Virginia Audit Reports
Issue Date: July 24, 2007
Audit
Report No.: 2007-PH-1009
File Size: 463.59KB
Title: The Newport News Redevelopment and Housing Authority, Newport
News, Virginia, Did Not Effectively Operate Its Housing Choice Voucher
Program
We audited the Newport News Redevelopment and Housing Authority's
(Authority) Section 8 Housing Choice Voucher program (program).
The audit was part of the activities in our fiscal year 2006 annual
audit plan. We selected the Authority based upon our analysis of
various risk factors relating to the housing authorities under the
jurisdiction of HUD's Baltimore field office. Our objective was
to determine whether the Authority managed its program in accordance
with U.S. Department of Housing and Urban Development (HUD) requirements.
The Authority often did not operate its program in accordance
with HUD requirements and regulations . It often failed to ensure
that its program housing stock met housing quality standards, did
not adequately support housing assistance payments , and incorrectly
calculated housing assistance payments. Of the 66 housing units
inspected, 54 did not meet HUD's housing quality standards, and
28 had 98 violations that existed at the time of the Authority's
previous inspection. This resulted in $110,850 in housing assistance
payments and administrative fees paid by HUD for units that were
not decent, safe, and sanitary. We also estimated that over the
next year, HUD will pay more than $4 million in housing assistance
payments on units with material housing quality standards violations.
Additionally, 48 of the 74 tenant files reviewed did not contain
the documentation required by HUD and the Authority's program administrative
plan resulting in $262,287 in unsupported housing assistance payments
and administrative fees. The Authority also incorrectly calculated
housing assistance payments, resulting in $7,523 in overpayments
and $7,197 in underpayments from January 2004 through March 2006.
We recommend that the director of HUD's Baltimore Public Housing
Program Hub require the Authority to ensure that housing units inspected
during the audit are repaired to meet HUD's housing quality standards,
implement adequate procedures and controls to ensure that program
units meet housing quality standards to prevent an estimated $4
million from being spent on units with material housing quality
standards violations, reimburse its program from nonfederal funds
for the improper use of $110,850 in program funds, and provide documentation
or reimburse its program $262,287 from nonfederal funds for unsupported
housing assistance payments and administrative fees. Lastly, we
recommend that HUD require the Authority to repay $7,523 in housing
assistance overpayments and reimburse tenants $7,197 in housing
assistance underpayments.
Issue Date: February 22, 2007
Audit
Report No.: 2007-PH-1005
File Size: 291KB
Title: The Newport News Redevelopment and Housing Authority, Newport
News, Virginia, Did Not Always Follow HUD Requirements
We audited of the Newport News Redevelopment and Housing Authority
(Authority). Our main audit objective was to determine whether the
Authority appropriately used low-rent public housing funds to support
its other programs and whether it purchased goods and services in
compliance with U.S. Department of Housing and Urban Development
(HUD) and federal regulations. We also evaluated the Authority's
compliance with HUD regulations for recertifying low-income housing
tenants and its support for drawdowns of HUD funds.
The Authority generally complied with HUD regulations for recertifying
low-income housing tenants and properly supported its drawdowns
of HUD funds. However, contrary to its consolidated annual contributions
contract, the Authority used low-rent public housing funds to pay
expenses of its other HUD and non-HUD programs and did not settle
the $246,254 balance due to the low-rent public housing fund in
a timely manner. It also did not always record financial transactions
on its books in a timely manner. Additionally, contrary to federal
procurement regulations and its own procurement policy, the Authority
did not always adequately justify awarding contracts. These problems
occurred because the Authority did not have internal controls requiring
it to reconcile and settle its accounts monthly and ensure that
it recorded financial transactions on its books in a timely manner.
Further, the Authority staff did not follow its established procurement
policy and was unaware of pertinent requirements.
We recommended that HUD direct the Authority to repay its low-rent
public housing fund $246,254 owed by its other HUD and non-HUD programs
and create and implement policies and procedures to ensure that
all transactions are recorded on the books in a timely manner and
that the due-to/due-from account is reconciled and settled monthly,
thereby putting $489,522 in public housing funds to better use over
a one-year period. Further, we recommended that the Authority develop
and implement procedures to ensure that it properly awards contracts
according to established policies and procedures and emphasize to
responsible personnel the need to follow applicable policies and
procedures and provide them training regarding federal procurement
requirements.
Issue
Date: September 18, 2006
Audit
Report No.: 2006-PH-1013
File Size: 1.13MB
Title:
The Commonwealth of Virginia, Richmond, Virginia, Did Not Ensure
HOME Funds Were Disbursed and Used in Accordane with Federal Regulations
We audited
the Commonwealth of Virginia's (Commonwealth) HOME Investment Partnerships
program (HOME) as part of our fiscal year 2006 annual audit plan.
Our audit objective was to determine whether the Commonwealth's
Department of Housing and Community Development was properly administering
its HOME program. The Commonwealth did not ensure that HOME funds
were disbursed and used in accordance with federal regulations.
We reviewed project funds disbursed through the Commonwealth's Affordable
Housing and Preservation program, operating assistance grants awarded
to community housing development organizations, and downpayment
and closing cost assistance provided through the Commonwealth's
Single Family Regional Loan Fund.
