Connecticut Audit Reports

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Issue Date: November 2, 2009
Audit Report No.: 2010-BO-1001
File Size: 614.16KB

Title: The State of Connecticut Department of Social Services ’ Section 8 Housing Units Did Not Always Meet HUD’s Housing Quality Standards

We audited the State of Connecticut Department of Social Services' (agency) administration of its housing quality standards program for its Section 8 Housing Choice Voucher program (Voucher program) as part of our fiscal year 2009 audit plan.

The agency was selected based upon our analysis of risk factors relating to rental housing authorities in Region 1. The audit objectives were to determine whether (1) Section 8 housing units met HUD's housing quality standards, (2) housing inspections were performed in a timely manner, (3) housing assistance payments were properly abated when units did not meet standards, (4) landlords were notified of failing inspection results, and (5) the quality control reviews of inspections were adequately performed in support of the agency's Section Eight Management Assessment Program (SEMAP) scores. This is the third and final audit of the agency. The agency did not adequately ensure that its Section 8 housing units met HUD's housing quality standards. Of the 67 program units statistically selected for inspection, 53 failed inspection, and 34 were materially noncompliant with housing quality standards. In addition, the agency did not always perform its inspections in a timely manner, properly abate the housing assistance payments when repairs were not made as required or notify the owners of inspection results in a timely manner. The agency also did not have an adequate housing quality standards quality control process.

We recommend that the Director of HUD's Boston Office of Public Housing require the agency to strengthen controls to ensure that it follows HUD's procedures for conducting inspections and performing Section 8 quality control inspections to ensure that units meet HUD's housing quality standards to prevent $22 million in program funds from being spent annually on units that fail to materially meet HUD's housing quality standards. In addition, the agency should be required to reimburse its program from nonfederal funds $62,459 for units that remained in noncompliance with housing quality standards and were not properly abated.

Issue Date: August 7, 2009
Audit Report No.: 2009-BO-1010
File Size: 326.18KB

Title: The City of New London Housing Authority Lacks the Capacity to Properly Administer its Capital Funds Program and Recovery Act Funds

We initiated this audit of the City of New London, Connecticut, Housing Authority (the Authority) as part of OIG's initiative to evaluate public housing authority's capability to administer the capital funds provided under the American Recovery and Reinvestment Act of 2009 (The Recovery Act). The Authority has had significant management deficiencies for more than ten years and HUD identified the Authority as "overall troubled" in May of 2004. Our objectives were to determine whether the Authority (1) properly administered its Capital Fund program, and (2) has the capacity to administer its Recovery Act capital funds in accordance with HUD requirements and the Recovery Act.

The Authority did not properly administer its Capital Fund program and lacks adequate capacity to ensure that Recovery Act funding for the Capital Fund program will be administered in accordance with HUD requirements and the Recovery Act. The Authority improperly awarded contracts without the Capital Funds to cover the costs; and failed to openly compete procurements and establish formal written contracts with required contract provisions to protect the Authority's interests. The Authority also did not ensure that contractors paid workers the minimum wage required by law or always ensure that contractors maintained adequate performance bonds and liability insurance. In addition, the Authority did not complete a cost or price estimates to ensure that prices paid were reasonable.

The Authority also lacked formal accounting procedures and has not had an effective financial or capital fund manager since February of 2008. Its capital funds were not monitored on a regular basis and its accounting records were not accurate or updated timely. In addition, it did not accurately report obligations and expenditures to HUD, and could not support $91,027 in capital funds used to administer the program. HUD evaluated the Authority as a medium risk grantee requiring additional controls and oversight for administration of its Recovery Act funds. The Authority was allocated $381,631 in Capital Funds under the Recovery Act. HUD also concluded that based on the Authority's extended history of poor performance and lack of improvement, the Authority lacked the management capacity to successfully operate its federal public housing programs. Based on our review, we agree with HUD's assessment. HUD also recommended that the Authority procure a contractor to manage its federal housing programs; and, the Authority was in the process of procuring a contract administrator.

