocker) complex; and (4) the events surrounding the construction
of elderly duplexes costing $500,000 that were appraised at $324,000.
Because the findings affect both Public Housing and Community Planning
and Development (CPD), we have addressed this memorandum to both
program directors.
Issue Date: April 28, 2003
Audit Report No.:
2003-FW-1004
File Size: 1.75MB
Title: Spanish Village Community Development Corporation Upfront
Grant and Home Loan, Houston, Texas
In response to a Citizen's complaint, we conducted an audit of
the Upfront Grant and the Home Loan provided to the Spanish Village
Community Development Corporation (SVCDC) in Houston Texas. The
Complainant alleged wrongful expenditures of government funds, violations
of the grant and loan agreements, failure by HUD and the City of
Houston to follow Upfront Grant and HOME loan guidelines, and political
influence that prevented HUD from declaring the SVCDC in default
of the agreements. Our primary objective was to determine whether
the allegations were valid. Specifically, our objectives were to
determine whether: (1) there were wrongful expenditures of government
funds by any party involved in the SVCDC renovation project; (2)
the SVCDC's performance complied with its agreement; (3) HUD executed
and monitored the sale and Upfront Grant properly and in accordance
with guidelines, (4) the City of Houston complied with its obligations
for monitoring the HOME loan, and (5) there was political influence
or involvement that limited HUD's ability to ensure completion of
the renovations.
Issue Date: March 17, 2003
Audit Report No.:
2003-FW-1003
File Size: 1.80MB
Title: City of Dallas' Mortgage Assistance Program HOME Investment
Partnerships Program, Dallas, Texas
We audited the City of Dallas' Mortgage Assistance Program, which
it operated using funds from the HOME Investment Partnerships Program
(HOME). The City contracted with Enterprise, a nonprofit organization,
to run the program. The purpose of our audit was to ensure the City
used HOME funds for its Mortgage Assistance Program for only eligible
homebuyers.
Overall, the City and Enterprise operated the Mortgage Assistance
Program within HUD HOME requirements. However, Enterprise did not
properly follow the more restrictive eligibility rules the City
established for program participants. This occurred because Enterprise
mistakenly relied on lenders to verify participant eligibility and
did not verify information lenders provided. The City's monitoring
did not identify this error. As a result, a significant number of
participants received benefits in excess of what the City intended.
We recommend HUD require the City of Dallas to require Enterprise
to revise its control procedures to scrutinize income and family
size information and to repay its HOME account $34,890 unless it
can provide documentation to support the eligibility for two homebuyers.
We further recommend HUD require the City's Housing Department and
Office of the City Auditor to revise their monitoring programs to
include testing to ensure homebuyers' income and family size meet
HOME regulations.
Issue Date: January 17, 2003
Audit Report No.:
2003-KS-1004
File Size: 969KB
Title: First Horizon Home Loans Non-Supervised Direct Endorsement
Lender Irving, Texas
We have completed an audit of First Horizon Home Loans, a non-supervised
direct endorsement lender approved to originate Federal Housing
Administration insured loans. We selected First Horizon for audit
because of its high number of late endorsements. Our audit objective
was to determine if First Horizon requested late endorsements for
loans that had late payments prior to submission.
First Horizon Home Loans improperly submitted 438 loans totaling
over $48 million for endorsement more than 60 days after closing
when the borrowers had delinquent payments prior to submission.
Although First Horizon incorporated HUD's late submission requirements
into its procedures, it did not ensure that its employees always
followed them. Since these loans are insured by the Federal Housing
Administration, they increase the risk to its insurance fund. As
of September 30, 2002, HUD paid claims on 15 of the loans and has
experienced a loss of $83,050 on the 3 properties that have been
sold. We recommended that HUD seek indemnification for the 423 active
and claim loans (15 had already been terminated).
Issue Date: January 9, 2003
Audit Memorandum
No.: 2003-FW-1802
File Size: 141KB
Title: Sale of Hargest College,
City of Houston CDBG, Houston, Texas
In response to an anonymous complaint, we reviewed the sale of
Hargest College (College) in Houston, Texas. The complaint alleged
the sale of the College by the City of Houston (City) to Midtown
Redevelopment Authority (Midtown) was for substantially less than
fair market value. It was also alleged the director of Midtown purchased
the property for less than fair market value due to political contributions
for, and jobs provided to family members of the Mayor of the City
of Houston (Mayor). The complaint also alleged the City obtained
a $1.1 million dollar HUD grant to renovate the College under false
pretenses and the City actually spent the funds on other properties.
Our objectives in performing the review were to determine: (1) if
the property was sold at less than fair market value; (2) if the
sales price was based on other than an arms length transaction;
and (3) if the $1.1 million grant was obtained under false pretenses.
Issue Date: November 18, 2002
Audit Memorandum
No.: 2003-FW-1801
File Size: 168KB
Title: Wood Hollow Place Apartments Project Number 114-11183
Texas City, Texas
We completed a review of Wood Hollow Place ApartmentS. The objective
of our review was to determine whether expenditures and disbursements
complied with the terms and conditions of the Regulatory Agreement
and other HUD requirements. Because the project experienced cash
flow problems, the management agent did not follow the Regulatory
Agreement and other HUD regulations. As a result, the management
agent: (1) improperly paid advances, loans and other fees totaling
$223,373 and (2) paid $27,684 in ineligible and $7,500 in unsupported
expenses. In addition, the management agent improperly used tenant
security deposits funds to fund project operations. These improper
payments weakened the project's financial condition and put the
project at risk of default.
Issue Date: August 21, 2002
Audit Report No.:
2002-FW-1805
File Size: 320KB
Title: Texas Tenant's Union Incorporated Outreach and Training
Assistance Grants and Public Entity Grant Dallas, Texas
We performed an audit of Texas Tenant's Union's two Outreach and
Training Assistance Grants (OTAG) and a Public Entity Grant. Congress
required our office to audit each provision of technical assistance
obligated under the requirements of Section 514 of the Multifamily
Assisted Housing Reform and Affordability Act of 1997 over the last
4 fiscal years. Under Section 514, HUD provided the funding for
the Texas Tenant's Union grants that we audited.
Our objectives were to determine whether the Texas Tenant's Union
used its grant funds for only eligible activities and to determine
whether it expended the funds for any lobbying activities.
Overall, the Texas Tenant's Union used its grants for eligible
activities. However, the Texas Tenant's Union supported the National
Alliance of HUD Tenants by attending annual conferences. Although
the National Alliance of HUD Tenants provided training opportunities
it also performed lobbying activities. Also, the Texas Tenant's
Union inadvertently claimed a minimal amount in ineligible and unsupported
costs.
