California Audit Reports

Date Issued: October 28, 2009
Audit Report No.: 2010-LA-1001
File Size: 935.66KB

Title: The City of Los Angeles Housing Department, Los Angeles, California, Did Not Ensure That the NoHo Commons Housing Development Met HOME Program Requirements

We audited the City of Los Angeles Housing Department (City) as a result of two complaints alleging violations of affordable housing and low-income housing tax credit regulations at the NoHo Commons housing development (development), which was partially funded with HOME funds and administered by the Community Redevelopment Agency of Los Angeles (subrecipient). Our objective was to determine whether the alleged violations had merit and warranted further review. Specifically, we wanted to determine (1) the type and amount of HUD funding used and (2) whether the City administered its subrecipient and the development in accordance with pertinent HUD regulations.

We recommend that HUD require the City to suspend all HOME funding to the subrecipient until acceptable monitoring policies and procedures have been implemented to ensure compliance with all HOME program requirements, reconstruct and establish a complete waiting list, and determine which eligible applicants were improperly bypassed and ensure that they are given first priority for housing as vacancies arise. We also recommend that both the City and the subrecipient establish and implement effective policies and procedures to ensure compliance with HOME regulations.

Date Issued: September 24, 2009
Audit Report No.: 2009-LA-1020
File Size: 906.22KB

Title: The Housing Authority of the City of Richmond, Richmond CA, Did Not Follow Procurement Requirements and Had Internal Control Weaknesses

We audited the Housing Authority of the City of Richmond's (Authority) procurement activities. Our objective was to determine whether the Authority followed procurement requirements. We found that the Authority could not adequately support that procurement activities were conducted in accordance with applicable requirements. As a result, it could not demonstrate that contracts were awarded to vendors whose proposals were most advantageous to the Authority. We also found that the Authority had internal control weaknesses. The written procedures contained inconsistent instructions, payments were processed and issued without proper supporting documentation and required approvals, contract limits were ignored, and controls for safeguarding the Authority's financial assets were not in place or not effective.

We recommend that HUD require the Authority to (1) terminate the existing contracts and ongoing purchases for security services, landscaping maintenance, Section 8 housing quality standards annual inspection services, and Section 8 housing quality standards initial inspection services; (2) conduct new procurements for these services in accordance with applicable requirements; (3) repay from nonfederal funds $112,755 to its public housing program or Section 8 program, as appropriate, for ineligible costs; (4) support or repay from nonfederal funds more than $2.4 million to its public housing program or Capital Fund or Section 8 program, as appropriate, for unsupported costs; (5) obtain HUD's review and approval of all contracts and amendments totaling more than $100,000, in part or aggregate before execution, for the next three years or until HUD is satisfied that procurement actions are appropriate; and (6) provide training to responsible personnel to ensure that they understand federal procurement requirements.

Date Issued: September 2, 2009
Audit Report No.: 2009-LA-1017
File Size: 462.11KB

Title: The Los Angeles County Community Development Commission Had Sufficient Capacity and the Necessary Controls to Administer its Neighborhood Stabilization Program

We completed a capacity review of the Los Angeles County Community Development Commission's (County) Neighborhood Stabilization Program. We performed the audit because Housing and Economic Recovery Act reviews were part of the Office of the Inspector General's annual audit plan and the program was identified as high risk. In addition, the County was awarded significant Neighborhood Stabilization Program funds of $16.8 million. Our objective was to determine whether the County had sufficient capacity and the necessary controls to manage and administer the Neighborhood Stabilization Program. We found no evidence indicating that the County lacked the capacity to adequately administer its current Neighborhood Stabilization Program funding. The County has applied for additional funding under the American Recovery and Reinvestment Act of 2009 to continue its Neighborhood Stabilization Program activities and based on our review, its procedures and controls should be adequate to administer the continuation of the program.

Date Issued: August 21, 2009
Audit Report No.: 2009-LA-1016
File Size: 262KB

Title: State of California"s Department of Housing and Community Development, Sacramento, California, Review of the Allocation Formula for the Neighborhood Stablization Program

We audited the State of California's Department of Housing and Community Development (State) to determine the basis and method used to allocate its $145 million in Neighborhood Stabilization Program (NSP) grant funds. Our objective was to determine whether the methodology the State used in allocating its NSP grant funds was logical, equitable, and in accordance with U.S. Department of Housing and Urban Development (HUD) requirements. The State logically and equitably allocated its NSP grant funds to those areas with greatest need, as described in the Housing and Economic Recovery Act of 2008.

Date Issued: July 29, 2009
Audit Report No.: 2009-LA-1014
File Size: 1.39MB

Title: The Housing Authority of the City of Long Beach, California, Did Not Adequately Conduct Housing Quality Standards

We audited the Housing Authority of the City of Long Beach's (Authority) Section 8 Housing Choice Voucher program. The Authority was selected based on its having received low housing quality standards indicator scores for fiscal years 2006 and 2007 under HUD's Section Eight Management Assessment Program in addition to a lack of recent on-site reviews by HUD. The objective of the audit was to determine whether the Authority conducted housing quality standards inspections in accordance with HUD's rules and regulations. We determined the Authority did not adequately enforce HUD's housing quality standards. Of the 66 program units statistically selected for inspection, 56 did not meet minimum housing quality standards, and 29 of those units were in material noncompliance with housing quality standards. Based on our statistical sample, we estimate that over the next year, HUD will pay more than $5.9 million in housing assistance for units with material housing quality standards deficiencies. We recommend that HUD require the Authority to (1) implement adequate procedures and controls regarding its inspection process to ensure that all units meet HUD's housing quality standards to prevent $5.9 million in program funds from being spent on units that are in material noncompliance with the standards, (2) create policies and procedures regarding quality control inspections, and (3) verify that the applicable owners have taken appropriate corrective action regarding the housing quality standards deficiencies identified during our inspections or take enforcement action.

Date Issued: July 24, 2009
Audit Report No.: 2009-LA-1013
File Size: 1.17MB

Title: The City of Oakland Did Not Always Administer Its HOME Investment Partnerships Program in Accordance with Federal Requirments and Its Own Policies and Procedures

We reviewed the City of Oakland's HOME Investment Partnerships Program to determine whether it administered its program in accordance with federal requirements and its own policies and procedures. We selected the City for review due to its large annual HUD funding and because it had not been the subject of an OIG audit for several years. The City did not always administer its HOME program in accordance with federal requirements and its own policies and procedures. Specifically, it did not follow HUD and Office of Management and Budget requirements and its own policies for (1) initial cost estimates, (2) rehabilitation standards, (3) income determinations, and (4) Integrated Disbursement and Information System entries. As a result, the City did not fulfill all of its responsibilities as a HOME participating jurisdiction, $286,103 was not available for eligible projects and activities, and $118,213 in HOME expenditures was not supported.

Date Issued: July 23, 2009
Audit Report No.: 2009-LA-1012
File: 718.29KB

Title: The City of Baldwin Park Housing Authority, Baldwin Park, California, Did Not Always Determine Housing Assistance Payments Correctly and Did Not Always Complete Reexaminations in a Timely Manner

We audited the City of Baldwin Park Housing Authority's (Authority) Housing Choice Voucher program. We conducted the audit because the Authority received a "near troubled" status and scores of zero on five Section Eight Management Assessment Program indicators for fiscal year 2007. The objective was to determine whether the Authority determined housing assistance payments correctly and completed annual reexaminations in a timely manner. The Authority did not determine housing assistance payments correctly in 29 of the 60 tenant files reviewed, which resulted in overpayments of $16,073 in housing assistance. In addition, the Authority made underpayments of housing assistance of $3,855. Based on our statistical sample, we estimate that over the next year, the Authority will overpay $24,112 and underpay $13,015 in housing assistance. In addition, the Authority did not complete annual reexaminations in a timely manner for 52 of the 60 tenant files reviewed, which resulted in overpayments of $3,093 in housing assistance. Based on our statistical sample, we estimate that over the next year, the Authority will overpay more than $8,181 in housing assistance. We recommend that HUD require the Authority to reimburse its program $19,166 ($16,073 + $3,093) from nonfederal funds for the overpayment of housing assistance, reimburse the appropriate tenants $3,855 for the underpaid housing assistance, and implement quality control procedures to ensure that $49,163 ($3,855 + $24,112 + $13,015 + $8,181) in housing assistance will be funds put to better use in the future.

Date Issued: July 1, 2009
Audit Report No.: 2009-LA-1011
File Size: 694KB

Title: City of Los Angeles Housing Department's, Los Angeles, CA, Did Not Ensure that the Buckingham Place Project Met HOME Program Requirements

We audited the City of Los Angeles Housing Department (City) as the result of problems noted during a prior audit involving HOME Investment Partnerships Program (HOME)-funded activities administered by the Community Redevelopment Agency of the City of Los Angeles (subrecipient), which was not adequately monitored by the City, compounded by concerns stemming from various newspaper articles related to the Marlton Square project, which included the Buckingham Place Senior Affordable Housing (Buckingham Place) project. Our objective was to determine whether HUD funds awarded to Los Angeles and administered by the City were administered in accordance with HUD's requirements for the HOME program as they relate to a specific subrecipient. We found the City improperly allocated HOME program funds for the Buckingham Place project to its subrecipient without adequate controls in place to ensure that HOME program requirements were met. This condition occurred because the City lacked written procedures and had insufficient monitoring controls in place for projects not processed and administered through its Affordable Housing Trust Fund Unit. We recommend that HUD require the City to provide documentation supporting the eligibility of the $8.5 million HOME funds investment for its proposal to complete the one partially-completed building and have it ready for occupancy within two years of the date of this report, or repay the funds from nonfederal sources. In addition, the City should establish and implement written procedures for projects administered by its subrecipients that are not processed through the Affordable Housing Trust Fund Unit.

Date Issued: July 1, 2009
Audit Report No.: 2009-LA-1010
File Size: 1.04MB

Title: The Culver City Housing Agency, Culver City California, Did Not Adminsiter Its Section 8 Housing Choice Voucher Program in Accordance with HUD Requirements

We audited the Culver City Housing Agency's (Agency) administration of its Section 8 Housing Choice Voucher program waiting list and housing assistance payment calculations. We initiated this review based upon information we received regarding waiting list administration and potential tenant eligibility issues. The Agency's ongoing lease-up deficiency and lack of monitoring visits by the U. S. Department of Housing and Urban Development (HUD) since 2004 were two other factors contributing to the audit. The objective of our audit was to determine whether the Agency followed HUD rules and regulations in determining tenant eligibility, housing assistance calculations, and waiting list administration. We determined that the Agency did not calculate housing assistance in accordance with HUD rules and regulations. We identified problems in five of the eight files reviewed, which resulted in $4,230 in housing assistance overpayments and $1,388 in housing assistance underpayments. We also determined that the Agency did not maintain and administer the waiting list in accordance with HUD rules and regulations. It ranked and selected residents without preference ahead of nonresidents with preference as part of two 2008 waiting list pulls and did not maintain a consistent, accurate, and complete waiting list, contrary to requirements of the administrative plan. We recommend that the Director of HUD's Los Angeles Office of Public Housing require the Agency to (1) reimburse the program $4,230 from nonfederal funds for the overpayment of housing assistance, (2) reimburse the appropriate tenants $1,388 from program funds for the underpayment of housing assistance, (3) follow up on errors that extended beyond our audit scope, (4) update the administrative plan with more specificity regarding Section 8 policies and procedures, (5) implement procedures and controls to ensure that quality control reviews are performed adequately, and (6) submit documentation to HUD showing that future selections from the waiting list have been conducted according to the administrative plan.

Date Issued: April 24, 2009
Audit Report No.: 2009-LA-1009
File Size: 524.36KB

Title: The Housing Authority of the County of Los Angeles, Los Angeles, California, Did Not Reasonably and Equitably Allocate Costs to Its Section 8 Program

We completed a financial review of the Housing Authority of the County of Los Angeles' (Authority) Section 8 program. We initiated the review in response to several citizen complaints alleging mismanagement, waste, and abuse of U. S. Department of Housing and Urban Development (HUD) Section 8 funding, including the use of Section 8 funds to pay the costs of non-Section 8 programs. Our objective was to determine the validity of the above allegations and to determine whether the Authority managed and spent its Section 8 funds in accordance with HUD rules and regulations. We found that the Authority did not properly manage its Section 8 funding in fiscal years 2005 and 2006 and over-allocated more than $5 million in indirect administrative expenses to its Section 8 Assisted Housing program (of which only $2.1 million was charged to an allowable source of reserve funds). We recommend that the Director of HUD's Los Angeles Office of Public Housing require the Authority to repay the Section 8 program from nonfederal funds, $2.9 million of the $5 million in over-allocations that were charged to restricted funds.

Date Issued: February 20, 2009
Audit Report No.: 2009-LA-1007
File Size: 440.66KB

Title: The City of Los Angeles Housing Department Did Not Always Ensure That Its HOME-Assited Rehabilitation Work Was Complete and in Accordance with HOME Requirements

We audited the City of Los Angeles Housing Department (Department) as a result of an earlier audit of the HOME Investment Partnerships Program (HOME) affordability monitoring requirements and inspections of HOME-assisted rental units, which detected four projects that may not have been rehabilitated as intended. Our audit objective was to determine whether HOME funds were used as intended to rehabilitate the four projects and in accordance with HOME requirements. We found that the Department did not always ensure that its HOME-assisted rehabilitation work was complete and in accordance with HOME requirements. Of the four projects, we found one project in which the Department paid $22,466 in HOME funds for incomplete rehabilitation work. In addition, it did not maintain agreements that described the use of HOME funds, such as the tasks to be performed. We recommend that HUD require the Department to properly support or repay the questioned costs from nonfederal funds, and implement revised operating policies and procedures.