Issue Date: August 4, 2009
Audit Report No.: 2009-BO-1009
File Size: 413.23KB

Title: Casa Otonal Multifamily Housing Project, New Haven, Connecticut, Was Not Properly Managed in Accordance with HUD Regulations

We audited the Casa Otonal multifamily housing project, located in New Haven, Connecticut, based on a referral received from the U.S. Department of Housing and Urban Development's (HUD) Hartford Program Center. The referral disclosed compliance findings regarding the project's audited financial statements, including instances of unauthorized loans/disbursements to an affiliate. Our primary audit objective was to determine whether the project owner managed and operated the project in accordance with HUD regulations and the project's regulatory agreement. We also wanted to (1) determine the extent of unauthorized distributions made while the project was in a non-surplus-cash position, (2) determine whether goods and services were properly procured, and (3) ensure that the project's cost allocation plan adequately prorated staff time and shared office space.

The project owner did not always use project funds in accordance with HUD regulations or the regulatory agreement. We identified questioned costs totaling $265,350 while the project was in a non-surplus-cash position. Specifically, the owner made $236,439 in unauthorized loans/distributions to an affiliate, Casa Otonal, Inc. Additionally, the owner did not follow proper procurement procedures due to a lack of written policies and procedures and the absence of a contract log, contracts, purchase orders, or related bidding or source selection evaluation documents. Later, the project incurred $18, 031 in ineligible costs, $8,748 in unsupported costs, and $2,132 in unreasonable costs. Finally, the owner did not prepare a formal written cost allocation plan to appropriately allocate staff time spent on nonproject activity or the use of office space by nonproject personnel.

However, the nonproject staff time and office space used appeared to be minimal. We recommend that the Director of the Office of Multifamily Housing, Boston hub, require the project owner to (1) reimburse the project $254,470 for the ineligible disbursements and $2,132 for the unreasonable disbursements and (2) provide documentation to support the $8,748 in unsupported disbursements or reimburse the project. We also recommend that the Director require the project owner to establish a written procurement policy that follows federal procurement regulations and an adequate cost allocation plan to appropriately allocate staff time and office space at the project. Further, we recommend that HUD pursue (1) double damages remedies against the responsible parties for the ineligible/inappropriate unsupported disbursements that were used in violation of the project's regulatory agreement and (2) civil money penalties and administrative sanctions, as appropriate, against the responsible parties for their part in the regulatory violations.

Issue Date: April 30, 2009
Audit Report No.: 2009-BO-1007
File Size: 425.4KB

Title: GMAC Mortgage, Fort Washington, Pennsylvania, Allowed Borrowers to Receive Cash Back In Excess of Their Cash Investment at Closing on FHA Loans with Secondary Financing from the Connecticut Housing Finance Authority

We reviewed lenders in the State of Connecticut that had Federal Housing Administration (FHA) loans with secondary financing from the Connecticut Housing Finance Authority as part of our annual audit plan. The objective was to determine whether the lenders inappropriately gave borrowers using secondary financing from the Connecticut Housing Finance Authority cash back at closing in excess of their total cash deposit and other closing costs paid outside of closing.

In general, the lenders reviewed, with one exception, did not give borrowers using secondary financing from the Connecticut Housing Finance Authority cash back at closing in excess of their total cash deposit and other costs paid outside of closing. However, we did find seven loans originated by GMAC Mortgage in which the borrowers received excess cash back at closing totaling $1,471. This practice resulted in the U.S. Department of Housing and Urban Development's (HUD) over insuring the loans.

We recommend that HUD's Assistant Secretary for Housing - Federal Housing Commissioner require GMAC Mortgage to pay down the principal balances of the over insured loans by the amounts of excess cash back paid to the borrowers at closing. We also recommend that GMAC Mortgage implement controls in its loan closing policies and procedures to ensure that it follows HUD's requirements regarding cash back to the borrower.

Issue Date: April 8, 2009
Audit Report No.: 2009-BO-1005
File Size: 625.93KB

Title: The State of Connecticut Department of Social Security Did Not Always Determine or Support Tenant Eligibility and Rent Calculations for Housing Choice Voucher Program

We initiated this audit as part of our annual audit plan to determine whether the State of Connecticut Department of Social Services (agency) properly administered its Housing Choice Voucher program (Voucher program) in compliance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) regulations. Our objectives focused on whether tenant eligibility, rent determinations, and annual reexaminations were performed in accordance with HUD requirements and the associated housing assistance payments were adequately supported. This is the second of three planned audit reports issued regarding the agency's Voucher program.