Issue Date: January 11, 2002
Audit Report No.:
2002-FW-1001
File Size: 1448KB
Title: Houston/Harris County/Coalition for the Homeless Continuum
of Care Houston, Texas
We audited the Houston/Harris County Continuum of Care (Continuum)
1996 and 1997 grants. Our audit objectives were to determine whether
the Continuum had adequate management controls to ensure that it:
(1) developed a strategic plan that fairly represented the community's
needs; (2) had a representative membership; (3) had a fair funding
process; (4) held its members accountable for their performance;
and (5) tracked participant progress.
Our audit concluded the Continuum had adequate management controls
to ensure it: (1) developed a strategic plan that fairly represented
the community's needs; (2) had a representative membership; and
(3) had a fair funding process. However, the Continuum did not administer
its Continuum of Care Programs according to the terms and conditions
of its consolidated applications. Specifically, it did not have
sufficient management controls to measure its members' performances
and to gather, track, record, and report critical program data.
Issue Date: December 4, 2001
Audit Memorandum
No.: 2002-FW-1801
File Size: 214KB
Title: Citizens' Complaint Housing Authority of the City of Lockhart
Lockhart, Texas
At the request of the Senior Community Builder of the HUD San
Antonio Office, we completed a limited review of the Housing Authority
of the City of Lockhart, Texas. The Senior Community Builder received
a complaint from a former employee of the Housing Authority who
alleged:
1. The Housing Authority wrongfully terminated the complainant
and offered the equivalent of "hush money" to keep her from exposing
wrongdoing at the Housing Authority.
2. A maintenance man owns a private business, which he operates
on Housing Authority time.
3. Family members of Housing Authority employees are paid to perform
"odd jobs" for the Housing Authority.
4. Family members of Housing Authority employees and Board Members
have custody of Housing Authority cell phones.
5. Multifamily properties are purchasing supplies and billing them
to the Housing Authority.
6. The Housing Authority used Housing Authority paint to paint
a private property.
7. The Housing Authority purchased its vehicles from a company owned
by the Chairman of the Board. We concluded that three of the seven
allegations are valid. During our review, we also noted weaknesses
that we believe warrant reporting. These weaknesses are disclosed
in the finding in Attachment A. The following are the results of
the review of each allegation.
Issue Date: September 21, 2001
Audit Report No.:
2001-FW-1006
File Size: 1,537KB
Title: Dallas Homeless Consortium Continuum of Care Dallas, Texas
As a part of a nationwide review of HUD's Continuum of Care Program,
we audited the Dallas Homeless Consortium. Our objectives were to
determine whether the Consortium: (1) fairly represented the needs
of the community; (2) achieved broad participation; (3) held members
accountable for their performance; and (4) tracked the progress
of programs and participants.
Our audit concluded the Consortium has a broad-based membership
that provided fair representation of the community. However, the
Continuum of Care applications filed by the Homeless Consortium
contain inaccurate information and overstate its achievements. The
peer review process, used to determine the priority order of the
projects contained in the consolidated application, was ineffective
and may have allowed unsuccessful programs to receive higher priority
than was appropriate. In addition, the Consortium had no means of
tracking or monitoring its participants or programs. We also have
concerns that in its role as lead agency of the Consortium, the
City of Dallas did not provide the organization with the leadership
and guidance necessary for the Consortium to become successful.
Issue Date: August 21, 2001
Audit Memorandum
No.: 2001-FW-1808
File Size: 167KB
Title: Citizen Complaint, HUD Takeover of the Beaumont Housing
Authority, Beaumont, Texas
We were unable to substantiate the overall complaint that the
Authority had been singled out and HUD's takeover was politically
motivated. HUD assumed control of the Authority in late 2000 after
finding it in substantial default of its Annual Contributions Contract
(ACC). Since the takeover occurred, HUD contracted with Price Waterhouse
Coopers to conduct a comprehensive review. Price Waterhouse Coopers
confirmed that substantial problems existed in the Authority's Homeownership
and Section 8 Programs. These two issues alone support HUD's finding
of substantial default. However, HUD's lack of monitoring at the
Authority contributed to or exacerbated some of the problems that
existed. In HUD's defense though, the Authority's high Public Housing
Management Assessment Program (PHMAP) scores placed the Authority
low on HUD's monitoring schedule. Further, once HUD became aware
of problems at the Authority, HUD took action that ultimately resulted
in HUD declaring the Authority in substantial default.
Our audit concluded the Consortium has a broad-based membership
that provided fair representation of the community. However, the
Continuum of Care applications filed by the Homeless Consortium
contain inaccurate information and overstate its achievements. The
peer review process, used to determine the priority order of the
projects contained in the consolidated application, was ineffective
and may have allowed unsuccessful programs to receive higher priority
than was appropriate. In addition, the Consortium had no means of
tracking or monitoring its participants or programs. We also have
concerns that in its role as lead agency of the Consortium, the
City of Dallas did not provide the organization with the leadership
and guidance necessary for the Consortium to become successful.
Issue Date: August 17, 2001
Audit Memorandum
No.: 2001-FW-1807
File Size: 323KB
Title: Community Housing Fund, Nonprofit Participation in FHA
Single Family Insurance Program, Irving, Texas
As part of a nationwide audit of the Federal Housing Administration's
(FHA) Single Family Insurance Program, we audited Community Housing
Fund's purchase of Real Estate Owned (REO) properties. Our objectives
were to determine whether Community Housing Fund was legitimate
and independent (not under the influence, control, or direction)
of other parties and passed on the benefits of discounts received
on the purchase of HUD homes to low- and moderate-income homebuyers.
Our audit concluded Community Housing Fund did not meet HUD's affordable
housing program's objectives and Community Housing Fund received
excess profits from the resale of properties obtained under the
affordable housing program.
Issue Date: June 29, 2001
Audit Memorandum
No.: 2001-FW-1806
File Size: 70KB
Title: Citizens' Complaint, Housing Authority of the City of
Edinburg, Edinburg, Texas
We completed a limited review of the Housing Authority of the
City of Edinburg (Authority) because of a request for audit assistance
from our Office of Investigations who had received a complaint from
concerned citizens. The complaint included allegations of missing
assets and records and abusive management practices at the Authority.
The allegations involved various HUD programs including: Low Rent,
Comprehensive Grants, Public Housing Drug Elimination Grants, Section
8 Voucher, Section 8 Certificate, and Section 8 Moderate Rehabilitation
Programs. The complaint alleged the Authority staff:
Used the Authority's Tax Exempt Certificate to purchase personal
vehicles;
Bypassed the Section 8 waiting list to provide housing for friends
and relatives;
Housed friends in Low Rent units at zero or reduced rents;
Housed employees in Low Rent units at reduced rents;
Paid landlords, who are friends, higher than authorized rents for
Section 8 Moderate Rehabilitation units;
Failed to maintain an inventory of equipment purchases in the
Public Housing Drug Elimination Program;
Took equipment from the Public Housing Drug Elimination Program;
and
Transferred money from the Public Housing Drug Elimination Program
to a personal account.