The
Commonwealth did not always comply with federal regulations and/or
its own requirements in its disbursements and administration of
HOME funds for various purposes. These problems occurred because
it did not develop and document critical risk assessments and implement
an adequate monitoring program to ensure that it properly administered
the HOME program. As a result, HOME funds totaling $183,706 were
used for ineligible expenses or activities and $527,060 in expenses
were unsupported. The Commonwealth also accumulated more than $3.2
million in administrative funds that should have been used to improve
its administration of its HOME program and to fund additional eligible
HOME projects.
We recommend
that the director of the Richmond Office of Community Planning and
Development require the Commonwealth to recover $183,706 it spent
on ineligible expenses and provide support for $527,060 in expenses
or repay the amount to the HOME program. In addition, the Commonwealth
should use the accumulated $3.2 million in administrative funds
to improve its monitoring program and recommit any excess funds
to eligible HOME projects. Lastly, we recommend that the Commonwealth
create and implement procedures to ensure that HOME funds are disbursed
and used in compliance with applicable regulations.
Issue
Date: July 12, 2006
Audit
Report No.: 2006-PH-1011
File Size: 451.15KB
Title:
The Hampton Redevelopment and Housing Authority, Hampton, Virginia,
Did Not Always Follow HUD Requirements
We audited
of the Hampton Redevelopment and Housing Authority. Our objective
was to determine whether the Authority carried out its operations
in accordance with applicable U.S. Department of Housing and Urban
Development (HUD) requirements.
The
Authority carried out much of its operations in accordance with
applicable HUD requirements. It generally provided reasonable housing
assistance payments to eligible recipients, inspected its Section
8 units annually, and properly supported its drawdown of HUD funds.
However, contrary to its annual contributions contract, the Authority
did not properly allocate $59,816 in salary and benefit costs to
its nonfederal housing developments. It also did not always follow
federal procurement requirements when awarding contracts. In addition,
it made some incorrect housing assistance payments and did not settle
$61,867 in interfund balances due its low-rent public housing fund
from other HUD programs in a timely manner. These problems generally
occurred because the Authority did not have adequate internal controls
in place to ensure that it fully complied with HUD and other federal
requirements.
We recommend
that the director of the Baltimore Public Housing Program Hub require
the Authority to provide adequate documentation to support $59,816
in questioned salary and benefit costs or reimburse its public housing
program from nonfederal sources. We also recommend that the Authority
provide adequate documentation to justify its awarding of four contracts
or repay the program $84,891 or the amount currently expended under
the contracts from nonfederal funds. Additionally, we recommend
that HUD reduce the amount of housing assistance payments by the
$5,090 overpayment on the Authority's next Section 8 year-end settlement
statement and require the Authority to reimburse applicable tenants
$773 for housing assistance underpayments, thereby putting these
funds to better use. We further recommend that HUD direct the Authority
to repay its low-rent public housing fund $61,867 from its other
HUD programs. Lastly, we made several recommendations for the Authority
to create and implement adequate internal controls to ensure that
it fully complies with HUD and other federal requirements.
Issue Date: November 30, 2005
Audit
Report No.: 2006-PH-1003
File Size: 261.95KB
Title: The Franklin Redevelopment and Housing Authority, Franklin,
Virginia, Did Not Adequately Administer Its Section 8 Program
We audited the Franklin Redevelopment and Housing Authority's (Authority)
Section 8 Housing Choice Voucher program. Our audit objective was
to determine whether the Authority adequately administered its Section
8 program according to U.S. Department of Housing and Urban Development
(HUD) requirements.
The Authority did not adequately administer its Section 8 program
according to HUD requirements. The Authority often made incorrect
housing assistance payments and did not perform required quality
control reviews of its Section 8 tenant files. Additionally, the
Authority did not verify rent reasonableness and it allowed an apparent
conflict of interest situation to exist. These problems occurred
because the Authority did not have adequate internal controls in
place to ensure it adequately administered its Section 8 program.
We recommend that HUD require the Authority to repay $9,662 in
housing assistance overpayments and reimburse tenants $1,520 in
housing assistance underpayments. We also recommend and the Authority
agreed to strengthen its internal controls in order to ensure it
adequately administers its Section 8 program and prevents future
apparent conflict of interest situations.
Issue
Date: October 17, 2005
Audit
Report No.: 2006-PH-1002
File Size: 194KB
Title:
The Suffolk Redevelopment and Housing Authority, Suffolk, Virginia
We
audited the Suffolk Redevelopment and Housing Authority's (Authority)
Operations as part of our fiscal year 2005 annual audit plan. Our
audit objective was to determine if the Suffolk Redevelopment and
Housing Authority carried out its operations in accordance with
applicable U.S. Department of Housing and Urban Development (HUD)
requirements. For the most part, the Authority carried out its operations
in accordance with applicable HUD criteria. It properly inspected
its Section 8 units, followed proper contracting procedures, and
properly supported its draw down of HUD funds. However, the Authority
did not always properly calculate Section 8 tenant income and utility
allowances resulting in net overpayments of $5,127. Additionally,
for one of its public housing developments, the Authority sometimes
did not perform required annual inspections or properly recertify
the tenants. We recommend that HUD reduce the Authority's housing
assistance payments by $5,127 on its next Section 8 year-end settlement
statement to account for the overpayments. Additionally, we recommend
that HUD require the Authority to follow its Section 8 administrative
plan and to prepare periodic reports showing the results of file
reviews and any actions taken. We further recommended that HUD require
the Director of Public Housing to perform the necessary reviews
to ensure re-certifications and inspections are done when required.