The agency did not comply with HUD requirements in the administration of its Voucher program. Specifically, our review of 66 tenant files found that the agency's contractor did not adequately support tenant eligibility, properly calculate rent payments, or always perform timely annual reexaminations for 49 of the tenants. As a result of these errors, the agency paid $194,821 in unsupported rent and $31,971 in overpaid rent and underpaid $9,269 in rent to landlords and limited-income households This amount includes housing assistance payments and utility reimbursements. for these 49 tenant files. Based on our testing, we estimate that errors may exist in 74 percent (or 4,558) of the 6,139 files in our universe.

We recommend that the Public Housing Program Center Coordinator require the agency to support or reimburse its program $194,821 for unsupported rent payments, reimburse its program $31,971 for ineligible rent payments, reimburse $9,269 for rent underpayments to tenants and landlords, and implement a corrective action plan.

Issue Date: January 5, 2009
Audit Report No.: 2009-BO-1004
File Size: 432.33KB

Issue Date: September 4, 2008
Audit Report No.: 2008-BO-1008
File Size:185.68KB

Title:The State of Connecticut Department of Social Services Significantly Underleased Its Housing Choice Voucher Program and Did Not Always Comply with Its Annual Contributions Contracts and HUD Regulation

We initiated this audit as part of the audit plan to determine whether the State of Connecticut Department of Social Services (agency) properly administered its Housing Choice Voucher program (Voucher program) in compliance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) regulations. Our objectives were to determine whether the agency (1) adequately (95 percent or more) leased up its Voucher program, (2) properly accounted for and reported program fraud repayments and related program income, and (3) could adequately support administrative costs charged to the Voucher program.

The agency did not adequately utilize its Section 8 vouchers. As a result, approximately 770 households in calendar year 2007 were not served. In addition, the agency did not ensure that its contractor had adequate controls over fraud recoveries and related interest income. Specifically, the agency did not ensure that the contractor properly accounted for, reported, and returned fraud recoveries and related interest income in accordance with HUD’s requirements. As a result, more than $1 million needs to be returned to the agency to be used for program purposes. Lastly, the agency could not support the allocation of more than $1.6 million in salary and benefits to the Voucher program and charged $14,440 to the Voucher program for costs related to the state-funded housing program.

We recommend that the Public Housing Program Center Coordinator require the agency to implement adequate procedures and controls to ensure that it is adequately leased up to at least the 95 percent threshold required by HUD and provide additional housing assistance to eligible households; recover more than $1 million from the contractor and account for, report, and use the funds in accordance with HUD requirements; provide support to show that more than $1.6 million in direct and indirect salaries was properly chargeable to the Voucher program or repay any ineligible costs.

Issue Date: July 24, 2008
Audit Report No.: 2008-BO-1007
File Size: 307.42KB

Title: Countrywide Bank, Milford and Madison, Connecticut, Did Not Comply with Certain HUD Requirements in Administering Its Federal Housing Administration Insured Loan Programs

We audited the Milford, Connecticut, branch office of Countrywide Bank, FSB (Countrywide), which is a supervised national bank approved by the U.S. Department of Housing and Urban Development (HUD) to originate, underwrite, and service Federal Housing Administration (FHA) single-family insured loans. We selected the Milford, Connecticut, branch office largely based on a lender risk analysis, which showed that the loans it originated had a higher default percentage than the Connecticut state average. We expanded the audit to cover the Madison, Connecticut, branch office, which used the same FHA identification number. Our objectives were to determine whether the lender acted in a prudent manner and complied with HUD regulations, procedures, and instructions in the origination of the FHA-insured single-family mortgages selected for review; and whether its quality control plan as implemented met HUD requirements.

Countrywide did not fully comply with HUD regulations, procedures, and instructions in the origination of FHA-insured single-family mortgages. However, the lender’s quality control plan and implementation was adequate. Specifically, Countrywide allowed some borrowers utilizing secondary financing from an agency acting as an instrumentality of government to incorrectly receive cash back at closing in excess of their total cash deposit totaling $5,767. This occurred because Countrywide did not follow proper HUD underwriting guidelines, which resulted in the loans being overinsured and a minimal increased risk to the FHA insurance fund. Countrywide also did not properly notify HUD upon the sale and/or transfer of FHA-insured loans. This condition occurred because Countrywide was not fully aware of the HUD requirements regarding mortgage record changes.