Date Issued: February 9, 2009
Audit Report No.: 2009-LA-1006
File Size: 136.32KB

Title: St. Vincent de Paul Village, Inc., San Diego, California, Generally Administered Its Supportive Housing Program Grants in Accordance with HUD Requirements

We audited the use of Supportive Housing Program funds by St. Vincent de Paul Village, Inc. (St. Vincent de Paul Village), because it is a large organization receiving more than $4 million in grants annually. Our objective was to determine whether St. Vincent de Paul Village used supportive housing grants in accordance with U.S. Department of Housing and Urban Development (HUD) requirements and the grant agreements.

St. Vincent de Paul Village generally administered its supportive housing program grants in accordance with HUD requirements. Identity-of-interest contracts between St. Vincent de Paul Village and its associated nonprofit, SVDP Management, Inc., were reasonable. Although contract documents did not include all clauses required by Office of Management and Budget Circular A-110, we found there to be no overall affect. Also, grant expenditures were eligible and supported in accordance with HUD requirements and the grant agreements, and adequate written procedures were in effect.

Date Issued: December 30, 2008
Audit Report No.: 2009-LA-1005
File Size: 1.88MB

Title: The City of San Diego, California Did Not Administer Its Community Development Block Grant Program in Accordance with HUD Requirements When Funding the City's Redevelopment Agency Projects

We audited the City of San Diego's (City) Community Development Block Grant (CDBG) program in response to a hotline complaint alleging that the City and its Redevelopment Agency (Agency) were violating U.S. Department of Housing and Urban Development (HUD) rules and regulations. Our main objective was to address the citizen complaint and determine whether the City administered CDBG loans issued to the Agency in accordance with HUD rules and regulations. We found that the City failed to properly administer CDBG funds provided to the Agency in accordance with HUD requirements. For all 35 redevelopment projects sampled, the City did not (1) enter into required agreements with the Agency, (2) list the projects in the action plan or subsequent amendments to HUD, and (3) failed to monitor the project activities, resulting in more than $1.8 million in ineligible and $11 million in unsupported costs. The City also failed to execute loan agreements and repayment schedules for CDBG funded loans issued to the Agency with an overall principal and interest balance of more than $139 million, and the Agency did not make consistent good faith efforts to repay the CDBG loans so the program income could be used for eligible CDBG activity. We recommend that HUD require the City to pay back ineligible costs of more than $1.8 million plus any applicable interest to HUD from nonfederal funds, provide supporting documentation or reimburse HUD more than $11 million from nonfederal funds, execute written interagency agreements and loan agreements with the Agency for outstanding CDBG loans, and implement procedures and controls to ensure that the City and the Agency adequately monitor CDBG activity.

Date Issued: November 26, 2008
Audit Report No.: 2009-LA-1004
File Size: 2.46MB

Title: Alameda County Home Investment Partnership Consortium's Compliance with HUD Rules and Regulations

We reviewed the Alameda County HOME Investment Partnership Consortium's use of HOME Investment Partnerships Program (HOME) funds to determine whether it used its allocation of HOME funds in accordance with U.S. Department of Housing and Urban Development (HUD) rules and regulations. We performed the review because there was a high risk for noncompliance due to a lack of HUD monitoring since 2003. We found that the consortium used $5.6 million in HOME funds to pay for construction and rehabilitation cost increases on six projects resulting from unreasonable delays ranging from 31 to 81 months. Additionally, the consortium provided $81,873 in excessive assistance to home buyers under the American Dream Downpayment Initiative. Moreover, the consortium did not comply with HUD's requirements for committing HOME funds within 24 months from the date the funds became available to the consortium.

We recommend the Director of the San Francisco Community Planning and Development Division require the consortium to (i) repay the consortium's HOME trust fund $5.6 million from nonfederal sources for HOME funds used to pay for the cost increases resulting from unreasonably lengthy construction delays and implement policies and procedures to ensure that foreseeable construction delays do not occur; (ii) repay the consortium's HOME trust fund $81,873 from nonfederal sources for the ineligible use of downpayment initiative assistance and implement policies and procedures to ensure that downpayment assistance is calculated using the purchase price; (iii) review all agreements for the use of HOME funds entered into the information system from October 1998 to the present and change the entry dates to the dates of the agreements, repay HUD or have the consortium's future funding reduced by the amount determined not to have been committed within the requisite 24-month period, and implement policies, procedures and internal controls to comply with HUD's requirements for committing HOME funds within 24 months.

Title: The Housing Authority of the County of Ventura, Newbury, California, Payment-in-Lieu-of-Taxes Obligations

We audited the Area Housing Authority of the County of Ventura based on concerns over the Authority's compliance with its annual contributions contract. Our audit objective was to determine whether the Authority fulfilled its Payment-in-Lieu-of-Taxes obligations for its Low Rent Public Housing program and if not, whether applicable funds were used in accordance with HUD requirements. We found that the Authority disregarded its Low Rent Public Housing program's Payment-in-Lieu-of-Taxes obligations to the County of Ventura (County), including the cities of Ojai, Moorpark, Camarillo and Thousand Oaks (Cities), contrary to its consolidated annual contributions contract and cooperation agreements. Specifically, we determined that the Authority discontinued the payment of its Payment-in-Lieu-of-Taxes obligations in 2001 and instead allocated $637,428 in reserves between 2001 and 2007, which it maintained in an interest bearing bank account. Further, we found that the Authority also requested and received additional funding from HUD to make this Payment-in-Lieu-of-Taxes obligation as part of an additional expense incurred for calendar years 2007 and 2008 in the amount of $195,643.

We recommend that HUD require the Authority to comply with HUD's requirements regarding the use of Payment-in-Lieu-of-Taxes funds with the County and the Cities by settling its Payment-in-Lieu-of-Taxes obligations to the County in the amount of $637,428 or reimburse HUD $736,315.

Date Issued: November 17, 2008
Audit Report No.: 2009-LA-1002
File Size: 1.24MB

Title: The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Conduct Housing Quality Standards Inspections

Date Issued: October 17, 2008
Audit Report No.: 2009-LA-1001
File Size: 325.97

Title: The Housing Authority of the County of Marin, San Rafael, CA, Did not Correctly Calculate tenant Rents in the Public Housing Program

We audited the Housing Authority of the County of Marin's (Authority) Section 8 funds transfer and public housing program (program) tenant rent calculations. Our objectives were to determine (1) whether the transfer of Section 8 operating reserve funds to the public housing program in fiscal year 2006 was made in compliance with HUD regulations and (2) whether the Authority calculated public housing tenant rents in accordance with HUD requirements. We found that the Authority's transfer of Section 8 operating reserve funds to the public housing program in fiscal year 2006 was made using pre-2004 funds, which was in compliance with HUD regulations. However, the Authority did not calculate public housing tenant rents in accordance with HUD requirements. Of the 71 files we reviewed, the Authority incorrectly calculated tenant rents for 35 (49 percent) of the households. From January through December 2007, it overcharged program residents $3,811 and undercharged program residents $25,638 in tenant rents.

We recommend that HUD require the Authority to (1) reimburse its program residents $3,811 for overcharged tenant rents, (2) establish and implement procedures and controls to ensure that tenant rents are calculated in accordance with HUD requirements, and (3) provide appropriate training to Authority staff to ensure that they understand how to calculate tenant rents correctly. These procedures and controls should help prevent tenant rent miscalculations in the future. We also recommend that HUD perform a review of the Authority's tenant files within six months after the issuance of this audit report to ensure that tenant rents are calculated correctly.

Date Issued: September 18, 2008
Audit Report No.: 2008-LA-1016
File Size: 1.33MB

Title: The City of Los Angeles Housing Department Did Not Comply with HOME Affordability Monitoring and Inspection Requirements for Its HOME-Assisted Rental Housing

We audited the City of Los Angeles Housing Department (Department) as a result of an earlier audit of its HOME Investment Partnerships Program (HOME) rehabilitation program, which detected problems with the Department's monitoring of HOME-assisted rental units. Our audit objective was to determine whether the Department complied with HOME affordability monitoring and inspection requirements regarding HOME-assisted rental units. We found the Department did not comply with HOME affordability monitoring and inspection requirements for its HOME-assisted rental housing. It failed to maintain the required tenant eligibility information for 26 HOME-assisted rental housing projects totaling nearly $38 million. In addition, it did not maintain complete tenant eligibility information for 27 tenants living in seven projects, resulting in $103,693 in unsupported costs. Further, it did not ensure that its contractor conducted occupancy monitoring as required. Finally, the Department failed to inspect HOME-assisted rental housing projects when required and ensure local housing code regulations were met. Improvements on controls would ensure that $226,483 in funds could be put to better use. We recommend that HUD require the Department to properly support or repay from nonfederal funds more than $38 million in unsupported expenses, and establish and implement more effective procedures and controls.

Date Issued: August 21, 2008
Audit Report No.: 2008-LA-1015
File Size: 1.51 MB

Title: The Housing Authority of the City of Los Angeles, California, Could Not Show That It Used HUD Program Funds in Accordance with HUD Requirements

We audited the Housing Authority of the City of Los Angeles' (Authority) Section 8 Housing Choice Voucher program's financial transactions. Our audit objective was to determine whether the Authority properly used Section 8 Housing Choice Voucher program funds in accordance with HUD rules and regulations for the benefit of its program participants. During the audit, we expanded our scope to include a review of its other HUD programs to determine the extent of its inappropriate interprogram fund transfers. The Authority could not show that it used program funds in accordance with its consolidated annual contributions contracts, executed grant agreements, or HUD rules and regulations. Without the required HUD approval, the Authority's accounting records showed that it improperly advanced and expended more than $27 million in restricted funds to cover its operating losses for its other programs. The Authority contended that there was no misappropriation of funds, but rather just a problem with the way the accounting system presented its financial transactions; however, we were unable to validate its contention. We attribute the problem to the Authority's failure to exercise prudent oversight over the use of HUD funds to ensure that federal requirements and grant agreements and contracts were followed. We recommend that HUD require the Authority to reimburse $27.8 million in restricted funds to the proper programs and establish and implement adequate procedures and accounting controls to ensure that no interprogram advances of restricted funds are made in the future.

Title: Oakland Housing Authority, Oakland, California, Did Not Comply with Procurement and Contracting Requirements

We audited Oakland Housing Authority's (Authority) procurement and contracting activities, in response to a citizen's complaint. Our objective was to determine whether the Authority's procurement and contracting practices were in compliance with federal requirements. We found the Authority did not follow HUD's procurement requirements and its own procurement policy when it awarded, renewed, amended, and made payments on several legal services contracts. As a result, the Authority made unsupported and excessive payments for these services. We recommend that HUD require the Authority to

• provide support to show rates charged by its general counsel were reasonable;

• provide adequate support to show $1,125,951 in payments to its general counsel were made in accordance with the terms of the contracts, or repay unsupported amounts to its low-rent program;

• provide support to show $470,354 in amendments to a Hope VI development legal services contract were reasonable;

• provide support to show $954,631 paid for eviction legal services between June 1, 2002 and July 31, 2005 was reasonable, or repay its low-rent program from nonfederal funds;

• provide support to show the $289,949 paid for eviction legal service between August 1, 2005 and June 2006 was reasonable and was paid in accordance with contract terms, or repay unsupported amounts to its low-rent program from nonfederal funds;

• issue a new Request for Proposal for eviction legal services to ensure it obtains competitive prices for the service;

• revise its contract monitoring system to ensure it only pays for goods and services in accordance with contract terms;

• perform all future procurement actions in accordance with applicable requirements; and

• revise its Moving to Work Agreement so that it requires the Authority to obtain HUD's approval before executing any professional service contracts and amendments totaling more than $50,000 in part or aggregate for a minimum of one year or until HUD is satisfied the procurements and contracts meet federal requirements.

Date Issued: December 15, 2006
Audit Report No.: 2007-LA-1004
File Size: 862KB

Title: The Housing Authority of Contra Costa Did Not Adequately Determine and Support Section 8 Rents

We audited the Housing Authority of the County of Contra Costa's (Authority) administration of rent reasonableness determinations for units leased under its Section 8 Housing Choice Voucher program in response to a request from the Office of Public Housing. Our objective was to determine whether the Authority ensured that rents were reasonable and that its written procedures and internal controls were adequate to ensure compliance with U.S. Department of Housing and Urban Development (HUD) rules and regulations, and consequently, to ensure the use of federal funds was supported and for eligible purposes. We found the Authority did not adequately determine reasonable rent or document support because written policies and controls were inadequate.

We recommend that HUD require the Authority to (1) support or reimburse HUD $82,659 in unsupported housing assistance payments, (2) follow HUD-approved policies and procedures when performing rent reasonableness determinations and ensure that adequate quality control procedures are in place, (3) reimburse HUD $77,997 in administrative fees, (4) repay HUD $5,236 for subsidy overpayments resulting from processing delays, (5) repay additional subsidies disbursed due to late processing of rent increases from July 1, 2005, to the present, and (6) develop procedures that ensure the timely processing of rent increase requests; prevent the use of federal funds to pay for the Authority's errors or omissions; and address repayment of funds to HUD for overpayments resulting from the use of federal funds to pay for errors or omissions.