Issue Date: October 4, 2005
Audit
Report No.: 2006-PH-1001
File Size: 474KB
Title: The Alexandria Redevelopment and Housing Authority, Alexandria,
VA, Improperly Used Section 8 Funds to Support Its Other Programs
We performed an audit of the Alexandria Redevelopment and Housing
Authority's (Authority's) use of Section 8 funds. Our audit objective
was to determine whether the Authority improperly used Section 8
funds to support its other programs.
We found that the Authority, contrary to its consolidated annual
contributions contracts, improperly used Section 8 funds to support
its other programs. This occurred because the Authority did not
have internal controls in place to track its Section 8 administrative
and housing assistance funds during the year, monitor and periodically
settle the Section 8 programs' due-to/due-from account, and prevent
it from using Section 8 funds to support its other programs. As
a result, the Authority improperly used $462,214 of Section 8 funds
to support its other programs.
We recommended that the Authority repay its Section 8 programs
$462,214 that it improperly used to support its other programs.
The Authority took action to repay that amount during the audit.
We further recommended that HUD require the Authority to create
and implement internal controls to track its Section 8 administrative
and housing assistance funds during the year, reconcile and settle
its Section 8 due-to/due-from account monthly, and prevent it from
improperly using Section 8 funds to support its other programs,
thereby putting $462,214 to better use over a one-year period.
Issue Date: June 1, 2005
Audit
Report No.: 2005-PH-1011
File Size: 448.28KB
Title: America House, Incorporated, Marshall, Virginia, and Its
Subsidiaries Did Not Comply with HUD Requirements Covering Their
HUD-insured Mortgages
We completed this audit at the request of the director of HUD's
Richmond Multifamily Program Center. The objective of our audit
was to determine whether America House, Incorporated and its subsidiaries
complied with HUD requirements covering their HUD-insured mortgages.
America House, Incorporated and its subsidiaries did not comply
with HUD requirements covering their HUD-insured mortgages. Contrary
to their regulatory agreements with HUD, America House, Incorporated
and its subsidiaries failed to make the mortgage payments for their
three HUD-insured properties even when the mortgaged properties
produced sufficient income to cover the payments. In addition, America
House, Incorporated improperly commingled funds in violation of
its Regulatory Agreements and did not properly maintain project
records. These later actions prevented us from performing a thorough
audit of the three HUD-insured properties. America House, Incorporated
defaulted on the notes and HUD was compelled to sell the properties
at a loss of $4.1 million in September 2004.
We recommend that HUD pursue appropriate administrative sanctions
against the owner and president of America House, Incorporated and
its three wholly owned subsidiaries.
Issue Date: April 8, 2005
Audit
Report No.: 2005-PH-1009
File Size: 714.43KB
Title: Richmond Redevelopment and Housing Authority, Richmond,
VA, Did Not Always Properly Use HUD Funds
We performed the audit in response to a citizen's complaint. Our
audit objective was to determine if the Authority properly used
HUD funds in accordance with its Annual Contributions Contract.
We found the Authority did not always properly use HUD funds in
accordance with its Annual Contributions Contract. Contrary to its
Annual Contributions Contract, the Authority improperly used $6.1
million in Public Housing Low Rent Funds to pay the administrative
expenses of other HUD programs. Additionally, the Authority improperly
used $1.5 million in HUD funds to support its nonfederal entities
and could not support all costs. These problems occurred because
the Authority's former Executive Director and the Authority's Board
of Commissioners did not ensure adequate internal controls were
in place to prevent them.
We recommend HUD require the Authority to discontinue its practice
of using Public Housing Low Rent Funds to pay administrative expenses
of its other programs. We also recommend that HUD require the Authority
to reconcile funds owed to its Public Housing Low Rent Program from
its other HUD programs and then reduce the appropriate programs'
funding by $6.1 million or the amount certified from the reconciliation.
We further recommend the Authority recover $1.5 million it provided
its nonfederal entities or repay it from nonfederal sources.
Issue
Date: December 21, 2004
Audit
Report No.: 2005-PH-1003
File Size: 1.1MB
Title:
The Town of Clifton, VA's, Participation in the Single Family Property
Disposition Discount Sales Program
In
response to a congressional and departmental request, we audited
the Town of Clifton's participation in the U.S. Department of Housing
and Urban Development's (HUD) Single Family Property Disposition
Discount Sales Program (Sales Program). Our objective was to determine
whether the Town appropriately participated under the Sales Program
using the competitive sales method, re-sold rehabilitated properties
at prices less than 110 percent of their net development cost, and
re-sold the properties only to income-eligible homebuyers.
We found the Town of Clifton did not fully comply with HUD's rules
and regulations in administering its Sales Program. Specifically,
the Town of Clifton could not adequately support property rehabilitation
costs it claimed it made to the properties it sold under the program,
paid for a number of repairs that did not exist, and it sold several
properties at sale prices above the amount allowed by HUD requirements.
Specifically, from our review of a sample of 10 of the 89 properties
the Town of Clifton re-sold under the program, we found the Town
of Clifton's contractor paid $9,380 of ineligible charges for repairs
to items that did not exist in seven homes. For these seven homes,
the Town received $103,125 of ineligible discounts from HUD when
it purchased under the Discount Sales Program. Also, since we found
the process the Town of Clifton's contractor used to identify and
pay for repair costs was neither accurate nor reliable, we questioned
the remaining $205,615 in repair costs claimed for the 10 homes
we inspected and the $37,350 in discounts the Town received on the
three remaining homes.
