Wisconsin Audit Reports
Issue Date: September 30, 2007
Title: The City of Milwaukee, Wisconsin, Needs to Improve Existing Controls over Its HOME Program Regarding Housing Conditions and Contracting
The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the City of Milwaukee's (City) HOME Investment Partnerships Program (Program). The audit was part of the activities in our fiscal year 2007 annual audit plan. We selected the City based upon our analysis of risk factors relating to Program grantees in Region V's jurisdiction. Our objectives were to determine whether the City effectively administered its Program and followed requirements.
The City needs to improve existing controls over the administration of its Program regarding housing conditions and contracting to ensure it follows HUD's requirements. It did not ensure that its owner-occupied single-family rehabilitation projects (projects) and American Dream Downpayment Initiative (Initiative) activities (activities) met HUD's and/or the City's property standards (standards) and did not maintain an effective system of controls over its contracting processes for projects. It used more than $300,000 in HUD funds (Program and Initiative) for projects and activities that did not meet HUD's and/or the City's standards.
We informed the director of the City's Community Development Grants Administration (Administration) and the Director of HUD's Milwaukee Office of Community Planning and Development of minor deficiencies through a memorandum, dated September 30, 2007.
We recommend that the Director of HUD's Milwaukee Office of Community Planning and Development require the City to ensure that housing rehabilitation work and required repairs are completed or reimburse its Program and Initiative from nonfederal funds for the projects and an activity that did not meet HUD's and/or the City's standards and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that at least $120,000 in Program funds is appropriately used over the next year for projects that meet HUD's and the City's standards.
Date: December 5, 2005
Title: HUD 's Interest in $47,668 in Economic Development Initiative � Special Purpose Grant Funds Awarded to the City of Rhinelander, Wisconsin Was Not Secured
The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the City of Rhinelander, Wisconsin's (City) Economic Development Initiative � Special Purpose Grant (Grant). We initiated the audit in conjunction with our internal review of HUD's oversight of Economic Development Initiative � Special Purpose Grants. The review is part of our fiscal year 2005 annual audit plan. We chose the City's Grant based upon a statistical sample of fiscal years 2002 and 2003 Economic Development Initiative � Special Purpose Grants, in which 90 percent or more in funds were disbursed. Our objectives were to determine whether the City used its Grant funds in accordance with HUD's requirements and recorded HUD's interest on the assisted property.
The City used the Grant funds in accordance with HUD's requirements. It used $120,000 in Grant funds to pay for the reconstruction of U.S. Highway 8, which included the construction of a rail spur crossing ($72,332) and access road ($47,668). However, it did not place a covenant on the property title for the access road assuring nondiscrimination based on race, color, national origin, or handicap. Further, HUD did not request the City to record HUD's interest on the access road's property title.
Although the rail spur crossing is also real property based on HUD's requirements, we believe it is not practical to place a covenant on the rail spur crossing's property title since the crossing is not a building or land where discrimination could occur. Further, we believe that it is highly unlikely that the land where the rail spur crossing is located would be sold or change its purpose since the crossing is located on U.S. Highway 8. Therefore, we did not recommend the placing of a covenant or the securing of HUD's interest on the rail spur crossing's property title.
We recommend that HUD's director of congressional grants require the City to record a covenant on the title assuring nondiscrimination based on race, color, national origin, or handicap and record a lien on the property titles for the access road showing HUD's interest in the assisted property. If the covenant and lien are not recorded, the City should reimburse HUD $47,668 from nonfederal funds for the Grant funds used to pay for the construction of the access road.
Issue Date: September 16, 2005
Title: The Operator Improperly Used Funds Required to Be Used for Petersen Health Center, Rhinelander, Wisconsin
The U.S. Department of Housing and Urban Development's Office of Inspector General reviewed the books and records of Petersen Health Center (project). The project consists of three skilled nursing home facilities, Friendly Village, Horizons Unlimited, and Taylor Park, totaling 327 beds in Rhinelander, Wisconsin. The review was part of our efforts to combat multifamily equity skimming on HUD's Federal Housing Administration insurance fund. We chose the project based upon its negative surplus-cash position since 1999, its default status, and indicators of diverted project funds/assets. Our objective was to determine whether the owner/operator used project funds in compliance with the regulatory agreement and HUD's requirements.