Date Issued : December 12, 2006
Audit Report No.: 2007-LA-1003
File Size:1.0MB

Title: The City of Long Beach, Long Beach, California, Did Not Administer Its Continuum of Care Supportive Housing Program in Compliance of HUD Requirements

We audited the City of Long Beach's (City) Continuum of Care Supportive Housing Program in response to a recommendation from HUD. Our audit objectives were to determine whether the City (1) monitored its project sponsors adequately to ensure compliance with HUD regulations, (2) closed out expired grants in compliance with HUD regulations, (3) provided the proper amount of administrative fees to its project sponsors, and (4) made timely reimbursements to its project sponsors.

We found that the City did not administer its program in compliance with HUD requirements and/or its own procedures. It failed to (1) monitor its project sponsors, which resulted in project sponsors being unable to support $315,320 in required cash match; (2) close out $636,916 in expired grants in accordance with HUD requirements; (3) provide at least 50 percent of the administrative fees to the project sponsors as Congress intended; and (4) make timely reimbursement payments to its project sponsors. As a result, the City failed to ensure that HUD funds were spent in the most effective and efficient manner to maximize its program, unnecessarily overburdened project sponsors with paying for operations from nonfederal funding, and put HUD funds at risk of being misspent. Additionally, the City unnecessarily delayed nearly $2 million in expired grant funds from being deobligated and put to better use.

We recommended that HUD require the City to comply with HUD's and its own policies and procedures regarding on-site monitoring of its project sponsors; provide support for $315,320 in cash match or repay HUD for more than $1.1 million in expended grant funds; immediately close out $636,916 in expired grants so these funds can be put to better use; and reevaluate its payment process and establish and implement procedures to reduce the time it takes to reimburse its project sponsors.

Date Issued: October 20, 2006
Audit Report No. 2007-LA-1001
File Size: 2.21MB

Title: The Associates Group Pioneer Pines Park, Bakersfield, Did Not Follow the Provisions of the Regulatory Agreement

We audited The Associates Group Pioneer Pines Park, located in Bakersfield, California, in response to a request from the HUD Departmental Enforcement Center. Our audit objectives were to asses HUD's concerns about potential equity skimming and to determine whether the project was administered in compliance with the regulatory agreement and HUD requirements. We found that Pioneer Pines failed to collect $195,202 in rental payments from its mobile home dealers; paid $133,049 in unsupported wages; made payments of $375,327 for ineligible expenses; commingled funds and repaid advances while in a non-surplus cash position; failed to maintain its vacant spaces in good repair and condition; and failed to make required mortgage payments. We recommend that HUD require the owner to repay the uncollected rent and other ineligible and unsupported expenses. We also recommend that HUD pursue double damages remedies against the owner for the inappropriate disbursements that were used in violation of the regulatory agreement. We also recommended that HUD's Departmental Enforcement Center pursue action under the Program Fraud Civil Remedies Act against the owner's president, and impose other civil money penalties and administrative sanctions against the president and owner.

Date Issued: September 7, 2006
Audit Report No.: 2006-LA-1019
File Size: 2.36MB

Title:The City of Modesto (City) Modesto, California, Did Not Always Administer Its Community Development Block Grant in Compliance with Government Regulations

We audited the City of Modesto's (City) Park, Recreation and Neighborhood Services Division to determine whether the City administered its Community Development Block Grant in accordance with the U.S. Department of Housing and Urban Development (HUD) requirements. The audit covered the period from July 1, 2000, through December 31, 2005. Our audit found the City did not adequately administer its grant in accordance with HUD and its own requirements.

We recommend that HUD require the City to:

• Reduce the loan balances for loan recipients who were charged $64,938 for unreasonable and unnecessary rehabilitation costs identified during our audit.
• Review all additional loans related to rehabilitation work carried out after June 2005 to determine the reasonableness of costs charged for the work, and reduce the recipient loan balances for any identified overcharges.
• Implement a procurement system that meets federal requirements.
• Develop an adequate quality control system to ensure proper monitoring of contractor charges, rehabilitation work and work progress.
• Provide evidence that it now complies with its own underwriting requirements regarding verification of income and assistance eligibility for loan applicants.

Date Issued: July 20, 2006
Audit Report No.: 2006-LA-1016
File Size: 62.86KB

Title: Los Angeles Family Housing Corporation, North Hollywood, California, Generally Administered Its Supportive Housing Program Grants in Accordance with HUD Requirements

We audited the Los Angeles Family Housing Corporation (Corporation) in response to a request from the HUD Los Angeles Office of Community Planning and Development. Our audit objective was to determine whether the Corporation administered its Supportive Housing Program grants in accordance with HUD requirements and its grant agreements. We found that the Corporation generally administered its Supportive Housing Program grants in accordance with HUD requirements and grant agreements.

Date Issued: July 20, 2006
Audit Report No.: 2006-LA-1015
File Size: 745.25KB

Title: Institute for Urban Research and Development, El Monte, California, Did Not Properly Administer Its Supportive Housing Program Grants

We audited the Institute for Urban Research and Development (Institute), located in El Monte, California, in response to a citizen's complaint. The objective of the audit was to determine whether the complainant's allegations had merit and whether the Institute administered its Supportive Housing Program grants in accordance with pertinent requirements. We found that the complainant's allegations had merit, and the Institute did not adequately administer its Supportive Housing Program grants. HUD originally awarded these grants to the Los Angeles Homeless Services Authority and the City of Glendale (grantees), which were subsequently passed through to the Institute. We reviewed grant funds provided for four grants totaling nearly $1.5 million and found that the Institute claimed to have spent $108,853 in grant funds for allocated supportive housing and corporate office expenses that were not documented. In addition, the Institute could not provide support for $181,020 in required matching funds for three of the grants. We recommend that HUD require the grantees (1) provide adequate supporting documentation for the $108,853 in unsupported expenses or repay it from nonfederal funds; and (2) provide adequate supporting documentation that the $181,020 in required matching funds was provided, or repay the $1,159,580 balance of grant funds expended.

Date Issued: July 17, 2006
Audit Report No.: 2006-LA-1014
File Size: 708.10KB

Title: KB Home Mortgage Failed to Ensure Underwriting Certifications for Federal Housing Administration Loans Were Accurate

We performed an audit of KB Home Mortgage Company (KB) after a prior HUD Office of Inspector General (OIG) audit found indications that KB underwriters inaccurately certified that they underwrote certain Federal Housing Administration loans. The objective of the audit was to follow up on this potential violation and determine the extent to which it occurred. We found KB failed to ensure underwriter certifications for Federal Housing Administration loans were accurate. Based upon statistical sample testing, we found in an estimated 206 of 543 HUD loans targeted for review, KB's underwriters certified that they personally underwrote the loans when they did not. As a result, HUD has no assurance that these loans were properly underwritten to ensure they were eligible for Federal Housing Administration mortgage insurance; therefore, HUD was exposed to unnecessary insurance risk for these loans. We recommend that HUD require KB, for any current or future FHA loan operations for which KB may exercise management control, to ensure that underwriter certifications for HUD-insured loans are only executed by direct endorsement underwriters after personally reviewing the appraisal, credit application, and all associated documents and using due diligence in underwriting the mortgage.

Date Issued: July 17, 2006
Audit Report No.:2006-LA-1013
File Size: 4.06MB

Title: The Child Abuse Prevention Council of Sacramento, North Highlands, California, Did Not Adequately Administer Its Healthy Homes Initiative Grant

We audited the Child Abuse Prevention Council of Sacramento, located in North Highlands, California, in response to a referral from the U.S. Department of Housing and Urban Development's Office of Healthy Homes and Lead Hazard Control. Our objectives were to determine whether the Council administered its Supportive Housing Program grant in accordance with HUD requirements and its grant agreement. We found that the Council did not adequately administer its Healthy Homes Initiative grant. As a result, $936,879 of the $1,027,477 in payment (reimbursement) requests submitted to HUD was for ineligible ($350,840) and unsupported ($586,039) costs. The Council also failed to implement and maintain an adequate procurement process, develop an adequate financial management system, or meet its grant performance objectives. We recommend that HUD require the Council to repay it from nonfederal sources for ineligible and unsupported expenses (for which reimbursement was previously received from HUD), and that HUD not pay the Council for outstanding reimbursement requests, consisting of ineligible and unsupported expenses, unless it can provide adequate supporting documentation. We also recommend that HUD deobligate all remaining grant funds including ineligible costs, any unsupported costs that cannot be documented, and the $472,523 unused portion of the $1.5 million grant. Finally, we recommend that HUD not award the Council additional funding until it has implemented adequate financial management and procurement systems and can provide evidence that it has developed the organizational capacity to carry out a HUD grant.

Date Issued: June 21, 2006
Audit Report No.: 2006-LA-1012
File Size: 978.63KB

Title: The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Determine and Support Section 8 Tenant Eligibility

We audited the Housing Authority of the City of Los Angeles' (Authority) Section 8 tenant eligibility determinations for its Section 8 Housing Choice Voucher program. The objective of the audit was to determine whether the Authority established the eligibility of its Section 8 tenants in accordance with HUD requirements. We found that the Authority did not establish and document its Section 8 tenants' eligibility to receive housing choice vouchers in 76 of 133 cases reviewed. We recommend that HUD require the Authority to (1) support or reimburse HUD more than $1 million in unsupported Section 8 housing assistance payments; (2) implement the necessary controls and/or revisions to its administrative plan to ensure the determinations are made properly in the future; and (3) conduct training with the Section 8 personnel on the new controls and procedures.

Date Issued: May 18, 2006
Audit Report No.: 2006-LA-1011
File Size: 400KB

Title: Sundial Care Center, Modesto, California, Used $659,746 in Project Funds for Ineligible and Undocumented Costs and Was Unable to Account for Revenue Totaling $407,454

In response to a request from HUD's Office of Multifamily Housing in San Francisco, we audited Sundial Care Center to determine whether the owner used project funds in compliance with the regulatory agreement and HUD's requirements. We determined the owner misused $659,746 in project funds for nonproject (ineligible) purposes, or lacked supporting documentation and could not account for $407,454 in project revenue receipts. The owner's noncompliance caused the default on the insured mortgage and HUD's subsequent $3.6 million loss on the sale of the mortgage note. We recommend HUD require the owner to repay HUD's Federal Housing Administration insurance fund $1,067,200, pursue double damages remedies against the owner, and take administrative actions against the owner and its principals/officers.

Date Issued: March 3, 2006
Audit Report No.: 2006-LA-1010
File Size: 5.17MB

Title: The Owner and Agent of Holiday Apartments, LA Pro 30, and Two Worlds II, Los Angeles, California, Mismanaged Project Finances and Operations

In response to a request from HUD’s Departmental Enforcement Center, we audited the four Holiday Apartments (101-A, 101-B, 101-C, and 102), LA Pro 30, and Two Worlds II to assess HUD’s concerns over inappropriate disbursements and determine whether the projects were administered in compliance with HUD requirements.

We determined the owner and identity-of-interest management agent used project funds to pay $2,670,118 in ineligible and unsupported costs, including $1,562,193 for excessive and unreasonable charges by an identity-of-interest maintenance contractor, $365,734 in excessive charges for accounting services paid to identity-of-interest contractors, $380,670 in payroll charges for the management agent’s president, $209,441 in unsupported rent charges and $140,880 in capital improvement expenses for the management agent’s office, and $11,200 in ineligible ownership expenses. We anticipate similar additional questionable costs continued after the end of our audit period that could cost the projects another $457,444. In addition, our building inspections identified more than 240 health and safety violations, which resulted in $561,600 in housing assistance payments for units and buildings that were not decent, safe, and sanitary. Finally, the owner and identity-of-interest management agent did not effectively manage the projects, which also included not accurately calculating, reporting, and resolving $655,173 in project liabilities.

We recommend HUD require the owner to repay the respective projects for the ineligible costs, and provide support over the reasonableness of unsupported costs or repay the projects. In addition, HUD should require the owner to correct unit deficiencies and obtain new management, accounting, and maintenance services.

Date Issued: March 3, 2006
Audit Report No.: 2006-LA-1009
File Size: 815.03KB

Title: Fontana Native American Indian Center, Fontana, California, Did Not Adequately Administer Its Supportive Housing Program Grant

We audited the Fontana Native American Indian Center, located in Fontana, California, in response to a HUD request. Our objectives were to determine whether the Center administered its Supportive Housing Program grant in accordance with HUD requirements and its grant agreement. We found that the Center did not adequately administer its grant program. The Center spent $194,541 in grant funds for ineligible ($138,503), unsupported (55,776), and unnecessary ($262) expenses. Additionally, the Center did not implement adequate financial management and record-keeping systems. We recommend that HUD require the Center to reimburse the grant and/or repay HUD from nonfederal funds for the ineligible, unsupported, and unnecessary expenses. We also recommend HUD require the Center to establish and implement a financial management system and an adequate record-keeping system that meet federal requirements, and not award the Center additional funding until it has implemented adequate systems and controls.