We concluded that the allegations are not valid. Vehicle history
records show that the Authority registered all the vehicles purchased
with the Tax Exempt Certificate. The vehicles are included in the
Authority's vehicle inventory. Our review of the Low Rent and Section
8 Programs did not indicate that the Authority bypassed people on
the waiting list or paid or charged inappropriate rents to friends,
relatives, or employees. We were also able to account for the cash,
equipment, and assets related to the Public Housing Drug Elimination
Program. However, during the review, we found that the Authority
did not maintain a control system to ensure adequate safeguards
for equipment. The Authority has already taken steps to address
our concerns. During our review, the Board of Commissioners adopted
a policy to capitalize and inventory equipment. We are recommending
HUD to follow-up on the policy implementation to ensure the adequacy
of controls over equipment. We provided a draft and had an exit
conference with the Authority on May 9, 2001. The Authority agreed
with our finding.
Issue Date: May 25, 2001
Audit Report No.:
2001-FW-1004
File Size: 7,813KB
Title: Community Development Block Grant Section 108 Loan Program,
City of San Antonio, San Antonio, Texas
We conducted an audit of the City of San Antonio's Community Development
Block Grant (CDBG) Section 108 Loan Program to determine whether
the City and its subrecipient, the Greater Kelly Development Authority,
expended CDBG Section 108 loan funds for eligible activities in
accordance with HUD regulations. We found that responsible City
staff seemed unfamiliar with CDBG regulations and had not taken
adequate steps to ensure compliance with applicable low- and moderate-income
benefit and procurement requirements.
Issue Date: April 27, 2001
Audit Memorandum
No.: 2001-FW-1805
File Size: 653KB
Title: Harris County, Supportive Housing Grant - TX21B971306,
Houston, Texas
Title IV of the Stewart B. McKinney Homeless Assistance Act authorized
the Supportive Housing Program. HUD designed the program to promote
the development of supportive housing and services, including innovative
approaches to assist homeless persons in the transition from homelessness,
and to promote the provision of supportive housing to homeless persons
to enable them to live as independently as possible.
In November 1999, HUD contracted with ABT Associates Inc. (ABT)
to provide on-site assessment of the operations and technical assistance
needs of its homeless assistance projects. As part of this review,
ABT visited the Campus on April 18 and 19, 2000. In its review,
ABT touted the Campus' success in accomplishing six of its seven
performance goals. For example, ABT reported that 79 percent of
the participants successfully completed the Program and secured
permanent housing in less than 6 months. It also reported that 95
percent of Program graduates remained in permanent housing for at
least 1 year after graduation. However, ABT based its conclusions
on data from the Campus' annual progress report and staff interviews.
ABT did not substantiate the veracity of the annual progress report
or interviews by alternative means. ABT identified weaknesses in
participant rent charges, fair market rents, and lack of documentation
for discharge plans and follow-up. Yet, ABT only recommended technical
assistance in the area of determining appropriate rents and rent
contributions. Therefore, ABT's assessment that the Program exceeded
its performance goals differs from our audit findings.
We recommend that HUD:
1A. Require the County to only count as successful graduates those
participants that complete the Program.
1B. Require the County to ensure that employees capture required
data when participants leave the Program and in follow-up contact
with previous participants.
1C. Require the County and the Campus to bring the units into compliance
with its habitability standards.
1D. Determine rents that are reasonable and require the County
to reimburse the grant for any excess rent paid.
1E. Require the County to monitor the Campus to ensure proper administration
of its Program.
1F. Require the County to follow rent income guidelines for participant
rent payments.
1G. Require that the County timely reimburse the Campus for eligible
expenditures. HUD should also deobligate any grant funds not expended
as of September 30, 2001.
Issue Date: March 9, 2001
Audit Memorandum
No.: 2001-FW-1803
File Size: 86KB
Title: AIDS Foundation Houston, Inc., Supportive Housing Grant
TX21B97-1304, Houston, Texas
As part of a nationwide review of HUD's Continuum of Care Program,
we audited AIDS Foundation Houston, Inc.'s (Foundation) 1997 supportive
housing program grant #TX21B97-1304. Our audit objectives were to
determine whether the Foundation: (1) maintained adequate management
controls; (2) implemented its grant in accordance with its application;
(3) expended funds for eligible activities under federal regulations
and applicable cost principles; (4) maintained evidence of measurable
results; (5) leveraged HUD funds adequately; (6) expended funds
timely; (7) expended funds for leasing in compliance with federal
regulations; (8) met the federal requirements for supportive service
costs; and (9) met the federal requirements for operating costs.
Our audit concluded that, while the Foundation and its Partners
generally implemented grant activities consistent with its grant
application, it expended funds for ineligible and unsupported activities
and did not comply with federal cost requirements. The Foundation
maintained evidence of measurable results, leveraged HUD funds adequately,
expended funds timely, and met federal requirements related to leasing.
Additionally, the Foundation provided sufficient technical assistance
to its Partners and reviewed their single audit reports and monthly
expense reports.
However, of the $397,395 grant funds audited, the Foundation expended
$69,369 on ineligible or unsupported activities. The Foundation
reimbursed Building Lives Offering Community Knowledge (the BLOCK),
a Partner, $14,888 in ineligible payroll, office supplies, telephone
costs, and mileage costs. The ineligible costs included $13,090
that the BLOCK charged to two grants. Additionally, the Foundation
reimbursed the BLOCK $27,203 for unsupported payroll, office supplies,
telephone, and mileage costs.
Issue Date: February 13, 2001
Audit Memorandum
No.: 2001-FW-1802
File Size: 69KB
Title: Greater Dallas Council on Alcohol and Drug Abuse Supportive
Housing Grant TX21B970908, Dallas, Texas
As part of a nationwide audit of HUD's Continuum of Care Program,
we reviewed the Supportive Housing grant awarded to the Greater
Dallas Council on Alcohol and Drug Abuse (Council). Our objectives
were to determine whether the Council:
1.Implemented the grant in accordance with federal regulations
and its grant agreements;
2.Expended funds for eligible activities under federal regulations
and applicable cost principles;
3.Maintained accurate and adequate evidence of measurable results;
4.Administered a sustainable program; and
5.Expended funds timely.
To accomplish our objectives, we interviewed HUD and Council officials;
reviewed the grant application, grant agreement, technical submission,
and Annual Progress Report. We also analyzed financial and participant
records. We selected a judgmental sample of financial transactions
and participants for our audit. The sample of financial transactions
included all salary and benefit costs associated with the grant.
We selected 16 of the 78 individuals assessed by the Council from
October 1998 through April 2000.
Our review concluded the Council's activities were consistent
with its application. However, the Council included $28,892 in ineligible
and/or unsupported costs in grant drawdowns. These costs included
costs not directly associated with the provision of supportive services
and a portion of a director's salary. Due to the Council's goals
and lack of coordination of other members of the Homeless Consortium
in Dallas (Consortium), the Council did not report on its goals.
Furthermore, it has not expended its funds in a timely manner.