We
recommend the Department require the Town of Clifton schedule an
independent inspection of the 79 remaining homes it has processed
under the Discount Sales Program to verify that all work was satisfactorily
completed. For any work that had not been actually completed, we
recommend the Town pay down the homeowners' mortgage by the appropriate
amount. Additionally, we recommend HUD review the deficiencies noted
in this report and determine whether the Town of Clifton should
be allowed to participate in the Discount Sales Program.
Issue Date: September 8, 2004
Audit
Report No.: 2004-PH-1011
File Size: 737.7KB
Title: Petersburg Redevelopment and Housing Authority, Petersburg,
VA, Did Not Follow Federal Procurement Regulations or Properly Manage
HUD Funds
We performed an audit report on the operations of the Petersburg
Redevelopment and Housing Authority (Authority). Our audit objective
was to determine if the Authority properly awarded contracts to
its consultants and attorneys and whether it could support that
it used U.S. Department of Housing and Urban Development (HUD) funds
to meet its mission of providing safe and sanitary housing for the
low income citizens of Petersburg, Virginia.
Our audit showed the Authority did not properly award contracts
to its consultants and attorneys and it could not support that it
used all HUD funds to meet its mission. We reviewed all payments
the Authority made to consultants and attorneys from January 1998
to October 2003 in which it used federal funds, and found in all
instances it violated federal procurement regulations. Specifically,
the Authority paid $558,842 four consultants and attorneys who were
never awarded written contracts that specified the terms and conditions
of the services they would be required to provide the Authority.
It also paid another law firm $324,074 under a contract that was
never competitively bid to ensure it obtained the best value for
those services. The Authority also could not provide required documentation
such as invoices, receipts, cancelled checks and payroll records
to substantiate how it spent $1.9 million HUD provided it from December
1998 to May 2003.
We recommend HUD take appropriate administrative action against
the Authority's former Executive Director and former Finance Director.
We also recommend that it require the Authority to reimburse HUD
$2.8 million from nonfederal sources unless it can provide additional
documentation to resolve the cited deficiencies. We further recommend
that HUD periodically monitor the Authority to ensure it complies
with federal regulations governing procurement and bookkeeping requirements
in the future.
Issue Date: May 17, 2004
Audit
Memorandum No.: 2004-PH-1006
File Size: 165.3KB
Title: Peninsula AIDS Foundation, Incorporated, Newport News,
Virginia
We performed an audit of the Peninsula AIDS Foundation, Incorporated
at the request of HUD's Richmond Office, Community Planning and
Development Division to determine if it expended grant funds in
accordance with HUD policies and procedures, and within the terms
and conditions set forth in its grant agreement. The Peninsula AIDS
Foundation, Incorporated became officially inactive on March 1,
2004.
We found the Peninsula AIDS Foundation, Incorporated could not
substantiate how it used $339,661of $353,562 (96-percent) of the
grant funds it received from HUD under a Supportive Housing Program
renewal grant and a Housing Opportunities for Persons with AIDS
grant. It did not retain, nor did it provide the organizations assigned
the grants, auditable financial records or related documentation.
As a result, there is no assurance that it used the funds to assist
the homeless with housing and supportive services or addressed the
specific housing and other supportive needs of persons living with
HIV/AIDS and their families as required by the grant agreements.
We recommend that HUD initiate administrative actions as appropriate
against former members of the Board of Directors and Executive Committee
of the Peninsula AIDS Foundation, Incorporated to preclude them
from participating in any future federal awards. We also recommend
that HUD request guidance from its Office of General Counsel on
the possibility of recovering the unsupported costs from the former
members of the Board of Directors and Executive Committee of the
Peninsula AIDS Foundation, Incorporated. HUD agreed to our recommendations
and proposed a final action target date of November 17, 2004, which
we accepted.
Issue Date: March 25, 2004
Audit
Report No.: 2004-PH-1005
File Size: 1.38MB
Title: Petersburg Redevelopment and Housing Authority Nonfederal
Entities
Petersburg, Virginia
Our audit showed the Authority regularly used federal funds improperly
to support its nonfederal entities and placed its Annual Contributions
Contract assets at risk by improperly guaranteeing the debt of two
of its three affiliated nonfederal entities. This occurred because
the Authority did not properly account for work its employees performed,
and failed to establish appropriate management controls to prevent
it from encumbering or pledging its federal assets without HUD approval.
The Authority's high management turnover, inadequate financial system,
and practice of allowing key Authority personnel to serve in similar
roles for its nonfederal entities contributed to these problems.
As a result, the Authority improperly pledged assets to guarantee
debt incurred by its nonfederal entities estimated at $950,318.
Additionally, the Authority paid salaries from federal funds for
work its employees performed in support of its affiliated nonfederal
entities on a part-time basis. We recommended HUD require the Authority
to recover or repay these salaries estimated at $620,236 from nonfederal
funds. Further, we estimated the Authority could more effectively
utilize another $370,415 annually by ensuring it was properly accounting
for and receiving reimbursement for work its employees performed
for its affiliated nonfederal housing projects, and by preventing
apparent conflict of interest situations in the future. We further
recommended HUD require the Authority to implement controls to prevent
it from pledging future HUD assets, and that it immediately withdraw
its pledge of Consolidated Annual Contributions Contract assets.