Date Issued: March 1, 2006
Audit Report No.: 2006-LA-1008
File Size: 809.23KB

Title: The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Administer and Maintain Its Section 8 Waiting List

We audited the Housing Authority of the City of Los Angeles (Authority), California, in response to a request from its executive director regarding his concern over the management of the waiting list. Our objective was to determine whether the Authority complied with applicable laws and regulations when placing registrants on the waiting list and selecting applicants in the proper order to receive housing vouchers. We found that the Authority did not adequately administer and maintain a waiting list in accordance with program requirements and, thus, may not have selected applicants in the proper order. We recommend, before the waiting list is reopened, that HUD require the Authority to (1) engage a dedicated team to analyze, purge, and update its current waiting list to ensure that it has an accurate and complete waiting list; (2) evaluate and implement any changes that are needed to its current administrative plan; and (3) provide training to pertinent employees on the revised waiting list procedures and policies.

Date Issued: December 7, 2005
Audit Report No.: 2006-LA-1004
File Size: 389KB

Date Issued: December 7, 2005
Audit Report No.: 2006-LA-1003
File Size: 248KB

Date Issued: November 8, 2005
Audit Report No.: 2006-LA-1002
File Size: 300.63KB

Title: The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Determine and Support Section 8 Rents

At the request of the Executive Director of the Housing Authority of the City of Los Angeles, we conducted a review of its Section 8 rent reasonableness determinations for the housing choice voucher program. The Executive Director, in his request, expressed concerns regarding prior administration of the program.

We determined the Housing Authority did not adequately document rent reasonableness determinations to ensure Section 8 rents were reasonable before entering into housing assistance payment contracts. We attributed these conditions to the Housing Authority not following established HUD-approved policies and procedures. We recommended the Housing Authority support or reimburse HUD $186,881 in unsupported Section 8 housing assistance payments. In addition, we recommended the Housing Authority follow the established policies and procedures for rent reasonableness determinations.

Date Issued: September 7, 2005
Audit Report No.: 2005-LA-1009
File Size: 225.70KB

Title: Inglewood Housing Authority, Inglewood, California, Housing Choice Voucher Program, Did Not Ensure Tenant Reexaminations and Housing Quality Standards Inspections Were Completed Properly and in a Timely Manner

We audited the Inglewood Housing Authority's (Authority), administration of tenant eligibility, housing quality standards and its housing assistance payment register. Our objectives were to determine whether the Authority, located in Inglewood, California, (1) accurately determined tenant eligibility in the Section 8 Housing Choice Voucher program in accordance with HUD requirements; (2) made Section 8 payments only for units that were decent, safe and sanitary; and (3) maintained an accurate register.

We found that the Authority did not always ensure the initial tenant certifications were completed with all the necessary documents. We reviewed 72 tenant files and found 43 were missing a total of 96 required documents. In addition, the Authority's unit inspections did not sufficiently detect housing quality standards violations. We inspected 35 units and found that 25 contained a total of 119 violations. Lastly, the Authority did not maintain an accurate register. Our review of the Authority's October 2004 register identified inaccuracies due to problems with 20 tenants because the tenants were either deceased, had erroneous and/or false Social Security numbers, or were no longer receiving assistance.

We recommend that HUD require the Authority to repay HUD from nonfederal funds $261,411 in unsupported housing assistance payments for those tenants determined to be ineligible, and repay the appropriate HUD program $27,411 for ineligible expenses paid for units that were not decent, safe and sanitary.

This is one of four reports resulting from our audit of the Authority.

Date Issued: August 26, 2005
Audit Report No.: 2005-LA-1008
File Size: 1.14MB

Title: Inglewood Housing Authority, Inglewood, California, Did Not Comply with the Housing Choice Voucher Program Portability Procedures and Responsibilities

We audited the portability procedures and responsibilities at Inglewood Housing Authority (Authority), Inglewood, California. Our objective was to determine whether the Authority complied with the Housing Choice Voucher program's portability procedures and responsibilities and other HUD requirements.

We found that the Authority did not comply with portability procedures and responsibilities. We reviewed the 143 portable tenant files, in which the initial public housing agency, Housing Authority of the City of Los Angeles, refused to pay the housing assistance payments because the Authority did not submit the initial bill within the required timeframe causing the Authority to absorb these tenants and exceed their authorized budget by $1.9 million. We also found that the Authority did not submit the appropriate documentation to ensure duplicate payments were not made on behalf of the ported tenants.

We recommend that HUD's Financial Management Center not reimburse the Authority's Section 8 program for the $1,991,283 in excess of its budget authority as was requested in its fiscal year 2004 yearend settlement statement. We also recommend that HUD's Los Angeles Office of Public and Indian Housing ensures that the Authority submits its billings and documentation on time.

This is one of four reports resulting from our audit of the Authority.

Date Issued: August 12, 2005
Audit Report No. 2005-LA-1007
File Size:609.86KB

Title: KB Home Mortgage Company, Los Angeles, California, Improperly Submitted 13 Late Requests for Single Family Mortage Insurance

We audited KB Home Mortgage Company's (KB) submission for late endorsement under the U.S. Department of Housing and Urban Development's (HUD) Single Family Direct Endorsement program. We selected KB because of its high number of late single-family loan submissions for Federal Housing Administration insurance. Our objective was to determine whether KB complied with HUD's payment history requirements. From August 2002 to April 2004, KB improperly submitted 13 loans to HUD, totaling $1.9 million, for insurance endorsement when the borrowers had delinquent payments within six months before the submission date. In addition, data entered into KB's automated system was often erroneous. This occurred because KB did not have adequate controls in place. We recommend that HUD take appropriate administrative action up to and including recovery of losses on $79,260 in paid claims and indemnification of loans with a total mortgage value of $537,578 against future losses on the five loans that were not current when submitted for endorsement. We also recommend that HUD take appropriate administrative action against KB for violating the requirements in effect at the time it submitted the remaining eight loans without proper six month payment histories.

Date Issued: July 11, 2005
Audit Report No.: 2005-LA-1005
File Size: 709KB

Date Issued: May 20, 2005
Audit Report No.:2005-LA-1004
File Size: 301.1KB

Title: The Housing Authority of the County of Marin, San Rafael, CA, Inappropriately Administered $2.8 Million in Section 8 Project-Based Vouchers

We audited the Housing Authority of the County of Marin's (Authority) Section 8 project-based voucher program to determine whether the Authority (1) performed rent reasonableness determinations and (2) executed housing assistance payments without HUD-required contracts. The audit covered the period of August 1, 2002 through July 31, 2004. Our audit found the Housing Authority of the County of Marin:

* Did not perform rent reasonableness determinations to ensure Section 8 tenants' rent was reasonable before entering into housing assistance payment contracts.

* Used tenant-based contracts and unenforceable memorandums of understanding to issue housing assistance payments under its Section 8 project-based program instead of the appropriate project-based voucher contracts.

* Received $318,139 in Section 8 administrative fees while inappropriately administering its Section 8 program.

We attributed these conditions to the Authority not having policies and procedures in effect to properly administer the project-based program or safeguard Section 8 resources. The Authority's actions could have given participating tenants false impressions concerning how they were allowed to use these vouchers. The Authority unnecessarily jeopardized funds needed to provide Section 8 program recipients affordable housing.

We recommend that the Director, Office of Public and Indian Housing, require the Authority to: 1) Develop and implement Section 8 procedures in accordance with HUD regulations, and 2) Reimburse HUD $318,139 from its administrative reserves for inappropriately administering the Section 8 program.

Date Issued: January 21, 2005
Audit Report No.: 2005-LA-1805
File Size: 294KB

Date Issued: January 3, 2005
Audit Memorandum No.: 2005-LA-1804
File Size: 402KB

Date Issued: November 18, 2004
Audit Report No.: 2005-LA-1001
File Size: 1.47MB

Title: The Housing Authority of the County of San Joaquin, Stockton, CA

We completed an audit of the Housing Authority of the County of San Joaquin, located in Stockton, CA. The objectives of the audit were to determine whether the Housing Authority of the County of San Joaquin followed Federal requirements and regulations in: 1) Using public housing program funds, and 2) Procuring goods and services. Additionally, we determined whether allegations against the former Chief Executive Officer were valid. The audit covered the period between January 26 and July 31, 2004. Our audit found the Housing Authority of the County of San Joaquin:

• Improperly awarded $3,322,032 in contracts for goods and services
• Misspent $5,545,972 in Low-Rent Housing program funds to pay for non-Low-Rent Housing program expenses.

We attributed these problems to the Housing Authority of the County of San Joaquin's decentralized procurement process, poor management decisions, and the lack of adequate controls to safeguard Low-Rent Housing program funds. As a result, the Housing Authority of the County of San Joaquin placed itself and HUD funds at risk.

We recommend the Director, Office of Public Housing, require the Housing Authority of the County of San Joaquin take corrective actions to: 1) Centralize its procurement of goods and services in accordance with Federal requirements and regulations, and 2) Reimburse the Low-Rent Housing program for funds misspent on non-Low-Rent Housing program expenses.

Date Issued: November 5, 2004
Audit Memorandum No.: 2005-LA-1802
File Size: 41.5KB

Title: Housing Authority of the City of Los Angeles, Nonprofit Organizations,
Los Angeles, California

We completed an external audit survey of the Housing Authority of the City of Los Angeles' (Authority) activities with its 13 related nonprofit organizations. The survey focused on the use of assets provided by the Department of Housing and Urban Development (HUD). Based upon the limited external audit survey work, the majority of the Authority's activities with its 13 nonprofit subsidiaries appear to be in accordance with statutory and regulatory requirements. Our survey did identify a deviation from program requirements and an area of apparent risk: (1) transfer of $30,196,274 in Section 8 Administrative Fee Reserves to the nonprofit entity Los Angeles LOMOD West, Inc., and (2) inability to provide sufficient general ledger data. However, both of these problems have been adequately addressed by corrective actions taken by HUD and the Authority. Los Angeles LOMOD West, Inc. has transferred the $30,196,274 back to the Authority's reserve account, and the Authority's outdated accounting system is being replaced with a new Oracle based accounting system.

Date Issued: November 4, 2004
Audit Report Memorandum: 2005-LA-1801
File Size: 408.5KB

Title: The Carmichael Rehabilitation Center Federal Housing Administration Project Number 136-43061
Carmichael, California

The owner of the Carmichael Rehabilitation Center did not follow the project's Regulatory Agreement and other HUD requirements in managing the project's operations. This included the owner incorporating the project into its petition for bankruptcy and defaulting on the project's mortgage. In addition, the owner inappropriately disbursed $3,769,290 of the project's cash between January 1997 and September 2002. The latter included ineligible distributions to the owner totaling $2,965,619, and the use of project funds to pay ineligible ownership costs of $803,671. The inappropriate distributions continued while the project was subject to the owner's bankruptcy, in default, and HUD held the note. Although the project's financial audit reports identified a portion of the inappropriate distributions, the owner submitted misleading information to HUD to make it appear the problems had been corrected. This occurred because the owner lacked internal controls to ensure it complied with HUD's requirements. These actions increased the risk to HUD's mortgage insurance fund by reducing the cash available for the project's normal operations. In addition, the default directly resulted in HUD incurring a loss of $323,925 on the disposition of the Carmichael facility.

We recommend HUD take appropriate administrative action against the owner, pursue recovery from the owner of the $323,925 loss incurred on the sale of the mortgage note, and pursue recovery of the ineligible distributions amount of $3,769,290.

Date Issued: September 27, 2004
Audit Report No.: 2004-LA-1008
File Size: 2.05MB

Title: United States Veterans Initiative, Inc., Supportive Housing Program Grantee, Inglewood, California

We completed an audit of the U.S. Veterans Initiative, Inc., a Supportive Housing Program grantee based in Inglewood, California. The objectives of the report were to determine whether the concerns raised by the HUD's Honolulu Community Planning and Development Office had merit, and to determine whether the U.S. Veterans Initiative, Inc. administered its Supportive Housing Program grants in compliance with the pertinent HUD program requirements and applicable regulations. Our audit disclosed that U.S. Veterans: (1) did not meet cash matching funds requirements for $7.2 million in Supportive Housing Program funds expended; (2) spent at least $633,348 in Supportive Housing Program funds for ineligible and unsupported expenses; and (3) did not administer its Supportive Housing Program grants in accordance with requirements.

We recommended that HUD require U.S. Veterans Initiative, and/or its continuums Los Angeles Homeless Services Authority and City of Long Beach to: (1) repay HUD from non-federal funds for the Supportive Housing Program grant expenditures that did not have the required matching funds, unless it can provide supporting documentation; (2) comply with federal requirements in carrying out its Supportive Housing Program grant activities; (3) reimburse the Supportive Housing Program grants and/or repay HUD from non-federal funds for the ineligible and unsupported expenses; (4) revise U.S. Veterans Initiative's financial management system; (5) competitively procure the services in the Business Services Agreement; (6) develop and/or update indirect cost rates; and (7) submit financial closeout reports for expired grants.

Date Issued: July 9, 2004
Audit Report No.: 2004-LA-1005
File Size: 2.39MB

Title: Guild Mortgage Company DBA Residential Mortgage Bankers, Non-Supervised Direct Endorser, Downey, California

We have completed an audit of the branch office of Guild Mortgage Company (GMC) doing business as (dba) Residential Mortgage Bankers (RMB) in Downey, California. Guild Mortgage Company is a non-supervised direct endorsement lender headquartered in San Diego, California. The overall audit objective was to determine whether Guild Mortgage Company approved FHA insured loans in accordance with the HUD/FHA requirements, which require adherence to prudent lending practices. Additionally, we wanted to determine whether there were additional indications of irregularities or abuses of the loan origination process. Our audit disclosed GMC allowed the branch to:

• Engage in predatory lending practices.
  