Petersen Health Care of Wisconsin, Inc. (operator), the project's identity of interest operator, improperly used $728,801 in funds required to be used for project expenses from January 2003 through April 2005 when the project was in a non-surplus-cash position and/or in default of its HUD-insured loan. The inappropriate disbursements included $594,830 to P.P.F. Enterprises II, another identity of interest company, to pay estimated taxes of the partners of P.P.F. Enterprises (owner), the owner of the project; $80,385 in prepaid legal services; $47,890 for legal services not related to the project's operations; $3,000 for scholarships; $2,096 for Christmas presents; and $600 related to charitable activities. We provided the owner and operator schedules of the improper disbursements.
We recommend that HUD's director of the Minneapolis Multifamily Housing Hub ensure that the owner and/or operator reimburse HUD's Federal Housing Administration insurance fund $728,801 for the inappropriate disbursements and implement procedures and controls to ensure funds required to be used for project expenses are used according to the regulatory agreement.We also recommend that HUD's director, in conjunction with HUD's Office of Inspector General, pursue double damages remedies if the owner and/or operator do not reimburse the insurance fund for the inappropriate disbursements.
We recommend that HUD's director of the Departmental Enforcement Center impose civil money penalties and pursue administrative sanctions against the owner, operator, and/or their principals/owners for the payment of inappropriate disbursements that violated the project's regulatory agreement.
Date: December 22, 2004
Title: Lakewood Care Center; Milwaukee, WI; Multifamily Equity Skimming of More Than $1 Million in Project Funds
HUD's Office of Inspector General reviewed the books and records of the Lakewood Care Center (Project), a 196-bed skilled nursing facility in Milwaukee, WI. The review was part of our efforts to combat multifamily equity skimming. The review was also part of our nationwide reviews of nursing homes due to the increasingly high default rate and number of Federal Housing Administration (FHA) insurance claims being paid under the Section 232 program. We chose the Project due to its default status and more than $1 million dollar write-off of bad debt reported in its fiscal year 2002 audited financial statements.
Our review objective was to determine whether the owner/management agent used Project funds in compliance with the Regulatory Agreement and the Department of Housing and Urban Development's (HUD) requirements.
The owner of the Project, 2115 Woodstock Place, LLC (Woodstock Place), inappropriately disposed of $1,021,056 in Project assets on December 31, 2002, without obtaining HUD approval and in violation of its Regulatory Agreement. The Project was in a non-surplus cash position and in default of its FHA-insured loan at the time of the disposition. Woodstock Place also inappropriately loaned $612,500 of Project funds to Summit Health Care, Incorporated, the identity of interest operator of the Project. The Project was in a non-surplus cash position and/or in default at the time Woodstock Place made the loans.
We recommend that HUD's Director of Multifamily Housing Hub, Minneapolis Field Office, ensure that Woodstock Place reimburse the Project's Reserve for Replacement and/or HUD's FHA insurance fund $1,021,056 for the inappropriate disposition of Project assets. We also recommend that HUD's Director of Multifamily Housing Hub, in conjunction with HUD's Office of Inspector General, pursue double damages remedies if Woodstock Place does not reimburse the Project's Reserve for Replacement and/or the FHA insurance fund for the inappropriate disposition of Project assets.
We also recommend that HUD's Director of Departmental Enforcement Center impose civil money penalties and pursue administrative sanctions against Woodstock Place and its Managing Member.
Issue Date: November 26, 2003
Title: Waukesha County's Community Development Block Grant and HOME Investment Partnership Programs
HUD's Office of Inspector General completed an audit of Waukesha County's Community Development Block Grant and HOME Investment Partnership Programs. The audit was conducted based on a citizen complaint to our Office. The objectives of the audit were to determine whether the complainant's allegations were substantiated and whether HUD's rules and regulations for the Programs were followed.