We also recommended HUD take appropriate administrative action
against the Chairmen of the Authority's Board of Commissioners responsible
for pledging HUD assets. Lastly, we recommended HUD require the
Authority to develop a reasonable method for allocating and collecting
future costs from its affiliated nonfederal entities.
Issue Date: September 23, 2003
Audit
Report No.: 2003-PH-1005
File Size: 1.5MB
Title: Portsmouth Redevelopment and Housing Authority, Portsmouth,
VA
We completed an audit of the Portsmouth Redevelopment and Housing
Authority's (Authority) operations. Our specific objectives were
to determine whether the Authority (1) performed modernization effectively
and efficiently; (2) followed Federal Purchasing requirements and
its own established requirements in awarding and administering contracts;
(3) maintained low-income housing projects in a safe, decent, sanitary
condition and, (4) effectively managed its Section 8 Program.
We found significant weaknesses in the way the Authority awarded
and administered a number of its modernization contracts. Specifically,
we found the Authority awarded three consecutive contracts valued
at about $8.0 million from Fiscal Years 1997 to 2001 to a single
contractor who substantially missed deadlines, performed substandard
work and failed to comply with contract specifications. The Authority
also used its own maintenance staff to make repairs covered by the
contract warranty and did not ensure the contractor performed work
in accordance with Occupational Safety and Health Agency guidelines.
These problems generally occurred because the Authority did not
adequately consider the contractor's ability to perform the work
and did not maintain an adequate contract administration system
to ensure contractors performed in accordance with the terms, conditions,
and specifications of their contracts. Our HUD housing inspector
could only validate work estimated at about $3.5 million for the
$8.0 million the Authority expended on the three modernization contracts.
As a result, we questioned the entire $8.0 million value of the
contracts. Further, the Authority selected the developer of its
$24.8 million HOPE VI Grant without adequately documenting the reasons
why they selected it, and could not support HOPE VI costs totaling
$74,608.
We also identified significant weaknesses in the Authority's maintenance
of its low-income housing and administration of its Section 8 Program.
However, during the audit the Authority took corrective actions
to significantly improve its performance in these areas. For example,
the Authority increased its physical condition scores under HUD's
Public Housing Assessment System for its four developments by 11
to 77-percent from September 2001 to December 2002. Further, the
Authority provided about 500 additional low-income families with
Section 8 assistance from June 30, 2001 through June 30, 2003
Issue Date: June 24, 2003
Audit
Memorandum No.: 2003-KC-1006
File Size: 810KB
Title: Horizon Consulting, Inc.,
44135 Woodridge Parkway, Suite 100
Lansdowne, VA 20176
We have completed an audit of Horizon Consulting, Inc., a Santa
Ana Home Ownership Center contractor performing insurance endorsement
review procedures. Our objective was to determine if loans submitted
for late endorsement were properly endorsed by Horizon Consulting,
Inc. We found Horizon Consulting inappropriately endorsed 112 of
the 229 loans we reviewed. The 112 loans, valued at $16,298,236,
did not have the required documentation for processing. Based on
these results, we are 90 percent confident that Horizon Consulting
improperly endorsed between 10,484 and 13,249 loans during fiscal
year 2001. We recommend that the Assistant Secretary for Housing-Federal
Housing Commissioner seeks indemnification from the respective mortgagees
for the 83 loans that are still HUD insured where we found significant
documentation missing. Additionally, we recommend that the Assistant
Secretary ensures Horizon Consulting improves its quality control
procedures, and takes appropriate administrative action against
Horizon.
Issue Date: March 27, 2003
Audit Memorandum No.: 2003-PH-1801
File Size: 128KB
Title: Royal Arms Apartments, Front Royal, VA, Management Improvement Operating Funds
The purpose of our review was to determine if the allegations in
the complaint had merit. Specifically, our objectives were to determine
whether the sale of the property and subsequent transfer of the
Management Improvement Operating Funds was authorized by HUD, did
not violate any HUD regulations and did not financially benefit
the new owners. Our review showed the allegations in the complaint
had no merit.
Issue Date: December 20, 2002
Audit Report No.: 2003-PH-1001
File Size: 4.05MB
Title: Review of the Joint Empowerment Zone Program of the Cities
of Norfolk and Portsmouth, Virginia
We completed an audit of the Joint Empowerment Zone Program of
the cities of Norfolk and Portsmouth, Virginia at the request of
Congress. The City of Norfolk was the lead entity responsible for
administering the program. Our audit objectives were to determine
if the City efficiently and effectively used Zone funds and if it
accurately reported the Zone's accomplishments to HUD.
Our audit showed that the City generally maintained adequate oversight
over the majority of its Empowerment Zone funds but needed to strengthen
its administration of the Program to ensure that all funds are used
efficiently and effectively. Our review of eighteen funded Empowerment
Zone activities showed that the City did not maintain adequate control
over about 7.25-percent of the $8.9 million of disbursements we
reviewed and did not always accurately report the accomplishments
of the program to HUD.
The City obtained $293,772 from HUD for activities without approved
implementation plans and paid $100,332 for items or services that
were either unallowable or unsupported. To ensure that funds are
used efficiently and effectively the City needs to submit separate
implementation plans for each activity to HUD for review and approval
and ensure costs meet federal requirements. The City also did not
properly allocate costs totaling $249,342 among activities benefiting
from the funding. Lastly, the City needed to improve the accuracy
of information it reported to HUD by developing and maintaining
a formal reporting policy and a centralized database system.