  
• Be a prohibitive net branch.
  
  
• Manipulate the FHA loan process.

This was caused by GMC's lack of oversight, ineffective controls, and improper decisions. As a result, there were excessive defaults and foreclosures, increased risk to the FHA insurance fund, and actual losses of over $811,000.

We recommended GMC:

• Be referred to the Mortgagee Review Board for engaging in predatory lending practices. This includes considering seeking civil money penalties for failure to comply with the provisions of RESPA.
  
  
• Refund unallowable loan discount points and premium rate pricing to the borrower if the loan is current. If the loan is delinquent, a refund must be applied to the delinquency. If a claim was paid, refund should go to HUD Single Family Claims.
  
  
• Sign indemnification agreements for 938 loans totaling $159,865,833.
  
  
• Discontinue all similar net branch operations immediately.
  
  
• Indemnify HUD in the amount of $811,843 for losses incurred.
  
  
• In addition, GMC should establish policies and procedures to ensure these issues are addressed.

Date Issued: May 19, 2004
Audit Report No.: 2004-LA-1003
File Size: 665.5KB

Title: Homewide Lending Corporation, Non-Supervised Mortgagee
City of Industry, California

We completed an audit of Homewide Lending Corporation (Homewide), a non-supervised mortgagee based in City of Industry, California. Our objectives were to determine whether Homewide originated Federal Housing Administration (FHA) insured mortgages in accordance with prudent lending practices and HUD requirements, and implemented its Quality Control Plan as required. Our audit disclosed that Homewide used false employment and income documentation to originate FHA loans. Specifically, 21 of 30 loans we reviewed, totaling $3.5 million, contained false documents and information, including: (1) false or altered Internal Revenue Service (IRS) W-2 forms, pay stubs, and verification of employment forms; (2) false down payment and gift fund documentation; and (3) false statement of occupancy on the loan applications. Our review also identified other loan origination deficiencies with the 21 loans including: (1) overstated income; (2) inaccurate or excessive qualifying ratios; and (3) unsupported down payment and/or gift funds; and (4) understated liabilities. The problem occurred because of Homewide's complicity in the documentation falsification and a serious lack of due care by mortgagee personnel involved in the loan origination process. In addition, we found that Homewide did not fully implement its Quality Control Plan as required. While Homewide had establish a written Quality Control Plan that met HUD requirements, it failed to conduct the required quality control reviews, and to ensure that immediate corrective action was taken on deficiencies identified in the reviews. As a result, loans were approved based on false information and caused unnecessary risk to the FHA insurance fund. We recommended that HUD (1) remove Homewide from participation in HUD's Single Family Mortgage Insurance Program (2) require Homewide to indemnify HUD/FHA for the $3.5 million in FHA loans and (3) consider seeking civil monetary penalties against Homewide for the loans originated using false documents and (4) take the needed action to ensure the required Quality Control Plans are conducted, and that corrective action is taken for all reported deficiencies. This electronic audit report has been posted to our website and may be viewed directly via this link. This PDF version will allow you to print the report to your local printer.

Date Issued: May 12, 2004
Audit Memorandum No.: 2004-CH-1802
File Size: 60KB

Date Issued: March 30, 2004
Audit Memorandum No.: 2004-LA-1002
File Size: 263.3KB

Title: Housing Authority of the City of Los Angeles Management of Legal Matters

We previously completed a review of the Housing Authority of the City of Los Angeles' (HACLA) procurement activities, including ongoing monitoring and management of resultant contracts, as they relate to its Resident Management Corporations/Resident Advisory Councils (RMCs). The review was initiated in response to several citizen complaints alleging irregularities with HACLA's RMCs and related contracting activities. Legal complications have precluded the issuance of a final audit report setting out the results of this review. However, as part of this review, we also identified problems related to HACLA's management of its legal affairs, including failure to advise HUD of significant legal matters. Specifically, HACLA incurred outside legal service fees and also entered into a $1.8 million litigation settlement agreement to resolve an employee lawsuit without obtaining required prior HUD notification and approval. HACLA also incurred unnecessary and ineligible attorney fees of $119,440 on behalf of a consultant and $47,227 in unnecessary attorney fees to monitor information requests and activities of the OIG during our review.

We recommended that HUD ensure HACLA uses non-federal funds to reimburse its low-rent program for the ineligible legal fees and require HACLA to establish appropriate policies and procedures to ensure that in the future, legal activities are carried out in accordance with HUD requirements.

Date Issued: September 12, 2003
Audit Memorandum No.: 2003-LA-1802
File Size: 118.4KB

Title: 1736 Family Crisis Center, Supportive Housing Program
Los Angeles, California

We completed a limited review of Family Crisis Center's (FCC) Supportive Housing Program (SHP) operations. The purpose of our review was to determine whether FCC complied with Federal requirements and grant agreements. We determined FCC did not have adequate controls in place to ensure it would meet these requirements. Specifically, FCC did not (1) adequately account for grant funds; (2) sufficiently establish procedures to ensure only eligible and applicable expenditures were charged to SHP grants; and (3) promptly establish a cost allocation plan to properly allocate indirect cost pools. During our review, with the exception of the implementation of a cost allocation plan, we noted that FCC had already established and implemented accounting systems and procedures to correct these control weaknesses.

We are recommending that HUD: (1) determine the eligibility of about $91,000 in direct operating costs, and (2) follow-up on FCC's implementation of its indirect cost allocation plan to ensure it is being implemented as planned.

Date Issued: September 12, 2003
Audit Memorandum No.: 2003-LA-1002
File Size: 484.5KB

Title: The Housing Authority of the County of San Mateo, Belmont, California

We completed an audit of the Housing Authority of the County of San Mateo's (HACSM) conventional low rent housing and Section 8 subsidy programs, generally covering the period of July 2000 through December 2002, which was expanded as necessary. We initiated the audit to address concerns expressed by the Director of Public Housing at the U.S. Department of Housing and Urban Development (HUD) office in San Francisco.

The objective of our review was to determine if HACSM could improve its effectiveness of operations and compliance with federal requirements. Issues concerning HACSM's Section 8 administration, disbursement allocations, maintenance and inspections, and personnel practices were addressed separately in a March 2003 internal memorandum to HUD's Office of Public Housing. This report communicates the results of our review over HACSM's procurement and contracting practices.

We identified serious problems relating to HACSM's procurement and contracting practices. This included the continued use of a vendor/contractor for rehabilitation without following appropriate procurement, bidding, and contracting practices as required by the Codes of Federal Regulations and HUD Handbooks. HACSM also contracted with the County of San Mateo, a related party, without following procurement practices or maintaining records to substantiate expenses as required. In addition, HACSM failed to follow appropriate purchase order procedures. As a result, HACSM incurred $233,530 in excessive and unreasonable costs and $90,000 in questionable unsupported expenditures charged to federally funded programs.

Date Issued: September 30, 2002
Audit Memorandum No.: 2002-SF-1004
File Size: 836KB

Title: Congressionally Requested Audit of the Intermediary Technical Assistance Grants awarded to the Low Income Housing Fund, Oakland, CA Grant numbers FFIT98003LF and FFIT98004LF

In response to a Congressional request, we audited the Low Income Housing Fund's (LIHF) Intermediary Technical Assistance Grants (ITAG) with particular emphasis on identifying ineligible lobbying activities. The audit identified the grantee did not comply with reporting and monitoring requirements under the applicable Notice of Funds Availability (NOFA), Office of Management and Budget's (OMB) Circulars, Codes of Federal Regulations (CFR), and the grant agreements. Our report contains four recommendations to address the issues identified in the report and strengthen the management controls of the grantee.

Date Issued: September 30, 2002
Audit Memorandum No.: 2002-SF-1808
File Size: 192KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grants awarded to the Los Angeles Center for Affordable Tenant Housing, Los Angeles, California Grant Numbers FFOT98003CA and FFOT00006CA

In response to a Congressional request, we audited the Los Angeles Center for Affordable Tenant Housing (LACATH) Outreach and Training Assistance Grants (OTAGs) with particular emphasis on identifying ineligible lobbying activities. Although LACATH staff participated in conference calls and attended conferences, both of which included topics that could be construed as lobbying, there was no objective way to identify or separate costs associated with the possible lobbying activities from other eligible OTAG business conducted during the conference calls or at the conferences. Most of the other grant costs appear to have been incurred in compliance with the applicable regulations and requirements. However, LACATH did fail to properly allocate employee salary costs in accordance with Office of Management and Budget (OMB) requirements. The report includes one recommendation to resolve the salary allocation problem.

Date Issued: September 30, 2002
Audit Memorandum No.: 2002-SF-1807
File Size: 1,41KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Legal Aid Society of San Diego, Inc., San Diego, California Grant Number FFOT00006CA

In response to a Congressional request, we audited the Legal Aid Society of San Diego (LASSD) Outreach and Training Assistance Grant (OTAG) with particular emphasis on identifying ineligible lobbying activities. Although LASSD staff participated in conference calls and attended conferences, both of which included topics that could be construed as lobbying, there was no objective way to identify or separate costs associated with the possible lobbying activities from other eligible OTAG business conducted during the conference calls or at the conferences. All other grant costs appear to have been incurred in compliance with the applicable regulations and requirements. The report does not include any recommended corrective actions.

Date Issued: September 26, 2002
Audit Memorandum No.: 2002-SF-1005
File Size: 1,018KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Housing Rights Committee of San Francisco/Tides Center, San Francisco, CA Grant Numbers FFOT98004CA and FFOT00005CA

In response to a Congressional request, we audited the Housing Rights Committee of San Francisco (HRCSF) and Tides Center's Outreach and Training Assistance Grants (OTAG) with particular emphasis on identifying ineligible lobbying activities. Although HRCSF staff participated in conference calls and attended conferences, both of which included topics that could be construed as lobbying, there was no objective way to identify or separate costs associated with the possible lobbying activities from other eligible OTAG business conducted during the conference calls or at the conferences. HRCSF and Tides Center lack adequate management controls and they failed to properly document and allocate employee salary and other costs in accordance with Office of Management and Budget (OMB) requirements, resulting in $4,114 in unsupported costs. In addition the grantees did not comply with administrative and accounting requirements under the applicable Notices of Funds Availability (NOFA), Office of Management and Budget's (OMB) Circulars, Codes of Federal Regulations (CFR), and the grant agreements.

Our report contains five recommendations to address the issues identified in the report and strengthen the management controls of the grantees.

Date Issued: September 26, 2002
Audit Memorandum No.: 2002-SF-1806
File Size: 203KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grants awarded to the California Coalition for Rural Housing, Sacramento, California, Grant Numbers FFOT98002CA and FFOT00004CA

As directed by Congress, we have completed an audit of the California Coalition for Rural Housing's (CCRH) Outreach and Training Assistance Grants, numbered FFOT98002CA and FFOT00004CA. The primary purpose of the audit was to determine whether grant funds were expended in accordance with the requirements of Section 514 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 and other applicable regulations and requirements. Consistent with the Congressional directive, we reviewed the eligibility of costs with particular emphasis on identifying ineligible lobbying activities. Although CCRH staff participated in National Alliance of HUD Tenants (NAHT) conferences and teleconferences, both of which included lobbying related topics or activities, there was no information to show the grantee participated in or charged the grant for any material costs associated with possible lobbying related activity. Other grant costs appear to have been incurred in compliance with the applicable regulations and requirements. However, CCRH did not submit complete quarterly progress reports to the U.S. Department of Housing and Urban Development (HUD) in compliance with program requirements.

Date Issued: September 26, 2002
Audit Memorandum No.: 2002-SF-1805
File Size: 485KB

As directed by Congress, we have completed an audit of the Amador-Tuolumne Community Action Agency (A-TCAA) Intermediary Technical Assistance Grants (ITAG), Numbers FFIT98001AT and FFIT98002AT. This was pursuant to a Congressional directive to audit all grants authorized under Section 514 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). The primary purpose of the audit was to determine whether grant funds were expended in accordance with the requirements of MAHRA and other applicable regulations and requirements. Consistent with the Congressional directive, we reviewed the eligibility of costs with particular emphasis on identifying ineligible lobbying activities. Although sub-recipients used ITAG funds to send tenants and staff to the National Association of HUD Tenants (NAHT) conferences, which consisted of two days of training and a third day of lobbying activities, most sub-recipients excluded the last day's costs or showed they did not participate in lobbying on the third day. Only one met with Congressional staff while including the last day's costs in its reimbursement request. However, there is no evidence this resulted in additional grant costs that would not have occurred if activity were limited to the two days of training.

All other grant costs appear to have been incurred in compliance with the applicable regulations and requirements.

Date Issued: September 25, 2002
Audit Report No.: 2002-SF-1003
File Size: 1,885KB

Title: Los Angeles Community Development Bank - Economic Development Initiative Grant/Section 108 Loan Guarantee Program City of Los Angeles, County of Los Angeles Los Angeles, California

Pursuant to a Congressional request, we performed an audit of the Los Angeles Community Development Bank's (LACDB) Economic Development Initiative (EDI) Grant/Section 108 Loan Guarantee Program. Our audit was to determine whether allegations of mismanagement of LACDB's operations contained in a citizen's complaint prompting the Congressional request, as well as allegations of improper use of funds contained in another citizen's complaint, had merit. Specifically, we assessed LACDB's compliance with Department of Housing and Urban Development (HUD) and EDI Agreements' requirements and reviewed LACDB's policies, procedures, and practices for administering and using EDI Grant and Section 108 Loan Guarantee Program funds.