We recommend that HUD’s Assistant Secretary for Housing–Federal Housing Commissioner require Countrywide to (1) pay down the principal by $5,767 for the five overinsured loans and implement controls to prevent cash back when secondary financing is used; and (2) update their mortgage records in HUD's system to reflect the appropriate mortgage holder and implement procedures to ensure the timely submission of mortgage record changes for future loans assigned or sold.

Issue Date: February 5, 2008
Audit Report No.: 2008-BO-1005
File Size: 1.11MB

Title: Multifamily Project Deficiencies Resulted in More Than $2.8 million in Cost Exceptions for Windham Heights Apartments, Windham, Connecticut

We audited Vesta Windham Heights, LLC (Windham Heights), after completing an audit of the owners’ related project, Vesta Moosup, LLC (Moosup Gardens). The Moosup Gardens audit (OIG Audit Report Number 2007-BO-1006) disclosed cost exceptions totaling more than $700,000 related to unauthorized distributions and repayments of owner advances while in a non-surplus-cash position and unreasonable payments to identity-of-interest (related) companies. Our audit objective was to determine whether the owners and/or management agent used project funds in accordance with the regulatory agreement. The owners did not use project funds in accordance with the regulatory agreement. We identified questioned costs and opportunities for funds to be put to better use totaling more than $2.8 million (see appendix A). These cost exceptions were due to weak internal controls, a lack of policies for related company transactions, and inadequate accounting procedures. Specifically, the owners and management agent (1) used more than $171,000 for services that were unnecessary and unreasonable to operate and maintain the project and when the project was in a non-surplus-cash position; (2) included unreasonable and unnecessary costs in their cost certification, causing the U.S. Department of Housing and Urban Development (HUD) to overinsure the mortgage by more than $598,000; and (3) repaid more than $800,000 in advances when the project was in a non-surplus-cash position. These violations, which included charging the project more than $1.3 million for unreasonable relocation services when the project was in a non-surplus-cash position, may subject the owners to monetary penalties.

We recommend that the Acting New England Hub Director for Multifamily Housing require the owners to (1) repay the project for ineligible use of operating funds for unreasonable and unnecessary costs charged to the project, (2) make a principal payment or establish an escrow with the lender from nonproject funds to pay down the amount of overinsurance, and (3) repay the project for ineligible repayments to their related companies.

Further, we recommend that HUD pursue sanctions as appropriate against the responsible parties for the unreasonable disbursements cited in this report.

Issue Date: February 4, 2008
Audit Report No.: 2008-BO-1004
File Size: 446.49KB

Title: Multifamily Project Deficiencies Resulted in More Than $1.1 Million in Cost Exceptions for Mohegan Commons, Norwich, Connecticut

We audited Vesta Mohegan, LLC (Mohegan Commons), after completing an audit of the owners’ related project, Vesta Moosup, LLC (Moosup Gardens). The Moosup Gardens audit (OIG Audit Report Number 2007-BO-1006) disclosed cost exceptions totaling more than $700,000 related to unauthorized distributions and repayments of owner advances while in a non-surplus-cash position and unreasonable payments to identity-of-interest (related) companies. Our audit objective was to determine whether the owners used project funds in accordance with the regulatory agreement.

The owners did not use project funds in accordance with the regulatory agreement. We identified questioned costs and opportunities for funds to be put to better use totaling $1,194,242 (see appendix A). Specifically, the owners (1) used $58,342 in project funds for unnecessary and unreasonable operating costs; (2) included more than $593,000 in unreasonable relocation costs, and other questionable costs in the cost certification, causing the U.S. Department of Housing and Urban Development (HUD)-insured mortgage to be overinsured by $341,160; and (3) repaid $200,947 $259,804 - $58,857 reimbursed as of April 2007. in member advances when the project was in a non-surplus-cash position. These cost exceptions were due to weak internal controls, a lack of policies for related company transactions, and inadequate accounting procedures. These violations of the regulatory agreement may subject the owners to monetary penalties.

We recommend that the Acting New England Hub Director for Multifamily Housing require the owners to (1) repay the project for the questioned operating costs from nonproject funds, (2) make a principal payment or establish an escrow with the lender from nonproject funds to pay down the amount of overinsurance, and (3) reimburse the project from nonproject fund sources for the ineligible member advance repayments, and remove the unreasonable member advances accrued from the project’s accounting records.