Issue
Date: September 30, 2002
Audit
Memorandum No.: 2002-PH-1002
File Size: 399KB
Title: Congressionally Requested Audit of the Outreach and Training
Assistance Grant Awarded the Virginia Poverty Law Center, Grant
Number FFOT98029VA Richmond, VA
Pursuant to Section 1303 of the 2002 Defense Appropriations Act
(Public Law 107-117), we completed an audit of the Virginia Poverty
Law Center's (Grantee) Outreach and Technical Assistance Grant (OTAG).
The primary objective of our review was to determine whether the
Grantee expended Section 514 grant funds for only eligible activities
as identified in the OTAG agreement and in accordance with U.S.
Department of Housing and Urban Development (HUD) and other Federal
requirements to further the Mark-to-Market Program. Also, the review
was conducted to determine whether the Grantee used grant funds
to pay expenses associated with lobbying activities. Federal regulations
specifically prohibit the use of grant funds for lobbying activities.
The audit identified that the Grantee could not provide adequate
support for $63,050 in disbursements it made for salaries and fringe
benefits and $11,950 in indirect costs. We also noted the Grantee
did not comply with other requirements of the enabling legislation
and the Office of Management and Budget's (OMB) Circular A-122,
Cost Principles for Non-Profit Organizations, which included using
grant funds to participate in various lobbying activities. Accordingly,
we made recommendations that will correct the above deficiencies.
Issue Date: March 26, 2002
Audit
Memorandum No.: 2002-PH-1802
File Size: 544KB
Title: D.B. Frye and Associates, Management Agent Activities,
Norfolk, Virginia
We completed a limited review of project operations and management
agent activities of D.B. Frye and Associates, an owner and identity-of-interest
management agent. The review was initiated in conjunction with an
investigation conducted by the Office of Inspector General for Investigations,
Mid-Atlantic of alleged financial mismanagement at the Stuart Gardens
I and II projects. The criminal investigation showed employees at
both Stuart Gardens projects circumvented financial and procurement
controls and embezzled over $891,000 in fraudulent construction,
renovation, and rent receipt schemes over several years.
We reviewed the Owner/Agent's operations at four multi-family projects
(Stuart Gardens I and II, Hilltop North, and Southgate Court) within
the jurisdiction of the Virginia State HUD Office to determine whether
the Owner/Agent operated the projects in accordance with Regulatory
and Management Agreements and in compliance with HUD requirements.
We found the Owner/Agent did not maintain adequate accountability
over project financial operations in accordance with its regulatory
and management agreements with HUD. In total, the Owner/Agent could
not provide adequate documentation to support $1.1 of the $6.65
million expenditures we reviewed for the four projects. Details
of our review can be found under the �Results Of Our Review� section
of this memorandum.
Issue Date: February 11, 2000
Audit
Report No.: 00-PH-203-1003
File Size: 604KB
Title: VHDA Section 8 Certificate and Voucher Programs, Richmond,
VA
We performed a review of the Virginia Housing Development Authority
(VHDA) Section 8 Certificate and Voucher Programs. Our report contains
four findings with recommendations requiring action by the Office
of Public Housing, Virginia State Office. The findings address the
need for VHDA to administer and monitor its Section 8 Program properly,
utilize Section 8 resources fully, improve its recertification procedures,
and establish Section 8 utility allowances properly.
Issue Date: February 16, 1999
Audit
Report No.: 99-PH-241-1002
File Size: 466KB
Title: City of Norfolk Community Development Block Grant Program
Norfolk, VA
The purpose of the audit was to determine whether the City of
Norfolk carried out its CDBG program in an economical, efficient,
and effective manner and complied with CDBG Program requirements,
laws, and regulations.
Our review showed that the Grantee generally administered an effective
program. However, we determined that the City did not have adequate
controls in place to ensure compliance with regulations and effectively
manage programs administered by its subgrantee.
Issue Date: February 2, 1999
Audit
Report No.: 99-PH-212-1001
File Size: 72KB
Title: Charlestowne at Cavalier Mutual Homes, Inc.Multifamily
Mortgagor Operations Portsmouth, VA
We performed an audit of the mortgagor operations of Charlestowne
at Cavalier Mutual Homes, Inc. The objective of this audit was to
determine whether the mortgagor and management agents operated the
project according to the terms and conditions set forth in the Regulatory
Agreement, and other applicable HUD directives.
We determined the mortgagor and management agents did not administer
project operations in accordance with applicable regulations and
requirements. Inadequate controls and mismanagement in project financial
operations and program administration resulted in ineligible and
unsupported costs of $591,952 and $177,583, respectively.
Issue Date: June 29, 1998
Audit
Report No.: 98-PH-101-0001
File Size: 44KB
Title: Drug Elimination Grant Program, VA State Office, Richmond,
VA
We completed an audit to determine if the Virginia State Office
effectively monitored grant recipients administrating their DEP
in compliance with the NOFAs and applicable Federal requirements.
We selected four Housing Authorities that had received Drug Elimination
Grants during Fiscal Years 1994 to 1996. The Authorities selected
were the Richmond, Portsmouth, Petersburg, and Norfolk Redevelopment
and Housing Authorities. We reviewed the Authorities administration
of their DEP to determine whether grant funds were expended for
eligible activities and whether they effectively monitored subgrantees.