Since the inception of the grant, the Council has had a complete
turnover of staff, and the new staff were not familiar with the
program requirements. Furthermore, many of the Council's goals address
the long-term status of its participants. The Council's program
did not include housing assistance, and therefore, could not report
on these goals without the coordination and cooperation of Consortium
members.
We recommend HUD require the Council repay its grant or support
the $28,892 in ineligible and unsupported salary costs charged to
the grant. HUD and the Council should determine whether the Council
should continue providing substance abuse treatment referrals. Also,
HUD should ensure the coordination among Consortium members to meet
the objectives of the Continuum of Care concept.
Recommendations
We recommend that HUD:
1A. Require the Council to reimburse its grant for the $7,536
spent on ineligible salary costs.
1B. Require the Council to either support the $18,274 of salary
costs paid to the Utilization Review Manager or reimburse its grant.
1C. Require the Council to either support or reimburse its grants
the $3,082 of salary benefits paid on the ineligible and unsupported
salary.
1D. Work with the Council in order to determine the feasibility
of the Council continuing to provide substance abuse referrals for
the Dallas Consortium.
1E. Reimburse the Council for eligible substance abuse treatment
provided to participants not drawn down from the supportive housing
grant to date.
1F. Deobligate any funds not expended as of May 31, 2001.
Issue Date: December 18, 2000
Audit Report No.:
01-FW-203-1003
File Size: 920KB
Title: Housing Authority of the City of Uvalde Section 8 and
Low Rent Programs
We have completed an audit of the Housing Authority of Uvalde,
Texas. The objectives of the audit were to: (1) identify the purposes
for which the Authority used unearned Section 8 administrative fees;
(2) determine whether the Authority complied with its Annual Contribution
Contracts (ACC) in the use of certain Section 8 and Low Rent funds;
(3) determine whether the Authority used its Low Rent or Comprehensive
Improvement Assistance Program (CIAP) funds for other purposes;
and (4) determine whether the Authority duplicated payments of certain
travel or other administrative expenses in the Section 8 or Low
Rent Programs that may have been paid by the Authority's affiliate,
the Uvalde Housing Development Corporation. We found the Authority
violated provisions of the ACCs by spending unearned Section 8 funds
and Low Rent funds for other purposes.
The former Executive Director ignored HUD's instructions and violated
HUD requirements by using $563,702 in HUD Program funds to pay for
excessive and questionable expenses. The Authority incurred $375,552
in excessive administrative costs in the Section 8 Program and $188,150
in questionable costs in the Low Rent Program. The excessive or
questionable costs are: (1) $188,284 used to undertake various projects
not related to the operation of these programs, including the construction
of an affiliate's apartment complex; (2) $85,012 paid in excessive
salaries; (3) $167,960 in Low Rent funds transferred to Section
8; (4) $38,023 in unsupported costs; and (5) $84,423 in additional
administrative expenses in excess of the amount earned.
The former Executive Director had an objective to develop properties
not related to the Section 8 and Low Rent Programs. To do this,
he manipulated the Section 8 requisition process. The former Executive
Director was also the Secretary/Treasurer of the affiliate from
which he arranged to receive a rent-free apartment. Therefore, a
conflict of interest appears to be evident. However, the former
Executive Director of the Authority, acting as the Executive Director
of the Authority and the Secretary/Treasurer of the affiliate, severed
the affiliate from the Authority in 1999. As a result, the Authority
is currently in a severe financial condition. The Authority has
reimbursed $224,194 to the Section 8 and Low Rent Programs, but
the Authority still owes HUD $262,925 in unearned Section 8 funds
and $76,583 to the Low Rent Program for the excessive administrative
expenses and questionable costs.
We are making recommendations for corrective actions, including
a recommendation for HUD to consider taking administrative sanctions
against the former Executive Director.
We also looked for duplicative payments from the Section 8, Low
Rent, HOME, and CIAPs that the Authority's affiliate may have paid.
Our review did not disclose such duplicative payments.
We provided a copy of this report to the interim Executive Director
of the City of Uvalde Housing Authority on September 26, 2000, and
they issued their response on October 13, 2000. We had an exit conference
with current Authority Officials on October 19, 2000. We also requested
a response to our preliminary findings from the former Executive
Director, which we received on December 22, 1999, while he was still
employed by the Authority. The responses generally agreed that the
Authority used HUD program funds for other purposes. The former
Executive Director attributed the Authority's severe financial condition
to an embezzlement that occurred prior to his employment. The Authority's
current management said they are taking action to improve the efficiency
of the operations and to collect the funds owed to HUD programs.
The complete responses are contained in Appendix B.
We recommend the Office of Public Housing:
1A. Require the Authority repay HUD $262,925 from nonfederal funds
for the Section 8 funds they over-requisitioned and spent. Also,
identify other additional funds "Due HUD" following HUD's approval
and revision of the Year End Settlement Statements for June 30,
2000;
1B. Require the Authority to recover $49,143 from UHDC for expenses
paid on their behalf. The Authority should reimburse $44,441 to
the Section 8 account and $4,702 to the Low Rent account (We consider
the $44,441 that UHDC owes the Section 8 Programs as part of the
$262,925 the Authority owes HUD and included under recommendation
1A.);
1C. Require the Authority to repay the Low Rent Program $58,799
from nonfederal funds for ineligible transfers that have not been
reimbursed by the Section 8 Program. The Authority should also reimburse
the Low Rent Program for any transfers that have occurred from April
2000 to the report date;
1D. Require the Authority to provide support for $13,082 in unsupported
costs charged to the Low Rent Program for the audit period and any
subsequent unsupported costs from the cut-off date in the audit
report. For the amounts the Authority cannot support, those costs
should be considered ineligible and be repaid from nonfederal funds;
1E. Require the Authority to follow its own travel policies;
1F. Monitor the administrative expense levels until satisfied that
the Authority is complying with HUD budgets and program requirements
by obtaining monthly income and expense reports for Section 8 and
Low Rent Programs from the Board of Commissioners;
1G. Monitor the Section 8 estimates and requisitions until satisfied
that the Authority is not over-requisitioning more annual contributions
than is required by obtaining monthly reports on the amount of Section
8 Administrative Fees Earned and Expended and lease-up activity;
and
1H. Consider taking appropriate administrative sanctions against
the former Executive Director for violations of the Annual Contribution
Contracts that have affected the integrity of the Section 8 and
Low Rent Programs.
Issue Date: December 13, 2000
Audit Report No.:
01-FW-251-1002
File Size: 708KB
Title: City of Dallas Continuum of Care Program, Dallas, Texas
As a part of a nationwide review of HUD's Continuum of Care Program,
we audited the City of Dallas' (City) 1996 Shelter Plus Care grant
and its 1997 Supportive Housing grant. Our objectives were to determine
whether the City: (1) implemented the grants in accordance with
federal regulations and its grant agreements; (2) expended funds
for eligible activities under federal regulations and applicable
cost principles; (3) maintained accurate and adequate evidence of
measurable results; (4) administered a sustainable program; and
(5) expended funds timely.