We found the allegations were partially correct. LACDB had not fully complied with HUD regulations and EDI Agreements' requirements. Specifically, LACDB:

* Assisted 101 businesses that had not met the national objective standard of 51% of creating or retaining jobs for low- and moderate-income persons. Similarly, LACDB had not met the EDI Agreements' requirement of creating jobs predominantly for Empowerment Zone (EZ) target area residents;

* Provided City-funded loans or investments to businesses located outside the EZ target area in excess of the 25 percent funding limit; and

* Invested over $26 million of City-funded venture capital businesses that provided minimal benefit to EZ target area residents.

Date Issued: September 17, 2002
Audit Memorandum No.: 2002-SF-1002
File Size: 3,204KB

Title: Audit Memorandum - Oakland Housing Authority - Limited Review Rehabilitation of the 49th Street Housing Authority Development Oakland, California

Because of a citizen complaint, the OIG completed a limited review of the operations at the Oakland Housing Authority (OHA) where OIG examined the process used to rehabilitate the 49th Street housing development. The objective of this limited review was to determine whether the rehabilitation performed on the housing development at 49th Street was done in accordance with applicable Federal requirements.

OIG found the OHA had expanded the scope of a $467,500 roof replacement contract into a comprehensive modernization project costing nearly $3 million without following Federal requirements. As a result, the work cost more than necessary, and a sample of change orders identified $105,201 of questionable costs. Further, OIG found problems with the quality of the work.

OIG recommended HUD require the OHA to return the monies to the modernization program from nonfederal funds for the ineligible and unnecessary/unreasonable costs of $105,201. OIG also recommended that OHA: (1) perform a comprehensive physical examination of the project and require the contractor to repair all construction defects identified, or repair the defects at its own expense with nonfederal funds; (2) use a competitive procurement process any time there is a substantial change in the scope of a modernization project as required by HUD and Federal procurement regulations; and (3) institute improved procedures over the change order process. This would include requiring contractors to submit supporting cost estimates, OHA performing proper cost analyses, documentation on the negotiation or prices, and effective scrutiny by supervisors.

Date Issued: September 4, 2002
Audit Report No.: 2002-SF-1001
File Size: 1,304KB

Title: Casa de Vallejo - Multifamily Senior Housing Project, Casa de Vallejo, CA

Due to concerns voiced by the Multifamily Housing program office, we performed an audit of Casa de Vallejo, a multifamily senior housing project. We found the rental income was being used to subsidize the food and maid service programs. Also, project funds were being used to pay non-project expenses such as unsecured loans, loans to persons outside the project, personal expenses, donations and contributions, excessive management fees, and expenses of projects not related to Casa de Vallejo. In addition, the management agent was borrowing from the Tenants' Security Deposits account to supplement rental income. The required Monthly Report For Establishing Net Income was not properly completed so HUD could not properly monitor the project. As a result of our findings, we determined more than $110,000 in ineligible costs was paid using project funds. We also questioned over $8,000 due to lack of supporting documentation. As a result of our audit, the management agent generally agreed with our findings and has already reimbursed the project almost $14,000.

Date Issued: July 31, 2002
Audit Memorandum No.: 2002-SF-1804
File Size: 232KB

Title: HOME Investment Partnerships Program, City of Stockton, CA, San Joaquin County, CA Asociacion Campensina Lazaro Cardenas Inc. (ACLC), Stocktonians Taking Action to Neutralize Drugs (STAND)

As part of a national internal audit survey of the HOME Investment Partnerships Program (HOME), we reviewed the operations of the two subject Participating Jurisdictions (PJs) and the two subject Community Housing Development Organizations (CHDOs). This audit memorandum provides recommendations pertaining to these external audit entities. A separate internal audit memorandum provides recommendations addressing departmental and programmatic issues.

The majority of HOME program operations and activities at both PJs and both CHDOs appear to be in accordance with statutory and regulatory requirements. However, our survey did identify some areas of apparent risk and several deviations from program requirements including: (1) weaknesses in PJ monitoring of CHDOs, (2) administrative weaknesses at both the PJ and subrecipient or CHDO level, and (3) actual or apparent conflicts of interest.

Issue Date: April 24, 2002
Audit Memorandum No.: 2002-SF-1803
File Size: 62KB

Title: City of Pomona Community Development Block Grant Pomona, CA

We performed a limited review of the use of HUD Community Development Block Grant (CDBG) funds by the Latino Chamber of Commerce (LCC), a subgrantee of the City of Pomona. Specifically, we evaluated a complaint alleging the LCC had used its CDBG subgrantee allocation from the City of Pomona for ineligible activities. The complaint alleged Pomona City Council members sat on the board of directors for the LCC (subgrantee), and these individuals received campaign contributions from the LCC's CDBG funds allocated from the City of Pomona. Although we did not find evidence to support the complaint allegation, we did note concerns with the City of Pomona's oversight of its subgrantees as well as problems with the LCC's management controls and documentation supporting program activities. We recommended that the City of Pomona strengthen its subgrantee monitoring process; ensure that the LCC filed appropriate IRS form 1099s for contract employees; and, prior to providing additional funding to the LCC, verify that it has developed and implemented appropriate administrative and management policies necessary for grant administration.

Date Issued: March 25, 2002
Audit Memorandum No.: 2002-SF-1801
File Size: 2,529KB

Title: Mayor's Office of Housing and Nonprofit Developers Use of Various HUD Funds to Replace Geneva Towers San Francisco, California

OIG completed a review of the use of HUD funds for the development of three housing projects in the Visitacion Valley neighborhood of the City of San Francisco. HUD funds included CDBG and HOME program funds administered by the Office of Community Planning and Development, and Section 202 and Property Disposition Upfront Grant funds administered by the Office of Multifamily Housing. We conducted the review at the San Francisco Mayor's Office of Housing (MOH) and the offices of two nonprofit organizations, Mercy Charities Housing California (Mercy) and Housing Conservation and Development Corporation (HCDC). Generally, we found no significant deficiencies, problems, or weaknesses in the systems and procedures used by MOH and Mercy to administer HUD funds. However, HCDC did not establish written procedures for procurement of service contracts and the MOH did not adequately monitor HCDC's process for selecting a general contractor or development consultants. According to MOH officials, HCDC is not currently receiving any HUD funds from the City for development of multifamily housing projects.

Date Issued: March 25, 2002
Audit Memorandum No.: 2002-SF-1802
File Size: 1,389KB

Title: Limited Review-Lorenz Hotel, Project No. 136-38029 Property Disposition Program Redding, California

In response to a request from the U.S. Department of Housing and Urban Development's (HUD's) Sacramento Multifamily Program Center, OIG completed a limited review of commercial rent activities at the Lorenz Hotel located in the city of Redding, California.

The Lorenz Hotel is a 77-unit low-income housing project once owned by the Shasta Housing Development Corporation (SHDC), a California non-profit community entity. HUD and SHDC executed an agreement for Housing Assistance Payments (HAP) where HUD provides long-term Section 8 rental assistance to low-income people. In addition to the lobby used by the residents, there is commercial rental space on the ground floor that houses small businesses. OIG found SHDC disregarded requirements contained in the property's sale contract and grant deed by improperly retaining $53,484 in commercial rent. This reduced the project's ability to readily meet its financial obligations and provide for future monetary needs. OIG recommended SHDC, now known as Community Revitalization and Development Corporation, return $53,484 to the project.

Date Issued: September 28, 2001
Audit Memorandum No.: 2001-SF-1806
File Size: 158KB

Title: Limited Review - Golden Home Mortgage and Its Direct Endorsement Sponsors, Section 203(b) and 203(k) Mortgage Loan Insurance Programs, Concord, California

Neither Golden Home Mortgage nor its sponsors, SCME Mortgage Bankers and Western Sunrise Mortgage DBA Crossland Mortgage, prevented nonprofit mortgagors from exceeding the Department of Housing and Urban Development’s (HUD’s) 10 percent profit limitation on properties purchased from HUD at a 30 percent discount. The nonprofits had purchased the properties from HUD through a program that gave them 30 percent off the list price and made FHA’s 203(k) loans available for the properties’ purchase and rehabilitation. HUD’s stated purpose for giving the discounts was that the nonprofits pass the discount on to low and moderate-income homebuyers. The homebuyers, however, paid an average of $10,500 more for their homes than HUD intended.

Date Issued: September 25, 2001
Audit Memorandum No.: 2001-SF-1805
File Size: 708KB

Title: Los Coyotes Band of Mission Indians, Warner Springs, California

We conducted a limited review of Los Coyotes Band of Mission Indians' (Tribe) Indian Community Development Block Grant (ICDBG) and Indian Housing Block Grant (IHBG) funded housing activities. The review was initiated in response to a citizen complaint alleging overall grant fund mismanagement; ineligible housing recipients; inadequate pre-construction planning; and false information in the Tribe's grant applications. Although the majority of the complainant's allegations were determined not to be valid, we did note various matters that warrant action.

The Tribe did not effectively manage its procurement and contract administration process. We noted problems in almost every area of the procurement process. Additionally, we noted payments totaling $20,230 for services which were not necessary or not provided. The Tribe also had serious problems with its overall grant administration. Specifically, the Tribe's record keeping was almost non-existent. There were numerous missing documents related to the procurement process such as proposals, bids, price quotes, cost estimates, and executed contracts making it impossible to accurately determine what occurred during the contracting process. Financial records were also in disarray. There were missing invoices, receipts, bank statements, and cancelled checks and up to date financial data was not available. Additionally, we could not locate documents supporting the process used to rank and select housing recipients.

Date Issued: May 9, 2001
Audit Memorandum No.: 2001-SF-1804
File Size: 2,376KB

Title: County of Orange, Mercy House Coalition, Supportive Housing Program Grant (CA16B802-006), Santa Ana, California

As part of a nationwide review of HUD’s Continuum of Care Program, we audited the subject grant awarded to the County of Orange, Housing and Community Development Department (Orange County) for the 1998 Supportive Housing Program (SHP) operated by the Mercy House Coalition (Coalition). The Coalition carried out all grant activities as a sub-grantee of Orange County. The purpose of our audit was to determine whether Orange County and the Coalition operated the Continuum of Care SHP in accordance with the approved application as well as HUD and other federal requirements.

Both Orange County and the Coalition have been dedicated and responsive to the needs of the homeless population in Orange County and have worked hard to adhere to SHP requirements, as they understood them. However, we concluded that Orange County and the Coalition did not operate some aspects of the SHP in accordance with the approved application and other federal requirements. Specifically, we identified instances where the Coalition admitted ineligible participants and participants whose eligibility was not adequately documented, did not accomplish some program goals or did not maintain adequate evidence of goal accomplishment, and failed to comply with HUD requirements pertaining to client tracking, habitability inspections, and rent reasonableness determinations. Also, both Orange County and the Coalition charged unsupported and ineligible salary costs to the grant.

We believe these problems occurred because Orange County and the Coalition did not understand the applicable Federal or contractual requirements. As a result, Orange County and the Coalition have spent at least $294,987 of HUD funds on costs that did not benefit or may not have benefited the intended program participants.

Date Issued: March 30, 2001
Audit Report No.: 2001-SF-1001
File Size: 561KB

Title: San Francisco Housing Authority, Force Account Modernization Activities, Comprehensive Grant Program

We reviewed selected aspects of the San Francisco Housing Authority’s (SFHA’s) force account modernization activities under the Comprehensive Grant Program (CGP), generally covering the period January 1997 to June 30, 1999. We initiated the audit to address concerns expressed by the Director of Public Housing at the U.S. Department of Housing and Urban Development (HUD) office in San Francisco.

The objective of our review was to determine if the SFHA could improve its effectiveness of operations and compliance with federal requirements. Specifically, we determined whether the SFHA force account activities (1) operated effectively within HUD requirements and (2) included proper records for CGP assets and expenditures. We identified serious problems relating to both the force account operations and the record maintenance, requiring HUD’s immediate attention to set the proper tone and perspective for improvements.

The Housing Authority Was Not Operating The Force Account Programs Effectively

The SFHA modernization activities were not cost effective. In addition, insufficient construction records were maintained to accurately identify and assess all modernization work performed, and there were indications of poor workmanship. Also, the program did not sufficiently emphasize high priority modernization, and some of the low priority work performed cannot be adequately maintained by the SFHA. These problems primarily occurred due to inadequate management. As a result, the level of potential modernization available under the grant funds has been reduced. The SFHA’s neglect of high priority work resulted in emergency conditions requiring additional HUD funding. Finally, poor record maintenance made it impossible for inspectors to fully assess all the modernization performed.

We identified $18,186,844 of possibly excessive force account costs on the Clementina, Potrero Annex, and Sunnydale developments. However, due to deficient SFHA records, all modernization costs could not be estimated accurately. Nevertheless, we were able to establish $184,161 of excessive costs at the Clementina housing development, where the SFHA recorded costs that exceeded HUD Office of the Inspector General (OIG) estimates of what it should have cost for a contractor to perform the work.