Our review of Drug Elimination Grants for fiscal years 1994 to
1996 for Richmond, Petersburg, Portsmouth and Norfolk disclosed
the following deficiencies:
* Grant recipients did not support baseline of law enforcement
services prior to the awarding of the grants (Richmond, Petersburg
and Portsmouth).
* Grant recipients incurred ineligible, unsupported, and questionable
costs (Norfolk and Portsmouth).
The Office of Public Housing did not have adequate staffing resources
to effectively monitor the program, providing assurance that program
funds were properly spent and intended objectives were achieved.
Consequently, recipients were unsure of and/or disregarded program
requirements and regulations. As a result, ineligible and unsupported
costs of $21,481 and $2,091,717, respectively, were paid or budgeted
from program funds.
We recommend the Office of Public Housing effectively monitor grant
recipients under the DEP to determine if grant funds were spent
properly and to ensure recipients follow requirements under the
NOFAs and Federal regulations. Also, we recommend that grant recipients
repay ineligible costs and/or justify the unsupported costs.
We discussed the applicable deficiencies with Authority representatives
during the audit and where appropriate their comments are summarized
in the finding. We discussed the draft finding issues with the Virginia
State Office representatives during the audit. They concurred with
our finding and declined an exit conference.
Issue Date: November 25, 1997
Audit
Case No.: 98-PH-212-1002
File Size: 64KB
Title: Caru East Apts., Roanoke, VA.
The report identifies that the owners and agent incurred ineligible
and unsupported expenses. Additionally, the owners received improper
cash distributions.
Issue Date: November 6, 1997
Audit
Case No.: 98-PH-241-1001
File Size: 65KB
Title: City of Virginia Beach Community Development Block Grant
Program Virginia Beach, Virginia
We audited selected activities of the City of Virginia Beach (Grantee)
Community Development Block Grant (CDBG) Program. The purpose of
the audit was to determine whether the activities were administered
in accordance with HUD regulations and requirements and Grantee
policies. The report identifies the Grantee needs to follow HUD
requirements in its management of the (1) replacement housing loan
and grant program and (2) use of grant funds to pay-off homeowner
debts.
Issue Date: June 4, 1997
Audit
Case No.: 97-PH-212-1007
File Size: 53KB
Title: Princeton Lakes Apartments Multifamily Mortgagor Operations
Virginia Beach, Virginia
We have audited the operations of Princeton Lakes Apartments to
determine whether the owner operated the project according to the
terms and conditions of the Regulatory Agreement and other HUD requirements.
The report identifies that the owner improperly disbursed project
funds and failed to maintain proper control over project operations.
Issue Date: May 28, 1997
Audit
Related Memorandum No.: 97-PH-212-1808
File Size: 28KB
Title: Lafayette Villa Nursing Home Mortgagor Operations Norfolk,
Virginia
Our review disclosed the following:
I. LV contrary to requirements did not maintain proper books and
accounts for the mortgaged portion of the nursing home.
II. The owner used LV funds to pay expenses unnecessary to LV operations
contrary to HUD requirements.
III. As a result of the improper cash disbursements, LV did not
have sufficient cash to pay operational expenses and incurred $96,154
in additional late fees and finance charges during 1996.
IV. LV made improper loans to owners contrary to requirements.
V. In March 1992, an executive retirement agreement was established
between the owner and the nursing home's administrator.
Issue Date: December 30, 1996
Audit
Related Memorandum No.: 97-PH-212-1802
Title: Chesterfield Square Mutual Homes, Inc. Mortgagor Operations,
Richmond, Virginia
Our review disclosed the following: Evaluation of expenditure documentation
from June 1993 to May 1996 showed that project funds totalling $4,175
were used to pay health insurance premiums for a non-employee painting
contractor. This improper procedure was permitted by the Agent.
The contractor made periodic payments and reimbursed the project
$4,020. The contractor, who relocated out-of-state, still owes the
project $155. Expenditure documentation supports the reasonableness
of the project's $11,200 purchase of the Agent's personal truck
in 1993. No evidence was found to indicate that the purchase was
other than necessary to meet project requirements, and approved
by the project's Board of Directors.
Expenditures may not have been made at the lowest possible cost
to the project. Contrary to provisions contained in the Housing
Management Agreement, written cost estimates from three sources
were not always obtained for project expenses valued at $5,000 or
more. In addition, documentation was not available to show that
verbal and written quotes were solicited to validate the reasonableness
of costs for ongoing supply or service requirements valued at less
than $5,000 as required by the Management Agreement and the Management
Certification.
Required reserve deposits were made, reserve account levels were
maintained, and disbursements from reserve fund accounts were proper.
However, as of November 20, 1996, excess cash amounting to $107,425
was contained in the project's reserve accounts. The Agent maintained
an unneeded painting reserve fund, valued at $65,792. The Agent
also held earned interest in the membership trust and general operating
reserve accounts, totalling $36,252 and $5,381, respectively. The
Agent stated that the accounts were used to hold excess cash to
preclude residual receipts identification and restriction, and to
maintain control over the funds. The Regulatory Agreement requires
that any residual receipts realized from property operations be
deposited into the reserve fund for replacements and shall at all
times be subject to HUD's control. The Fiscal Year 1996 and 1997
annual budgets were not properly prepared, overstating project expenses
by $21,036 and $28,788, respectively. The Agent overstated the budgeted
expense for the reserve fund for replacements deposit requirement
by the amount of planned interest to be earned on the account. The
Agent stated that the interest amount was added to the expense in
order to offset the income since it was restricted and not readily
available for project use. According to the Regulatory Agreement,
housing charges shall be in amounts sufficient to meet the estimated
expenses set forth in the operating budget. Ownership should revise
the current budget and eliminate overstated expenses. In coordination
with the HUD Office of the Inspector General for Investigation,
we determined that the Agent was the subject of an investigation
involving another HUD project. As a result of the investigation,
the Agent was convicted of fraud in June 1996 in connection with
his position as managing agent for the other project. Because of
this conviction, HUD has suspended the Agent from participation
in procurement and non-procurement transactions as either a participant,
principal, or contractor with HUD. Additionally, HUD is considering
debarring the Agent for a three year period.