The complainant's specific allegations were: (1) abuse of HUD's HOME Investment Partnership Program in the State of Wisconsin; (2) poorly kept records with the intent to cover up discrepancies in funds given to individuals; and (3) HUD funds went to prominent elected officials or their spouses to acquire properties.
Although we were not able to substantiate any of the complainant's allegations, we found that Waukesha County did not follow Federal requirements regarding its Block Grant and HOME Programs. Specifically, the County did not ensure that:
* Federal requirements and its Agreements with Waukesha County Economic Development Corporation, the County's Loan Administrator, were followed regarding documentation maintenance for 16 economic development loans;
* Federal requirements and its Agreements with the Corporation were not followed for two economic development loan agreements since the agreements either failed to meet HUD's national objective of creating job opportunities for low and moderate-income persons or permitted Block Grant funds to pay for pre-award costs; and
* Federal requirements were followed to ensure assisted houses met local building codes and/or HUD's Housing Quality Standards.
Specifically, the County: (1) lacked adequate documentation to support that $463,734 in Block Grant loans were used for eligible expenses; (2) allowed two loan agreements totaling $306,000 to be executed with provisions that violated Federal requirements and its Agreements with the Corporation; (3) did not include $650 of housing rehabilitation work in specifications for four houses to ensure they met local codes and/or HUD's Standards; and (4) failed to assure local building permits were issued and assisted houses passed local inspections.
We recommend that HUD's Director of Community Planning and Development, Milwaukee Field Office, assures that the County reimburses its appropriate Program for the inappropriate use of HUD funds and implements controls to correct the weaknesses cited in this report. These improvements should help ensure that the County's annual average of $472,800 in economic development loans meet Federal requirements.
Issue Date October 29, 2002
Title: New Covenant Housing Corporation, Inc. Community Development Block Grant And HOME Programs Milwaukee, Wisconsin
We completed an audit of New Covenant Housing Corporation's Parkwest Townhouses Phase II project located in Milwaukee, Wisconsin. The audit resulted from a citizen complaint to our Office. The objectives of our audit were to determine whether the complainant's allegations were substantiated and whether HUD's rules and regulations were followed. The complainant's specific allegations were: the general contractor overseeing the project's construction shifted costs from the general operating account to the concrete and carpentry accounts; reimbursement claims for concrete and carpentry costs were inflated; some payroll reimbursement claims were for individuals who did not work on the project; and excessive equipment was purchased for the project. We found that no Federal funds were directly spent on construction costs for Parkwest Townhouses Phase II project. However, New Covenant Housing Corporation failed to follow Federal requirements and its Community Development Block Grant contract with the City of Milwaukee, Wisconsin by using $18,700 in Block Grant funds to pay ineligible costs. The ineligible costs consisted of interest expense related to a bank loan owed by Parkwest for construction materials and professional service expenses that were unrelated to the project. The payment of the ineligible costs occurred because New Covenant's Executive Director did not exercise adequate control over cost reports submitted to the City of Milwaukee. As a result, HUD funds were not efficiently and effectively used, and were not available for eligible Block Grant purposes.
Issue Date: January 31, 2002
Title: Partners for Community Development, Inc., Home Buyers-Lease Purchase HOME Rehabilitation and Accessibility Programs, Sheboygan, Wisconsin
We completed a review of Partners for Community Development, Inc.'s Home Buyers-Lease Purchase and HOME Homeowner Rehabilitation and Accessibility Program. The review resulted from three complaints to our Office. The objectives of our review were to determine whether the complainants' allegations were substantiated and whether HUD's rules and regulations were followed.
Issue Date: November 1, 1995
Title: St. Croix Chippewa HA, Comprehensive Review Hertel, Wisconsin
Findings: The Housing Authority needs to improve the administration of its programs and ensure compliance with the Annual Contributions Contract and other HUD requirements. This report addresses issues related to:
(1) inadequate internal control procedures;
(2) the receipt of unauthorized loans;
(3) improperly disbursed program funds;
(4) funds not properly accounted for;
(5) excessive funds drawn down from HUD; and
(6) uncollateralized deposits exceeding Federal Deposit Insurance Corporation limits.
|Content Archived: September 9, 2010|