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.

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.