Our audit concluded the City failed to implement its grants in
compliance with its grant agreements and federal regulations. Specifically,
the City did not: (1) provide and document the matching supportive
services required by the Shelter Plus Care grant; (2) expend its
funds timely; (3) file accurate and consistent Annual Progress Reports;
(4) include only eligible and supported costs in its grant drawdowns;
(5) monitor the participants and their supportive service needs
sufficiently; and (6) perform yearly Housing Quality Standards inspections
for apartments inhabited 1 year or more. Furthermore, the City received
$53,977 and $2,261 for ineligible and unsupported activities, respectively.
The $53,977 included $28,264 of duplicated expenses, $21,130 in
expenses for ineligible participants, and $4,583 in expenses incurred
prior to the grant start date.
Due to the seriousness of the problems, we recommend that HUD
discontinue funding Continuum of Care grants to the City until the
City can demonstrate that it can administer the funds appropriately.
This includes providing HUD a comprehensive management plan and
documentation detailing supportive services provided for all Shelter
Plus Care grants. We also recommend that HUD require the City to
repay $53,977 for ineligible costs and either support or repay $2,261
for unsupported costs.
We held an exit conference with the City on November 2, 2000, during
which we presented our findings. The City provided its response
to the audit report on November 3, 2000. We considered the responses
in preparing our final report.
We recommend HUD to:
1A. Discontinue funding Continuum of Care grants for the City
until such time as the City demonstrates its ability to administer
the grants appropriately. This includes providing HUD a comprehensive
management plan in the areas of: Supportive services; Personnel
training; Oversight responsibility; Participant monitoring; Draw
down procedures and review; Expenditures of grant funds along with
projections; and Annual Progress Report preparation and review.
1B. Require the City to provide a report detailing documented supportive
services provided for all Shelter Plus Care grants. The report should
reflect: Supportive Service providers utilized; Types of services
provided; Dollar value of those services; Steps taken to verify
documentation; and How the supportive services address the particular
needs of the Shelter Plus Care participants.
1C. Require the City to reimburse HUD for $53,977 for ineligible
expenditures.
1D. Require the City to either support or reimburse HUD $2,261
in unsupported costs.
Issue Date: October 10, 2000
Audit Related
Memorandum No.: 01-FW-201-1801
File Size: 69KB
Title: Congressional Inquiry, HOPE VI Roseland Homes Revitalization,
Dallas Housing Authority, Dallas, Texas
Representative Sessions requested a review of the DHA's HOPE VI
application to determine if it contained fraudulent and misleading
information. His office had received a complaint from a constituent
alleging that the HOPE VI Revitalization application contained false
information specifically involving the property purchased within
the Fitzhugh Capital Neighborhood. The complaint alleged the DHA
did not comply with applicable regulations.
The review determined that the HOPE VI Revitalization Application
filed by the DHA did not contain fraudulent or misleading information.
In reviewing the application, it is important to keep in mind that
it is only a proposed plan. The applicant is not required to pinpoint
property for off-site units. In fact, in the case of the HOPE VI
Revitalization Application filed by the DHA, the properties contained
in the application were not the same as the off-site units subsequently
purchased.
Issue Date: September 27, 2000
Audit Related
Memorandum No.: 00-FW-251-1806
File Size: 92KB
Title: Houston Regional HIV/AIDS Resource Group, Inc. Supportive
Housing Grant TX21B96-0617, Houston, Texas
As part of a nationwide review of HUD's Continuum of Care Program,
we audited the 1996 Supportive Housing Grant awarded to the Houston
Regional HIV/AIDS Resource Group, Inc. (Resource Group). The Resource
Group implemented its grant activities through four subgrantees.
During the audit period, Odyssey House did not perform any activities
under the grant. During January 2000, the Resource Group requested
and received HUD approval to replace two grantees.
To complete our audit, we performed audit work at the Resource
Group and three subgrantees: Trinity Life; Covenant House; and DePelchin.
The majority of the findings related to one subgrantee, Trinity
Life. Based upon its own review, the Resource Group terminated its
agreement with Trinity Life in August 1999. Nonetheless, HUD's agreement
was with the Resource Group and therefore, we recommend HUD take
actions against the Resource Group.
Issue Date: September 5, 2000
Audit Related
Memorandum No.: 00-FW-251-1805
File Size: 69KB
Title: Houston Regional HIV/AIDS Resource Group, Inc., Houston,
Texas, HOPWA 94 and SHP-95 Grants, Improper Use of Grant Funds
During our audit of the Houston Regional HIV/AIDS Resource Group,
Inc.'s (Resource Group) 1996 Supportive Housing Program Grant, we
received a complaint that Trinity Life Center (Trinity Life), a
subgrantee of the Resource Group, inappropriately used 1994 Housing
Opportunities for People With Aids (HOPWA) and 1995 Supportive Housing
Program (SHP) grant funds to pay unauthorized salaries. Due to Trinity
Life being a subgrantee of the Resource Group, we direct our findings
at the Resource Group. Our audit of the Resource Group's HOPWA and
SHP funds covered salaries paid from May 1, 1998, through February
15, 1999.
The Trinity Life staff responsible for billing the Resource Group
did not allocate the salaries based upon the employees' time sheets.
Further, it appears that Trinity Life wanted to expend grant funds
before grant termination. The grant agreements required the Resource
Group to charge the grant for the actual activity of the employees.
The Resource Group mistakenly relied upon Trinity Life's allocations
and its monitoring of Trinity Life did not detect the incorrect
billings. As a result, Resource Group charged the grant for ineligible
expenditures.
Issue Date: August 9, 2000
Audit Report No.:
00-FW-201-1004
File Size: 1,944KB
Title: Procurement Activities, Housing Authority of the City
of San Antonio, San Antonio, Texas
We conducted an audit of the San Antonio Housing Authority to
find the extent of procurement irregularities affecting HUD programs
involving: (1) purchases from the Authority's affiliated nonprofit
corporations; (2) child-care services purchased from a former resident
commissioner; (3) furniture purchased from a local nonprofit corporation;
and (4) the Economic Development Program. We found the Authority
violated federal conflict of interest, procurement, and cost requirements
and used HUD program funds to pay about $865,409 in questionable
costs.
Issue Date: May 24, 2000
Audit Report No.:
00-FW-222-1003
File Size: 579KB
Title: Pope and Booth Closing Agent Contract, Austin, Texas
We performed an audit of the law offices of Pope & Booth, P.C.
(Pope & Booth), a closing agent for HUD, as part of a nationwide
effort to review closing agents. Our audit objective was to determine
whether management controls were adequate to ensure the prevention
of fraud, waste, and abuse. To meet this objective, we performed
audit steps to determine whether the closing agent complied with
its contract terms and conditions. Overall, Pope & Booth's controls
were sufficient to ensure substantial compliance with its HUD contract.