The Housing Authority Was Not Maintaining Adequate Records Over Assets and Expenditures

The SFHA did not adequately record and track its assets and expenditures. The general ledger recording was inadequate to fully assess CGP force account expenditures. Expenditures were charged or moved to incorrect project accounts making the general ledger unreliable. The SFHA also did not consistently follow required procedures over the generation of its purchase orders relating to force account work. In addition, the inventory system over CGP purchased equipment was insufficient to accurately track all items. Finally, the SFHA was charging ineligible payroll to the CGP grant, while not maintaining adequate documentation to substantiate additional payroll attributed to the grants. These problems occurred because the SFHA did not develop sufficient procedures and controls, or was not following existing procedures. As a result, there was inadequate information to assure that all assets were accounted for and all expenditures were being legitimately used for CGP activities. In addition, $98,102 of ineligible and $73,210 of inadequately supported maintenance expenses were charged to the CGP, with additional amounts possible in other periods.

Date Issued: March 23, 2001
Audit Memorandum No.: 2001-SF-1803
File Size: 59KB

Title: Los Angeles Homeless Services Authority, El Monte Youth Development Center, Supportive Housing Program Grant (CA16B97-0021), Los Angeles, California

As part of a nationwide review of HUD’s Continuum of Care Program, we audited the 1997 Supportive Housing Program (SHP) grant awarded to the Los Angeles Homeless Services Authority (LAHSA) as operated by the sub-grantee El Monte Youth Development Center (El Monte). We concluded that LAHSA and El Monte did not carry out grant activities consistent with the application and applicable regulations. Specifically, El Monte admitted ineligible participants and participants whose eligibility was not adequately documented; did not accomplish program goals or maintain evidence of measurable results; did not maintain financial records that support specific grant expenditures; did not follow Federal procurement procedures in awarding contracts for services; charged ineligible costs to the grant; and failed to remit interest income earned on federal funds to the US Treasury Department as required. LAHSA was unaware of the problems at El Monte because they failed to perform timely sub-grantee monitoring reviews. We recommend HUD require LAHSA to: 1A. Conduct programmatic and financial monitoring of all sub-grantees and document follow-up actions resulting from the site visits; 1B. Ensure El Monte obtains and verifies the necessary information to determine participant eligibility; 1C. Assist El Monte in developing and implementing necessary procedures and systems to collect relevant data and accurately report on its performance; 1D. Perform in-depth reviews of all grants awarded to El Monte on a grant-by-grant basis to ensure supporting documentation is maintained and all costs are eligible and documented; 1E. Require El Monte to revise their accounting systems to properly account for individual grant expenses on a grant-by-grant basis prior to receiving additional funding; 1F. Reimburse HUD for the $80,639 of ineligible costs incurred by El Monte; and 1G. Require El Monte to provide documentation supporting the eligibility and allocability of $576,206 in unsupported costs, and reclassify or reimburse HUD for any costs, which cannot be documented as eligible costs specifically applicable to the TLC Program grant.

Date Issued: February 8, 2001
Audit Memorandum No.: 2001-SF-141-1802
File Size: 1047KB

Title: Audit of HUD Earthquake Loan Program HELP Funds, Fountain Park Cooperative, Inc., Project No. 122-92004, Woodland Hills, CA

At the time of our audit, the Los Angeles Multifamily HUB also conducted a management review and physical inspections of FPC’s dwelling units to determine whether repairs were either actually made or completed satisfactorily. Since the HUB was already addressing the issue concerning the repairs, we excluded this portion in our audit scope. Instead, we reviewed other areas relating to FPC’s receipt and expenditure of HELP and other earthquake-related funding sources to determine FPC’s compliance with the Financial Assistance Contract (FAC). Contrary to the provisions of the FAC, FPC did not use $55,524 that shareholders also received from other sources to pay for the same repair items also funded by HUD.

We discussed the results of our review with FPC officials during the audit and at a January 31, 2001 exit conference. On January 8, 2001, we provided a copy of our draft report to FPC for their review and comment and received their response on January 24, 2001. FPC generally disagreed with the finding and the recommendations. We considered FPC’s comments and made revisions where appropriate. The response and our evaluation are discussed in the finding and the full text of their response is included as Appendix B.

Date Issued: February 7, 2001
Audit Memorandum No.: 2001-SF-141-1801
File Size: 80KB

Title: Limited Review - Sacramento Housing and Redevelopment Agency

We reviewed the propriety of payments made by the Sacramento Housing and Redevelopment Agency to the Sacramento County Office of District Attorney for nuisance abatement activities in targeted areas. These activities were funded under U.S. Department of Housing and Urban Development’s (HUD’s) community development block grant (CDBG) program. We initiated this review based on a HUD hotline complaint questioning certain aspects of the agency’s operations. We concluded the $225,000 the agency paid to the Office of District Attorney exceeded actual costs and were not properly supported.

Date Issued: September 29, 2000
Audit Report No.: 00-PH-222-1005
File Size: 1,381KB

Title: Michaelson, Connor & Boul, Management and Marketing Contractor, Huntington Beach, California

We completed an audit of Michaelson, Connor & Boul, a Management and Marketing (M&M) contractor. The purpose of the audit was to determine whether the M&M contractor managed and marketed FHA's single family properties according to contract requirements.

Consistent with FHA and contract objectives, we found MCB's monthly property sales have steadily increased, and the number of properties in its inventory has steadily declined since MCB assumed management and marketing responsibilities for the Philadelphia HOC Area-2 property inventory. However, despite these accomplishments we did identify a number of areas where improvements need to be made by the contractor.

Date Issued: September 22, 2000
Audit Report No.: 00-SF-222-1002
File Size: 1,652KB

Title: Golden Feather Realty Services, Inc. Single Family Property Disposition Program Management and Marketing Services Contract (C-OPC-21322), Irvine, CA

As part of OIG’s nationwide review of HUD’s Management and Marketing (M&M) Services Contracts, we audited Golden Feather Realty Services, Inc.’s disposition of single family HUD-owned properties. The purpose of our audit was to determine whether GFR managed and marketed single family HUD-owned properties in accordance with its M&M contract, and other HUD requirements.

We determined that GFR generally managed and marketed single family HUD-owned properties in accordance with its M&M contract and other HUD requirements. We particularly noted GFR significantly reduced the number of HUD-owned properties in the Southern California inventory from almost 13,000 as of April 1999, to about 7,000 as of March 2000. However, as discussed in the two findings contained in this report, GFR needs to fully comply with certain aspects of its property disposition activities.

Golden Feather Realty (GFR) did not always adequately protect, preserve, and maintain HUD-owned properties. Our site inspections of 30 selected properties within the Los Angeles and San Bernardino, California areas disclosed that GFR did not always:

• correct health and safety hazards and remove defective paint surfaces;
  
• protect properties from the elements to prevent further deterioration;
  
• repair damages caused by routine vandalism;
  
• secure properties against unauthorized entry; and
  
• remove debris and maintain the lawns in order to maintain the physical
• appearance of the properties.

As a result, these conditions reflected a negative image of HUD’s REO program, but more importantly, it hampered HUD’s efforts to fully accomplish its mission of strengthening neighborhoods and communities. HUD was also less assured that sales of HUD-owned properties provided the maximum return to the mortgage insurance fund. GFR’s lack of written procedures did not ensure adverse conditions found during property inspections were accurately and consistently reported. The lack of follow-up action did not assure needed repair items identified were resolved timely and adequately.

Golden Feather Realty incurred delays in processing sales of HUD-owned properties in 24 of 45 HUD-owned properties reviewed. These delays occurred during (1) performing initial inspections, (2) obtaining appraisals, (3) approving disposition programs, and (4) reviewing sales contracts.

Consequently, the delays caused these properties to remain in HUD’s real estate owned property inventory longer than necessary. As a result of the delays, it could also increase property holding costs and exposure to deterioration or damage due to vandalism. Lack of knowledge and management emphasis of contract requirements, as well as staff misinterpretation of HUD regulations, caused GFR to incur the delays.

We discussed the findings with GFR officials during the audit and at a September 11, 2000 exit conference. We provided GFR with a draft copy of Finding 1 on July 19, and draft copy of Finding 2 on August 3, 2000 for their comments. We received GFR’s response to Finding 1 on August 7, and Finding 2 on August 16, 2000. GFR generally disagreed with both findings. We considered GFR’s comments and revised the findings where appropriate. The responses and our evaluation are discussed in the Findings and the full text of their responses are included as Appendix B.

We recommend HUD’s Santa Ana Homeownership Center (SAHOC) require GFR to fully comply with its M&M contract to ensure that HUD-owned properties are always adequately protected, preserved and maintained, as well as marketed and sold in a timely manner. We included specific recommendations at the end of each finding to correct the noted deficiencies.

Date Issued: August 23, 2000
Audit Report No.: 00-FW-222-1006
File Size: 1,543KB

Title: Fortune Escrow, Inc. Closing Agent Contract

We performed an audit of Fortune Escrow, Inc. (Fortune), a closing agent for HUD, as part of a nationwide effort to review closing agents. Our audit objective was to determine whether management controls were adequate to ensure the prevention of fraud, waste, and abuse. To meet this objective, we performed audit steps to determine whether Fortune complied with the contract terms and conditions of a closing agent. Overall, Fortune substantially complied with its HUD contract. However, Fortune did charge HUD for ineligible wire transfer fees.

Date Issued: March 31, 2000
Audit Memorandum 00-SF-201-1001
File Size: 358KB

Title: SF Housing Authority Low-Income and Section 8 Housing Programs

We conducted an audit of the San Francisco Housing Authority’s low-income and Section 8 housing programs. We determined the Authority complied with the rules and regulations governing the Public Housing Management Assessment Program and properly calculated its housing subsidy under the Performance Funding System. However, we also identified serious problems in the areas of contracting, administrative hiring and compensation, and Section 8 receivables. This report contains four findings and applicable recommendations to improve the effectiveness of the Authority’s housing programs.

Our recommendation to take administrative action against the Authority’s executive director and board of commissioners is similar to a recommendation contained in report number 00-CH-201-1002 issued March 31, 2000 by OIG’s Chicago Office covering its audit of the Cuyahoga Metropolitan Housing Authority. That report recommends administrative action to be taken against the former chief operating officer, who is the current executive director at the San Francisco Housing Authority.

The Troubled Agency Recovery Center is currently responsible for monitoring the Authority’s low-income housing program (a carry-over from when the Authority was considered troubled). The responsibility for the Section 8 program resides with the Office of Public Housing at HUD’s California state office. Since the responsibilities at the Authority are split between entities, we addressed our report to the Assistant Secretary who is over both entities to ensure proper coordination.

Date Issued: February 10, 2000
Audit Memorandum 00-SF-123-0801
File Size: 49KB

Title: Limited Review - REO Division Operations

We conducted a limited review to evaluate the internal control procedures in place for disposing of HUD-acquired single family properties at: (1) the former HUD Los Angeles (LAAO) Real Estate Owned (REO) Division during the time that a scheme involving the sale of REO properties at well below the appraised value was perpetrated by a HUD housing specialist; (2) the Santa Ana Homeownership Center (HOC) REO Division and, (3) the Management & Marketing (M & M) contractor, Golden Feather. The purpose of the review was to determine the adequacy of the internal control procedures at LAAO that allowed the scheme to occur and whether adequate internal control procedures are in place at the Santa Ana HOC and Golden Feather to minimize the likelihood that the scheme could reoccur.

We found that the HUD Housing Specialist was able to perpetrate the scheme involving the sale of REO properties at well below the appraised values because the LAAO had deviated from the internal control procedures established in the pertinent HUD handbook requiring the CPO to approve all sales contracts and price reductions. In addition, we believe that the CPO may not have performed adequate supervisory oversight of the housing specialists to ensure that they disposed of REO properties in accordance with program requirements. We evaluated the internal control procedures at Golden Feather, and found that those procedures are adequate to minimize the possibility that the scheme could reoccur. However, to sufficiently minimize the risk that the scheme could reoccur, we believe, that improvements are needed in the Santa Ana HOC’s monitoring of Golden Feather in order to ensure compliance with the established procedures and to best safeguard HUD’s interests.

Date Issued: August 19, 1999
Audit Memorandum 99-SF-241-1003
File Size: 124KB

Title: CDBG and HOME Investment Partnerships (HOME) Programs, Lynwood, California

The objective of our audit was to determine the validity of allegations concerning: (1) the lack of jobs created or retained by a subgrantee, Lynwood Entrepreneur Development Academy (LEDA), (2) the lack of documentation to support future benefits to its residents from training that was provided to businesses located outside of its city limits by a subgrantee, Lynwood Business Institute (LBI), and (3) a conflict of interest between a Grantee elected official and a director of LEDA and LBI. We also assessed the Grantee’s timely use of HOME funds to determine the reason for the large unexpended balance.

The Grantee could not demonstrate its compliance with CDBG requirements to support the number of jobs created and retained for low - and moderate-income persons by a subgrantee and document the future benefits accruing to its residents from training businesses located outside of its city limits. It also did not use its HOME funds timely since it only spent $1.2 million (40%) of the $3 million in HOME funds approved by HUD for Fiscal Years 1993 through 1998. We attribute these problems to the absence of adequate management controls and insufficient staff training.