Issue Date: July 25, 2007
Audit Report No.: 2007-BO-1006
File Size: 1.37MB

Title: Multifamily Project Deficiencies Resulted in More Than $730,000 in Cost Exceptions for Moosup Gardens Apartments, Moosup, Connecticut

We audited the records for Moosup Gardens Apartments (project), a U.S. Department of Housing and Urban Development (HUD)-insured multifamily project in response to a request from HUD. Our audit objective was to determine whether the project’s costs were accurately reported to HUD and in accordance with the regulatory agreement and HUD’s requirements.

We identified questioned costs and opportunities for funds to be put to better use totaling more than $730,000. These cost exceptions were due to weak internal controls, lack of policies for related company transactions, and inadequate accounting procedures. As a result, the owners (1) repaid advances when the project was in a non-surplus-cash position, charged ineligible costs, and did not adequately support payments to their related company; (2) paid their related company more than $230,000 in unreasonable and unsupported relocation services costs when the project was in a non-surplus-cash position; (3) included more than $280,000 in unreasonable and unsupported expenses in their HUD-insured mortgage cost certification; and (4) did not properly manage the HUD-assisted learning center.

We recommend that the director of HUD’s Boston Multifamily Hub require the owners to (1) repay the project for ineligible use of operating funds while the project was in a non-surplus-cash position and pay down the project’s mortgage for unsupported development costs; (2) repay the project for unreasonable and unsupported relocation costs; (3) make a principal payment to pay down the project’s mortgage for unreasonable relocation costs and provide support for or make a principal payment to pay down the project’s mortgage for unsupported operations expenses included in the mortgage amount HUD insured; and (4) establish and implement a business to plan which ensures that the learning center delivers effective programs in an economical and efficient manner and becomes self-sufficient without HUD funding.

Further, we recommend that HUD pursue administrative sanctions as appropriate against the responsible parties for the unreasonable and unsupported disbursements cited in this report

Issue Date: June 30, 2006
Audit Report No.: 2006-BO-1008
File Size: 616.33KB

Title: Hall Commons Inc. Bridgeport, Connecticut, Did Not Administer its $4.1 Million Section 202 Capital Advance Construction Grant in Accordance With Federal Requirements

At the request of HUD, we audited Hall Commons Inc.'s administration of its Section 202 Supportive Housing for the Elderly capital advance construction funds. Our audit objective was to determine whether Hall Commons administered the Section 202 funds advanced for construction in accordance with federal requirements. Hall Commons Inc. did not administer its Section 202 capital advance construction funds in accordance with federal requirements.

Hall Commons failed to maintain adequate and essential financial records to accurately account for project financial transactions and safeguard project assets. They also made unauthorized disbursements and allowed required insurance policies to lapse due to non-payment of premiums. This occurred because Hall Commons did not establish adequate internal controls over its cash accounts to safeguard project assets, and had inadequate board of directors oversight. As a result, more than $2 million in capital advances and payments to vendors and contractors were not properly recorded, $199,411 in project funds were disbursed in violation of the governing project agreements, the project was not always covered by builder’s risk or crime insurance, and real estate taxes were delinquent. The serious deficiencies indicate that Hall Commons does not have the capacity needed to successfully develop the project.

We recommend that the Connecticut multifamily program center director pursue applicable sanctions available under the regulatory agreement to protect HUD’s $4,079,100 investment including issuing a notice of default and if the violations are not corrected within 30 days declaring a default, taking possession of the project, foreclosing on the mortgage, or requiring a transfer of physical assets to a HUD approved nonprofit corporation; and require Hall Commons Inc. to support and/or repay the $199,411 in project funds that were disbursed in violation of the governing project agreements. If Hall Commons is allowed to remain the owner, we recommend the Connecticut multifamily program center director require Hall Commons to establish a financial accounting system and maintain current and accurate books and accounts, and a functioning board of directors to provide adequate oversight over project operations.

Issue Date: June 2, 2006
Audit Report No.: 2006-BO-1007
File Size: 488.27KB

Title: Capital Mortgage Associates, LLC (North Haven, Connecticut), Did Not Always Comply with HUD Requirements Regarding Its Single-Family Loan Originations and Quality Control Plans

We audited Capital Mortgage Associates LLC (Capital Mortgage), a nonsupervised loan correspondent approved by the U.S. Department of Housing and Urban Development (HUD) to originate Federal Housing Administration- insured single-family loans. We selected Capital Mortgage based on a lender risk analysis, which showed that the loans it originated had a higher default percentage than those of other lenders in the area. Our objectives were to determine whether Capital Mortgage acted in a prudent manner and complied with HUD regulations, procedures, and instructions in the origination of the Federal Housing Administration-insured single-family mortgages selected for review and whether its quality control plan as implemented met HUD requirements.