However, we also found that Pope & Booth split title insurance fees
and overcharged HUD for wire transfer fees.
Issue Date: May 12, 2000
Audit Report No.:
00-FW-251-1804
File Size: 69KB
Title: Housing Crisis Center Supportive Housing Grants, TX21B960505;
TX21B970903; TX21B970907; Dallas, Texas
As part of a nationwide audit of HUD's Continuum of Care Program,
we reviewed the Supportive Housing Grants awarded to the Housing
Crisis Center (Center).
Our review results concluded that the Center's activities were
consistent with its application. The Center should reimburse its
grant $48,720 for the ineligible participant expenditures. We recommend
that the Center follows its policies to ensure that it allows only
eligible participants into its programs. Also, the Center should
develop and implement procedures and systems to collect relevant
data and report on its performance. The Center also charged the
grant $6,559 in ineligible allocations that should be reimbursed.
Issue Date: January 27, 2000
Audit Report No.:
00-FW-255-1002
File Size: 501KB
Title: HOME Investment Partnership Program Administrative Costs,
Texas
Department of Housing and Community Affairs, Austin, Texas We
have completed a limited review of the direct administrative costs
of the HOME Investment Partnership Program (HOME Program) administered
by the Texas Department of Housing and Community Affairs (TDHCA).
We initiated the review after examining an anonymous complaint that
we could not substantiate relating to the TDHCA. We identified problems
with how the TDHCA supported the use of funds drawn down to cover
HOME Program administrative costs. This report contains two findings.
Issue Date: January 18, 2000
Audit Related
Memorandum No.: 00-251-FW-1801
File Size: 46KB
Title: Dallas Jewish Coalition for the Homeless, Supportive Housing
Grant, TX21B960501, Dallas, Texas
As part of a nationwide review of HUD's Continuum of Care Program,
we audited the Supportive Housing Grant awarded to the Dallas Jewish
Coalition for the Homeless (the Coalition). Our objectives were
to determine whether the Coalition:
Implemented the grant in accordance with its application;
Expended funds for eligible activities under Federal regulations
and applicable cost principles;
Maintained evidence of measurable results; and Expended funds
timely.
As a result of our audit, we determined that the Coalition's activities
were consistent with its application and that it expended funds
timely. However, the Coalition did not have sufficient documentation
to determine whether it met the purpose of the grant. Further, the
Coalition allocated $91,948 in ineligible expenses to the grant.
We recommend that the Coalition develop measurable criteria so that
it can measure grant activities. In addition, the Coalition should
reimburse its grant for ineligible expenses totaling $91,948. Further,
the Coalition should revise its cost allocation practices and procedures
to prevent the allocation of ineligible expenses to the grant.
Issue Date: March 23, 1999
Audit Report No.:
99-FW-255-1004
File Size: 118KB
Title: City of Houston, Texas Homebuyers Assistance Program (Funded
by the HOME Program)
We performed an audit of the City of Houston's Homebuyers Assistance
Program to determine if the City's Department of Housing and Community
Development: (1) properly determined and documented the eligibility
of participants and their properties; (2) had a system to recover
assistance if the program participants sold the property before
5 years; (3) properly contracted with qualified subrecipients to
carry out the program; and (4) adequately monitored administrative
costs paid to subrecipients. We expanded the scope of our review
to determine whether the City was providing unnecessary HOME assistance
to home buyers with large amounts of cash savings.
We found the City has a good system for recovering assistance if
program participants sell the property before 5 years. However,
the audit found that the City and its subrecipients have not properly
administered the Homebuyers Program, a conflict of interest existed
between the City and one of its subrecipients, and the City is providing
unnecessary assistance to home buyers who have sufficient funds
to purchase their own homes.
Issue Date: March 19, 1999
Audit Report No.:
99-FW-206-1801
File Size: 48KB
Title: Hotline Complaint - HM00-20195 Victoria Housing Authority
Victoria, TX
In response to a confidential complaint, we conducted a limited
review at the Housing Authority of Victoria, Texas (Authority).
Specifically, we reviewed the Authority's procurement of consultant
and architectural services and controls for safeguarding the proceeds
from scrapping of assets.
The Authority violated HUD regulations and its own requirements
in procuring construction management and architectural services
for its Comprehensive Grant Program. The Authority also did not
properly account for and safeguard proceeds from sale of scrap metal
and improperly used such funds for employee entertainment expenses.
Issue Date: January 29, 1999
Audit Report No.:
99-FW-201-1003
File Size: 82KB
Title: HA of the City of San Antonio, San Antonio, TX
As part of a nationwide audit of the HOPE VI Program, we performed
an audit of the Housing Authority of San Antonio's (Authority) HOPE
VI grants to determine if the Authority: (1) properly procured contracts
under its HOPE VI grants; (2) only expended amounts for eligible
activities; (3) met the objectives of its Revitalization Plans;
and (4) implemented its community and supportive services components
effectively, efficiently, and in a manner that will allow the activities
to be sustained beyond the grant term.
The audit disclosed serious concerns with the Authority's procurement
process. These concerns include the lack of a contract administration
system and a comprehensive procurement policy and procedures. This
resulted in ineligible and unsupported contract payments totaling
$454,407. The audit also disclosed the Authority's overall progress
has been slow in implementing its HOPE VI grants. Also, the Authority
has not done much in the area of community and supportive services.
Issue Date: October 9, 1998
Audit Report No.:
99-FW-201-1001
File Size: 148KB
Title: HA of the City of Dallas, Dallas, TX
As part of a nationwide audit of the HOPE VI Program, we performed
an audit of the Housing Authority of the City of Dallas' (Authority)
HOPE VI grants to determine if the Authority: (1) effectively, efficiently,
and economically used its HOPE VI funds; (2) properly procured contracts
under its HOPE VI grants; (3) only expended amounts for eligible
activities; (4) met the objectives of its Revitalization Plan; and
(5) implemented its community and supportive services components
in accordance with applicable rules and regulations, and in a manner
that will allow the activities to be sustained beyond the grant
term.
The Authority has made some progress on its revitalization, despite
being seriously hampered by lawsuits. However, the audit disclosed
significant concerns relating to Authority HOPE VI activities. These
concerns include: (1) improper procurements and misallocated costs;
(2) a questionable land purchase; and (3) the need for improved
planning and management of its community and supportive services
activities.
Issue Date: September 30, 1998
Audit Report No.:
98-FW-202-1005
File Size: 136KB
Title: HA of the City of San Antonio, TX
We conducted an audit of the Public Housing Drug Elimination Grant
Program administered by the Housing Authority of the City of San
Antonio, Texas (Authority). Our review was to determine whether
the Authority: (1) implemented its drug elimination program awards
for Grant years 1994 through 1996, with satisfactory outcomes and
benefits and (2) expended program funds for only eligible activities
and in accordance with program requirements for Grant years 1994,
1995, and 1996.