Date Issued: January 8, 1999
Audit Memorandum 99-SF-213-1802
File Size: 86KB

Title: Limited Review of Mortgagor Operations Astoria Gardens Tenant Association (AGTA) Sylmar, CA

As requested by the Los Angeles Area Office (LAAO) Director, Multifamily Housing Division, we performed a limited review of Astoria Gardens Tenants Association's (Mortgagor) operations. The purpose of our review was to determine whether concerns brought to HUD LAAO's attention pertaining to alleged misconduct by AGTA's board members and improper expenditure of grant funds could be substantiated.

We determined that allegations of misconduct by AGTA board members were unsubstantiated; however, allegations concerning improper expenditure and imprudent use of grant funds were valid. We found that AGTA improperly retained bank refunds of $64,062 relating to a good faith deposit and related fees that AGTA never actually paid. We also found that AGTA spent funds for ineligible lobbying activities and used $55,342 for expenses that may not have been reasonable and necessary.

Date Issued: October 23, 1998
Audit Memorandum 99-SF-212-1801
File Size: 68KB

Title: Unfavorable Laundry Lease Agreements at HUD-Insured Multifamily Projects Davis/Sacramento, CA

At the request of HUD attorney Shirley Hochhausen, we recently conducted a review of laundry lease agreements at selected HUD-insured multifamily projects in the Davis, CA area. During the review we found instances in which projects are being deprived of revenue due to unfavorable leases with the project owner general partners. The purpose of this memorandum is to alert your office so that appropriate action may be taken.

We reviewed the laundry lease agreements at 16 projects in the Davis/Sacramento area and found 4 projects with unfavorable laundry room lease arrangements with project owner general partners. As a result, the projects received income that was substantially less than the average laundry income earned at projects which either owned the laundry equipment or had lease arrangements with non-identity-of-interest vendors. We estimate that the annual income lost to these projects ranged individually from $1,850 to $7,050. Further, these identity-of-interest arrangements were not disclosed in the projects' financial statements as required.

Date Issued: July 22, 1998
Audit Report No. 98-SF-201-1003
File Size: 181KB

Title: San Francisco HA Drug Elimination Program, San Francisco, CA

As part of the Inspector General's nationwide review of HUD's drug elimination program, we conducted an audit of that program at the San Francisco Housing Authority. The report's six findings discuss excessive and unsupported costs; poor procurement practices; inadequate program monitoring, evaluation and reporting; and changes to implementation plans prior to HUD approval. Within 60 days, please furnish us a status report on the corrective action taken, the proposed corrective action and the date to be completed, or why action is not considered necessary for each recommendation in the report. Also, please furnish us with copies of any correspondence issued because of the audit.

Issue Date: March 31, 1998
Audit Report Number: 98-SF-212-1002
File Size: 96KB

Title: Redwood Villa, Mountain View, CA

The audit confirmed that the owners improperly spent over one million dollars for non-project uses even though the project was not in a surplus cash position as required by the regulatory agreement. Also in violation of HUD requirements, financial activities of the owner and another (non-HUD) project were commingled in the accounting records of the project.

Issue Date: March 24, 1998
Audit Report No. 98-SF-212-1001
File Size: 152KB

Title: Villa San Carlos Garden Apts., Santa Cruz, CA

We concluded that the project was not managed in accordance with HUD's requirements. There was unnecessary and unsupported use of assets. In addition, management practices were inadequate for procurement of services and materials, and for handling employee time and attendance records.

Issue Date: August 1, 1997
Audit Memorandum 97-SF-201-1803
File Size: 21KB

Title: San Francisco HA, Developer Selection for the Hayes Valley HOPE VI Development, San Francisco, CA

We found that the developer was not selected competitively, resulting in the lost opportunity to consider proposals from other potential developers and imparting the appearance of possible favoritism. Nevertheless, we are not recommending corrective action. Reprocuring a developer for Hayes Valley would not be practical or prudent. Also, the housing authority's present selection process appears to be open and competitive.

Issue Date: July 29, 1997
Audit Case Number 97-SF-203-1005
File Size: 75KB

Title: San Diego Housing Commission (SDHC), San Diego, CA

We determined that some Section 8 contract rents approved by SDHC since at least 1994 were excessive. SDHC not only approved initial contract rents that were too high but also gave annual adjustments to previously established rents without determining that those adjustments were warranted. This occurred because SDHC did not consistently compare rents it approved for Section 8 units to those rents that project owners charged for comparable unassisted units.

Issue Date: June 3, 1997
Audit Case Number 97-SF-229-1004
File Size: 95KB

Title: Oakbrook Village, Merced, CA

Our audit confirmed that certain FHA-insured houses in the two subdivisions have developed structural damages, some rather significant, because of inadequate preparation of the soil and deficient construction of the foundation slabs. The damages allowed underground moisture to penetrate into the houses, creating conditions for molds to grow. The damaged houses and the molds pose safety and health hazards to the occupants.

Issue Date: May 12, 1997
Audit Case Number 97-SF-212-1003
File Size: 102KB

Title: Huron Plaza and Sunridge Apts, Huron and Fresno, CA

We found that owner/agent misuse of project assets contributed to Huron Plaza's physical problems and Sunridge's continued loan delinquency and subsequent default. Huron assets of $407,136 and Sunridge assets of $98,468 were used in violation of the regulatory agreements. The violations included diverted laundry income and direct distributions to owners; payment of excessive, unsupported, or non-project charges by service contractors and others; and excessive management fees. These acts contributed to the insufficiency of funds to maintain Huron and to keep Sunridge's mortgage current. This occurred because the general partners disregarded the regulatory agreements. Further, one of the project's general partners, who was also general partner of the management agent, neglected his responsibilities.

We also noted other deficiencies with the projects' management, including non-compliance with Section 8 requirements; inadequate separation of accounting, disbursement, and procurement functions; and absence of a required fidelity bond. As a result, HUD paid excessive subsidies, and there was exposure to unnecessary financial risks. These problems occurred because the agent neglected its responsibilities and disregarded both HUD requirements and good business practices.

Issue Date: April 14, 1997
Audit Report No. 97-SF-219-1002
File Size: 73KB

Title: Granada Gardens, Granada Hills, CA

Contrary to HUD requirements and the Financial Assistance Contract, the project's owner (owner) improperly used $322,432 in leftover HELP funds that were earmarked for the project's earthquake related financial deficit arising from vacancy losses.

Contrary to HUD requirements, the project's owner did not prepay a portion of the HELP loan with the $11,037 received as a property tax refund.

Issue Date: December 24, 1996
Audit Case Number 97-SF-212-1001
File Size: 51KB

Title: Shade Tree Apartments, Sacramento, CA

We found that project cash was improperly used to make payments on a second deed of trust and to reimburse the management agent for unsupported and excessive costs. Also, the owner improperly retained some project cash. The misused monies contributed to the project's financial weakness and deferred maintenance.

Issue Date: September 24, 1996
Audit Related Memorandum 96-SF-229-1809
File Size: 20KB

Title: Interim Report, Construction Deficiencies in FHA Single Family Homes, Merced, CA

Our review shows that the contractor did not always comply with either the Uniform Building Codes or HUD Minimum Property Standards. We compared soils report recommendation requirements with conclusions reached by geotechnical engineers hired to determine the cause of settlement experienced by homes in the subdivisions. The reports concluded that settlement problems were caused by contractors either ignoring certain soils report recommendations or not complying with the UBC.

Issue Date: July 9, 1996
Audit-Related Memorandum 96-SF-241-1807
File Size: 49KB

Title: City of Pomona, Pomona, CA

Some of the concerns we reviewed were valid; however, others were not. The allegations of conflict of interest violations against the City Mayor and the President/board member of a subgrantee were not valid. Our review, however, determined there was the appearance of a conflict of interest between a Council member's relationship with Pomona Valley Center for Community Development (PVCCD), a subgrantee, and that person's position on the City Council.

We did not find conclusive evidence to support a determination that Council members steered funds to new subgrantees where they may have had a personal interest. We believe that the Grantee's CDBG funding procedures were adequate to provide for a fair and competitive process. Although our review of 20 proposals disclosed rating inconsistencies, we did not find indications of deliberate efforts by Grantee officials to direct the award of CDBG funds to specific subgrantees.

With respect to the concern that historically funded organizations received less or no funding, Grantee's records showed that the Community Life Commission (CLC), which reviewed and recommended funding to the City Council, recommended 22 proposals in the 1994-95 funding year. Of the 22 proposals, eight were organizations that received more funding in previous years than during the 1994-95 funding year. The Grantee's records showed that these organizations received less funding during the 1994-95 funding year due to a lack of available funds and not because Council members steered funds to new subgrantees.

We also did not find that organizations serving Hispanics were given preferential treatment or that they received the alleged 80 to 85 percent of the funds awarded. The City allocated only 24.8 percent to private organizations, including those serving Hispanics and other minority constituents. The Grantee's public agencies received 46.9 percent of awarded funds. These funds were generally used on citywide activities designed to benefit low income residents - rather than allocated based on the ethnic composition of Pomona's population. The remaining funds were used for program administration and a loan repayment.

Although rating inconsistencies occurred indicating that five proposals may have been overrated and three underrated, we did not find compelling evidence that CLC members who rated those proposals manipulated the selection and funding process so as to serve the personal interest of the Council members who appointed them.

The allegation that three subgrantees were new and had no track record administering the activities for which they were funded was valid but not necessarily improper. Although we found that these subgrantees may have been overrated and, therefore, could have been excluded from consideration, we did not find any compelling evidence that they were given preferential treatment.

The allegations concerning violations of the Grantee's program were valid, but those conditions were not violations of HUD requirements. The concern was that two subgrantees had failed to include required documents with their proposals, thus, they were ineligible for CDBG funding consideration. The Grantee's procedures, however, allowed the Grantee the prerogative of waiving some of its RFP requirements. Therefore, if the Grantee chose to accept proposals without receiving all the required documents, the applicant's failure to submit documents would not prevent its proposal from being considered for CDBG funding.

Issue Date: April 5, 1996
Audit Related Memorandum 96-SF-201-1806
File Size: 26KB

Title: San Francisco HA, San Francisco, CA

We recently gathered information on tenant screening and eviction practices of public housing agencies, particularly in regards to keeping criminals out of public housing. This work included visits to the San Francisco housing authority. Although this did not include a complete review of the housing authority's practices, we identified several ways it could keep criminals out of its housing projects. We recommend you share these ideas with the housing authority and consider whether other authorities might benefit from them, particularly in light of President Clinton's recently issued policy on crime in public housing.

Issue Date: March 29, 1996
Audit Report Number 96-SF-212-1004
File Size: 104KB

Title: Harvest Oaks and Auburn Palms, Lincoln and Auburn, CA

The audit found that the general partner made, or caused to be made, misrepresentations to the Department by inflating project income and tenant occupancy for Harvest Oaks in an apparent attempt to convince HUD to approve a second similar project. Received distributions of at least $187,270 of Auburn Palms assets and income greater than the maximum permitted by the regulatory agreement violated other requirements of the regulatory agreements governing project operations such as not maintaining adequate accounting records and not submitting financial data to HUD.

Issue Date: March 8, 1996
Audit Related Memorandum 96-SF-212-1804
File Size: 17KB

Title: Peach Tree Terrace Apts, Yuba City, CA

We found that loan repayments exceeding surplus cash were made to the general partners.

Issue Date: January 18, 1996
Audit Related Memorandum 96-SF-214-1803
File Size: 7KB

Title: DKD Property Mgmt, Inc., San Jose, CA

The audit found that the management company gave the identity-of-interest developer of two insured, multifamily projects -- while the mortgage loans were in default -- $217,190 for development cost refunds from a sanitation district. The developer paid $239,095 to the U.S. Government to settle. $231,922 are to be returned to the projects' operating and reserve accounts. The agreement also restricts allowable distributions from the projects for two years. Thus, HUD needs to obtain evidence that the monies are returned to the appropriate project accounts and monitor future distributions for compliance with the agreement.

Issue Date: December 19, 1995
Audit Case Number 96-SF-212-1001
File Size: 16KB

Title: Walnut Ranch Apts, Dixon, CA

We reviewed financial activities of the multifamily project known as Walnut Ranch Apartments (project number 121-35735) located in Dixon, California. We found that project funds were improperly used for many years to repay loans from third parties and the general partner. Also, the project was deprived of revenue by an unfavorable lease with the partner. These actions were mitigated by the partner's advances to the project until 1990. Since then, however, we estimate that project funds were improperly reduced by $94,519.

Issue Date: November 21, 1995
Audit Related Memorandum 96-SF-212-1802
File Size: 9KB

Title: Sharps and Flats Apts., Davis, CA

Our initial work identified risk of possible asset misuse in the areas of (1) development costs, (2) owner advances, (3) litigation, and (4) tenant security deposits account. Subsequent work, however, identified no material violations of the regulatory agreements or found that HUD asset management had approved the owner's actions.

Issue Date: October 11, 1995
Audit Related Memorandum 96-SF-214-1801
File Size: 20KB

Title: International Realty, Los Angeles, CA

IRI records for Finley Square disclosed that IRI: (1) obtained project funds for itself by falsifying invoices to inflate a vendor's actual charges; (2) improperly used project funds to pay a project coordinator to prepare an evidence package to support allegations against a former management agent; and (3) had no support, or inadequate support, for some amounts paid to outside vendors and to itself. As a result, project funds were unnecessarily depleted and neither the owners of Finley Square nor HUD can be assured that the project's funds were spent for necessary expenses. We attribute the deficiencies to a disregard for HUD requirements.