Capital Mortgage did not always comply with HUD requirements regarding its single-family loan originations. It engaged in a prohibited net branch arrangement. There was also material loan origination deficiencies with two of the loans originated from this branch. These deficiencies affected the credit quality of the loans and represented a risk of loss to the Federal Housing Administration insurance fund. Capital Mortgage also charged ineligible fees to borrowers because it was not fully aware of HUD-allowable fees or written disclosure requirements regarding certain closing fees. This resulted in borrowers paying excessive and/or unreasonable fees. In addition, Capital Mortgage did not establish or implement a quality control plan that met all of HUD’s requirements. As a result, it may not identify and correct potential deficiencies in a timely manner, resulting in an unnecessary risk to the Federal Housing Administration insurance fund.

We recommend that HUD’s assistant secretary for housing–federal housing commissioner require Capital Mortgage to (1) revise its branch agreements to comply with HUD requirements or cease originating Federal Housing Administration-insured loans from the affected branch office, (2) refund the ineligible fees, and (3) update and fully implement its quality control plan. We also recommend that the assistant secretary refer Capital Mortgage to the Mortgagee Review Board for consideration of administrative sanctions and/or civil money penalties for the violation of HUD requirements disclosed in this report.

Issue Date: March 10, 2006
Audit Report No.: 2006-BO-1005
File Size: 739.25KB

Title: Hartford Housing Authority, Hartford, Connecticut, Had Housing Choice Voucher Program Deficiencies Resulting in More Than $2.6 Million in Cost Exceptions

As part of our fiscal year 2005 annual audit plan, we reviewed the Housing Choice Voucher program at the Hartford Housing Authority (Authority). Our audit objective was to determine whether the Authority properly administered its Section 8 Housing Choice Voucher program (Voucher program) in accordance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) requirements

The Authority did not properly administer its Voucher program in compliance with its annual contributions contracts and HUD requirements. As a result, we identified questioned costs and opportunities for funds to be put to better use totaling more than $2.6 million because the Authority

•Inaccurately reported leasing and cost data to HUD and incorrectly received more than $841,000 in funding.
• Improperly charged more than $714,000 in administrative costs to the Voucher program.
• Approved unreasonable rents, resulting in ineligible and prospective ineligible costs totaling more than $595,000.
• Improperly awarded and managed its housing inspection contract and also paid the contractor $158,492 in unreasonable costs.
• Failed to ensure subsidized housing met minimum standards and paid for substandard housing.
• Did not account for its portable voucher receivables and failed to collect past-due receivables.

We recommend that the Office of Public Housing, Boston, Massachusetts, require the Authority to

Issue Date: October 7, 2005
Audit Report No.: 2006-BO-1001
File Size: 1.21MB

Title: The Division of Grants Management, City of Hartford, Connecticut, Paid $1,039,296 for Ineligible Community Development Block Grant Activities and Failed to Return Income to the Program

We audited the City of Hartford’s (City) Division of Grants Management’s administration of the Community Development Block Grant (Block Grant) program. The audit was initiated based on an Office of Inspector General (OIG) Hotline complaint. The objectives were to determine whether the City (1) awarded grants to subrecipients for eligible activities and adequately monitored their performance to ensure its subrecipients were paid in accordance with the contract terms and met contract objectives, and (2) properly accounted for Emergency Demolition and Repair program income.

The City did not always award grants to subrecipients for eligible activities. This occurred because the City’s evaluation and award process did not include steps to ensure that the subrecipient’s activities were eligible under the Block Grant program. As a result, the City paid $1,039,296 in ineligible costs associated with five of the 17 activities we reviewed. Of the $1,039,296 in ineligible costs, $831,796 related to activities ineligible under the Block Grant program and $207,500 related to an activity that was ineligible under the cited eligibility category. We also identified funds to be put to better use for an additional $394,461 allocated for ineligible activities for the City’s Block Grant program year beginning July 1, 2005. In addition, the City paid subrecipients in accordance with the contracts, but we could not always determine whether the contract objectives were met because the City did not have formalized monitoring procedures that documented whether the contract objectives were being met.