The Authority did not maintain data or have a system to measure
the satisfactory outcomes and benefits of its programs. Without
this data, neither the Authority nor HUD can determine whether the
Drug Elimination Grant Program has provided satisfactory outcomes
and benefits.
The Authority spent about 83 percent of its Drug Elimination Program
funds on eligible activities and costs. However, because the Authority
management and staff either chose to ignore or did not understand
Grant Program requirements, it spent $899,000 in ineligible or questionable
costs (17 percent of the $5,249,000 expenditures for the 1994, 1995,
and 1996 Grants) Also, the Authority received $28,000 in program
income but did not reduce its Grant costs by that amount.
The Authority also did not have a system for coordinated and effective
Grant administration. The Authority had not assigned responsibility
to any specific staff member to supervise, monitor, and coordinate
the overall activities. This led to lack of coordination among staff
and untimely reporting of Grant activities to HUD.
We are recommending the Authority strengthen and improve its administration
of the Grant; repay its Grant Program for ineligible costs; and
either support the questioned costs or repay the Grant program.
Issue Date: April 24, 1998
Audit Report No.:
98-FW-241-1810
File Size: 30KB
Title: City of Dallas Housing Department, Dallas, TX
We decided the matters do not warrant an in-depth audit of the
Dallas CDBG and HOME Programs at this time.
Issue Date: March 6, 1998
Audit Report No.: 98-FW-201-1003
File Size: 151KB
Title: HA of El Paso, TX
The audit disclosed serious concerns relating to major Authority
procurements. These concerns include: (1) sole-source and non-competitive
contracts; (2) apparent conflicts of interest and contractor influence
in Authority procurements; (3) multiple contracts being awarded
to a few contractors; and (4) poor contract documentation. In addition
to procurement concerns, the audit found the Authority may not be
able to sustain its community and supportive services. Due to the
significance of the procurement problems, we are reporting the results
of our review now rather than waiting until the completion of the
nationwide audit.
Issue Date: January 29, 1998
Audit Report No.:
98-FW-206-1807
File Size: 47KB
Title: HA of the City of Crystal City, TX
At your request, we conducted a review of the Housing Authority
of the City of Crystal City , Texas, (Authority). Because of the
deterioration in the Authority's financial condition, resulting
from payment of a lawsuit, and poor contracting practices, we provided
you with our preliminary findings and recommendations on November
14, 1996. This is a follow-up and final report on the results of
the review.
Based on the concerns expressed by your staff, our review objectives
primarily focused on whether the Authority: (1) has the financial
resources to satisfy pending litigation with current and former
employees; (2) procured goods and services in a manner providing
free and open competition free of any conflicts of interest; (3)
improperly paid Section 8 rental assistance to owners for vacant
units, or to local officials having a conflict of interest, or to
landlords that were selling the property to the recipient; (4) properly
expended funds questioned by its independent public accountant's
1994 audit report.
The preliminary report noted the primary problem facing the Authority
is its precarious financial position resulting from the Authority's
entering into an agreed judgment and payment of $115,000 to its
Executive Director. In addition, the Authority was involved in continuing
litigation with several former employees alleging wrongful termination.
The Authority's financial situation has not improved. Subsequently,
the Authority settled two of the lawsuits but has a potential liability
in excess of $100,000 on the third. Therefore, we are continuing
to recommend close monitoring of the financial condition and litigation
status, which may require your exercise of HUD's rights under the
depository agreements with the Authority's banks.
The preliminary report also noted the Authority did not follow
HUD and Federal procurement requirements. The Authority's procurement
practices did not ensure the Authority was obtaining goods and services
at the most reasonable price through open competition and use of
cost and price analyses. Further, the Authority did not have or
did not use appropriate written contracts or, when necessary, obtain
HUD approval of the contracts. In accordance with our preliminary
recommendations, you placed the Authority on a preaward review for
all contracts in excess of $500. This final report is questioning
$102,208 related to the procurement transactions conducted prior
to the HUD preaward requirement. Although we determined the Authority
did not violate HUD's former Annual Contributions Contract conflict-of-interest
provisions in awarding two major construction contracts, any such
future contracts will violate the current Annual Contributions Contract's
conflict-of-interest provisions. We are continuing our recommendation
to conduct preaward reviews because of the Authority's precarious
financial position.
Our review did not disclose any violation of HUD's Section 8 Program
requirements in the Authority's payment of assistance for eligible
families and units. The payment of Section 8 assistance to former
City officials did not violate HUD's Annual Contribution Contract
conflict-of-interest provisions. Further, our review did not disclose
any improper payment of Section 8 funds for vacant units.
The Authority's independent public accountant's report for the
Authority's 1994 fiscal year questioned over $20,000 of disbursements.
We reviewed these disbursements and determined that $3,141 represents
ineligible costs and that the Authority cannot support the propriety
of another $3,394. Both our review and subsequent independent accountant
audits for fiscal years 1995 and 1996 did not identify any subsequent
violations or failure to adequately document the propriety of expenditures.
Issue Date: January 2, 1998
Audit Case No.:
98-FW-202-1806
File Size 62KB
Title: Housing Authority of the City of Brownsville, TX
During the period covered by our review, we noted the Authority
was not in full compliance with HUD requirements for: (1) adequate
safeguarding of its equipment and materials inventory; (2) proper
accounting for use of Comprehensive Grant Program funds; (3) procurement
of goods and services; and (4) allocation of costs attributable
to more than one HUD-funded program. In addition, our review identified
instances where Authority employees were used to conduct non-Authority
business while being compensated with public funds.
Issue Date: October 24, 1997
Audit Case No.: 98-FW-206-1001/1996-01376-01
File Size: 154KB
Title: Housing Authority of the City of Lubbock, Lubbock, TX
The Authority did not follow sound procurement practices; it used
grant funds for unauthorized activities; and it did not report income
it earned on properties it purchased from RTC, thus, HUD overpaid
the annual operating subsidy.
Issue Date: October 14, 1997
Audit Report No.: 98-FW-202-1801
File Size: 56KB
Title: Housing Authority of the City of Corpus Christi, TX
We reviewed following areas: (1) existence of lead-based paint
hazards in family dwelling units, environmental hazards involving
chemical emissions, and location of D. N. Leathers buildings over
discarded chemical drums; (2) natural gas lines not being repaired
timely; (3) inadequate securing of vacant D. N. Leathers units;
(4) sewage problems at D. N. Leathers when it floods; and (5) Executive
Director exercising control over the D. N. Leathers Tenant Association
bank account.
Issue Date: September 29, 1997
Audit Related
Memorandum No.: 97-FW-202-1808
File Size: 15KB
Title: Tenant Opportunities Program Grants, Galveston, TX
During the audit of Housing Authority of the City of Galveston,
Texas the Authority's Board of Commissioners expressed concern over:
(1) the progress of grant activity; (2) the propriety of grant expenditures;
and (3) the appropriateness of the councils' contract with the Authority's
finance director. In February 1997, the resident councils were in
default because of lack of progress and any future grant activity
was suspended until the councils addressed their performance problems.