Issue Date: December 9, 1996
Audit
Case No.: 97-PH-212-1002
Title: Newport News General Hospital Section 242 Hospital Program
Newport News, Virginia
The report contains one finding. Based on our tests, we determined
that the mortgagor and agent did not properly manage the hospital's
financial operations. As a result, HUD's and the hospital's interests
were not adequately protected.
Issue Date: October 18, 1996
Audit
Report No.: 97-PH-241-1001
Title: City of Charlottesville, CDBG Program Charlottesville,
Virginia
Based on our review, the Grantee needs to improve its management
and oversight of the Economic Development Loan Program.
Issue Date: August 13, 1996
Audit
Related Memorandum No.: 96-PH-212-1821
Title: Hodges Manor Apartments Limited Review of Operations Portsmouth,
Virginia
Our review disclosed the following: Based on the OIG's calculation
of surplus cash for Fiscal Year 1995, the owner made $85,697 in
excess distributions. These distributions included $7,800 to Dorchester
Square Apartments. Calculation's by the owner's CPA revealed a surplus
cash deficiency of $93,497 for Fiscal Year 1995. Paragraph 6b of
the Regulatory Agreement prohibits distributions, unless there is
surplus cash.
Issue Date: July 31, 1996
Audit
Report No.: 96-PH-212-1019
Title: Oakmont North Apartments I, II, and III Multifamily Mortgagor
Operations Norfolk, Virginia
The report identifies that the owner used projects revenue to reduce
advances when the mortgages were in default, and incurred ineligible
and unsupported expenses. As a result the projects which are in
financial distress lost the use of needed revenue.
Issue Date: July 9, 1996
Audit
Related Memorandum No.: 96-PH-185-1819
Title: Citizen's Complaint, Richmond Redevelopment and Housing
Authority, Accounting Controls Rehabilitation Loan Program, Richmond,
Virginia
Based on the work performed, two findings were developed covering
the following issues. RRHA authorized its contracted loan servicing
company to charge $36,388 in bank loan servicing fees to the CDBG
program from June 30, 1993 through January 31, 1996. RRHA did not
adhere to loan servicing contracts, nor did RRHA properly match
revenues with related expenses per OMB Circular A-87. RRHA needs
to improve and strengthen internal accounting controls over the
CDBG rehabilitation loan program. RRHA: does not utilize or verify
the accuracy of remittance reports, and does not receive the same
remittance report as the bank; does not properly reconcile bank
statements to the general ledger, providing no assurance as to the
accuracy of general ledger balances; does not maintain a complete
data base to document the portfolio of rehabilitation bank and CDBG
loans; could not provide journal entries requested during our review;
and accounting journals disclosed undetected incorrect accounting
entries.
Issue Date: June 27, 1996
Audit
Report No.: 96-PH-212-1017
Title: Dorchester Square Apartments Multifamily Mortgagor Operations,
Franklin, Virginia
The report identifies that improper cash distributions were paid
to the Owner. Additionally, the identity-of-interest Agent and the
Owner incurred ineligible and unsupported expenses, did not properly
verify income of tenants reporting little or no income on recertification
and failed to maintain the financial records of the project as required.
Issue Date: February 16, 1996
Audit
Case No.: 96-PH-214-1013
Title: Great Atlantic Management CO., Inc. Multifamily Management
Agent, Hampton, Virginia
The report identifies that project owners incurred ineligible
and unsupported expenses, which the agent had an opportunity to
prevent, the agent prepared inaccurate reports of excess income
for three projects, and a project owner permitted unsanitary housing
to exist for two residents.
Issue Date: January 29, 1996
Audit
Related Memorandum No.: 96-PH-212-1010
Title: Bristol House Multifamily Mortgagor Operations, Bristol,
Virginia
1. An unauthorized owner and Virginia Retirement Management Company
of Ohio (agent) received BH funds and paid ineligible costs contrary
to HUD requirements. BH funds converted to owner and agent use totaled
$268,700. Improper transactions included unauthorized withdrawals,
unauthorized management fees, payment to a CPA firm and owner costs.
The owner of record sold his interest in BH without HUD approval
which caused BH to be managed by the unauthorized agent. The agent
and owner disregarded HUD requirements and improperly maintained
control of BH financial activities until it was sold.
2. The recognized owner of BH improperly administered various financial
aspects of BH's operations contrary to HUD requirements. The owner:
(1) sold his interest in BH with no benefit accruing to BH, (2)
incurred substantial ineligible costs ($212,169) which he was the
main beneficiary, and (3) permitted revenue of $24,666 to be lost
to BH while benefiting a relative and the project administrator.
As a result of these actions, the owner significantly contributed
to the financial distress of BH.