To resolve the remaining two issues, we reviewed the grant expenditures
and the contract with the finance director to determine whether
any irregularities were indeed present. Our review did disclose
irregularities, primarily the failure of the resident councils to
keep appropriate records. However, we did not note any expenditures
that were ineligible and the contract with the finance director
did not violate any HUD rule.
Issue Date: September 3, 1997
Audit Case No.: 97-FW-204-1004
File Size: 154KB
Title: Housing Authority of the City of Galveston, TX
Our review covered the areas of: (1) supporting documentation
for use of Low Rent Program funds; (2) procurement; (3) cash management;
(4) use of Section 8 operating reserves to subsidize a non-HUD project;
(5) Drug Elimination Grant activities; (6) administrative practices
related to cost allocation, payroll, and travel; and (7) classification
of employees under the Fair Labor Standards Act.
Issue Date: August 26, 1997
Audit Case No.: 97-FW-211-1003
File Size: 104KB
Title: Medlock Southwest Management Corp., Lubbock, TX
In response to a complaint, we performed an audit of Medlock Southwest
Management Corporation. The purpose of the audit was to determine
the validity and materiality of problems identified with payments
for employee injury insurance premiums, management agent reimbursement
for payrolls, payments to owners for administrative management fees,
and charges to projects by identity-of-interest companies.
Issue Date: July 7, 1997
Audit Case No.: 97-FW-209-1002
File Size: 1,515KB
Title: Housing Authority of the City of Austin, TX
Our review covered the areas of: (1) selection and housing of
tenants in the Section 8 Program; (2) maintenance of Low Rent units
including turnaround of vacant units; (3) procurement of goods and
professional services; and (4) administrative practices involving
payroll, travel, and use of vehicles and telephones. Subsequent
to our completion of field work, both the Executive Director and
Deputy Executive Director have resigned. In February, the Board
hired Mr. Jim Hargrove as the new Executive Director. Mr. Hargrove
has inherited the problems identified in the findings of this report.
The references within this report to executive management refers
to Ms. Chargois and Mr. Papoola, who were Executive Director and
Deputy Executive Director, respectively, during our audit of the
Authority.
Issue Date: March 28, 1997
Audit Related
Memorandum No.: 97-FW-211-1805
File Size: 26KB
Title: LULAC East Park Place Apts., San Antonio, TX
We did not identify any indications of improper diversions of
project funds or assets by the owner or agent other than: (1) the
$24,000 in mortgagor entity legal fees previously identified by
your staff and (2) a $563 purchase of supplies with project funds
that were for another project owned by the agent. We also observed
that the owner and management agent have sufficient documentation
to show the expenditure of the Flexible Subsidy Loan was for rehabilitating
the project and in accord with the HUD approved MIO Plan. Further,
we noted: (1) the taxing districts reduction in the appraised value
was based on value before the completion of the flexible subsidy
funded rehabilitation work; (2) the owner has accounted for the
1993 receipt and disposition of funds from the frozen bank account;
and (3) the independent auditor's 1994 report contains an explanation
for the beginning cash balance. However, we did observe that the
owner and management agent had not properly disclosed identity-of-interest
relationships with contractors and suppliers. HUD does not prohibit
such related party transactions but does require disclosure and
prohibits prices paid being more than that available from arms-length
companies. The owner and management agent obtained bids and/or proposals
from unrelated contractors to support that prices paid were reasonable.
Based on the survey, we do not believe a full audit is warranted.
However, we are making some recommendations regarding the questioned
cost and identity-of-interest disclosure issue.
Issue Date: February 14, 1997
Audit Case No.:
97-FW-249-1001
File Size: 104KB
Title: CDBG Program, Houston, TX
We have performed a review of the City of Houston's use of Community
Development Block Grant Program funds to rehabilitate two multifamily
properties. During our audit of the HUD-funded HOME Program, it
came to our attention that the City may not have followed proper
procurement procedures in contracting for the use of grant funds
to rehabilitate two multifamily properties the City acquired from
the Resolution Trust Corporation.
Issue Date: October 16, 1996
Memorandum No.:
97-FW-222-1802
File Size: 16KB
Tite: Hotline Complaint, Golden Feather Realty Services, Inc./REAM
Inc. HUD Offices - Fort Worth, TX, San Antonio, TX, and Phoenix,
AZ
The Office of Inspector General received a Hotline Complaint alleging
that: (1) Golden Feather Realty Services, Inc., a San Antonio-based
company, subcontracted work to a company that it owned and (2) a
HUD employee provided contracting information to Golden Feather
relative to their bid for the Fort Worth HUD Office Real Estate
Asset Management (REAM) contract. The anonymous complainant also
noted that Golden Feather currently had REAM contracts with HUD
in the Fort Worth, San Antonio, Phoenix, and New Orleans Offices.
HUD Property Disposition staff in New Orleans stated that neither
company had REAM contracts for their area. Neither the HUD Property
Disposition staff nor the third parties could provide any information
that would substantiate the allegations. Therefore, we plan no further
review of the allegations.
Issue Date: September 9, 1996
Audit Report No.: 96-FW-212-1804
File Size: 10KB
Title: Nova Management, Houston, Texas
As a result of your efforts, based on the draft, a successful
settlement agreement was reached with Nova Management. Your staff
advised that Nova made the last payment under the settlement agreement
on August 10, 1996. Also, the President of Nova Management has apparently
taken a more active interest in the day-to-day operations to ensure
that HUD requirements are being followed. Therefore, the combined
efforts of the HUD Multifamily staff and the OIG Audit staff led
to the successful completion of this Operation Safe Home effort.
Issue Date: August 19, 1996
Audit Report No.: 96-FW-214-1002
File Size: 37KB
Title: Credit Finance Corp., Dallas, TX
The review found that CFC disbursed at least $87,700 in project
funds for invalid boiler and machinery insurance. The "insurer"
and CFC's president lacked legal authority to sell insurance to
the projects. Consequently, nine HUD projects, including three projects
in default, paid for services they never received. This occurred
because CFC's president ignored or did not adequately consider applicable
State insurance laws and the impact of HUD requirements.
Issue Date: October 16, 1995
Audit Case No.: 96-FW-214-1001
File Size: 62KB
Title: Credit Finance Corp., Dallas, TX
Generally, CFC maintained good records and followed sound management
practices. However, the audit found that CFC: (1) made unauthorized
distributions and did not remit residual receipts to mortgagees;
(2) disbursed project funds for ineligible and unsupported costs;
(3) diverted operating funds from one project to the owner and overcharged
the project for bookkeeping services; (4) improperly implemented
the automated Tenant Rental Assistance Certification System (TRACS);
and (5) did not properly compute excess rental income for Section
236 projects.