The City also did not properly account for Block Grant program income generated through its Emergency Demolition and Repairs program because the City did not have adequate controls to ensure repayments from Block Grant-assisted properties were properly returned to the program account. We identified $62,515 in program income that was not returned to the program and an additional $85,581 in receipts that were credited to the City’s general fund, for which the City was unable to provide a breakdown by property. Without a breakdown, we could not determine how much of the $85,581 represents program income. We also noted that an additional $525,900 in receivables is at risk of not being returned because of the ineffective internal controls over the program receipts.

We recommend that the Hartford Office of Community Planning and Development require the City to

• Develop and implement procedures to ensure that only eligible activities meeting Block Grant program objectives are funded.
• Repay the Block Grant program account the $831,796 in ineligible costs from nonfederal sources or through future grant reductions.
• Repay $207,500 in costs that were improperly classified as direct homeownership assistance category by applying an offsetting lower public service cap in future grant years.
• Reprogram the $394,461 allocated for ineligible activities in the program year beginning July 1, 2005.
• Repay $62,515 in Emergency Demolition and Repair program income from the City’s general fund.
• Identify the source of funding for the $85,581 in unsupported Emergency Demolition, Repair program repayments, and repay applicable income to the Community Development Block Grant program.

Issue Date: September 26, 2005
Audit Report No.: 2005-BO-1007
File Size: 549.29KB

Title: Fairfield Financial Mortgage Group, Inc., Danbury, Connecticut, Did Not Always Comply with Federal Housing Administration Requirements

We audited Fairfield Financial Mortgage Group, Inc. (Fairfield Financial), a nonsupervised lender approved by the U.S. Department of Housing and Urban Development (HUD) to originate Federal Housing Administration-insured single-family mortgages. Our objectives were to determine whether Fairfield Financial complied with HUD regulations, procedures, and instructions in the origination of Federal Housing Administration loans and whether Fairfield Financial’s quality control plan, as implemented, met HUD requirements.

Fairfield Financial did not always comply with HUD regulations, procedures, and instructions in the origination of Federal Housing Administration loans. It improperly originated 4 of the 24 loans reviewed. These four loans contained deficiencies that affected the insurability of the loans, including unsupported income, underreported liabilities, excessive qualifying ratios, and derogatory credit information. As a result, HUD insured loans that placed the insurance fund at risk for $1,204,981. In addition, Fairfield Financial did not properly disclose to borrowers $11,390 for commitment fees in 20 of the 24 loans reviewed.

Further, Fairfield Financial’s quality control plan, as implemented, did not meet HUD requirements. As a result, HUD lacks assurance that Fairfield Financial is able to ensure the accuracy and completeness of its loan origination operations.

We recommend that the assistant secretary for housing-federal housing commissioner require Fairfield Financial to (1) indemnify HUD against future losses on the four loans totaling $1,204,981 and (2) revise its procedures to ensure that each borrower charged a commitment fee is properly informed, in writing, of the fee, the amount of the fee, and the purpose of the fee, and that the actual fee charged coincides with the amount disclosed to the borrower. Additionally, HUD should require Fairfield Financial to implement controls to ensure that it follows HUD’s quality control requirements and verify that it has implemented proper controls.

Issue Date: September 6, 2005
Audit Report No.: 2005-BO-1006
File Size: 395.25KB

Title: The Hartford Housing Authority Improperly Used $3.7 Million in Public Housing Operating Subsidies for Its State and Other Federal Programs

As part of our fiscal year 2005 annual audit plan, we reviewed the low-income public housing (public housing) program at the Hartford Housing Authority (Authority). Our objective was to determine whether the Authority used low-income public housing (public housing) operating subsidies in compliance with the financial provisions of its annual contributions contract.

The Authority did not administer its public housing operating subsidies in compliance with the financial provisions of its annual contributions contract. It used public housing operating subsidies to pay expenditures of its state-subsidized housing program and other federal housing programs. This condition occurred because the Authority failed to establish internal controls to ensure compliance with its annual contributions contracts for public housing and prevent the use of federal funds to pay nonprogram expenses. As a result, the Authority did not have $3.7 million available to administer its public housing program.

We recommend that the director of the Regional Office of Public Housing, Boston, Massachusetts, require that the Authority repay the public housing operating fund $3.7 million plus interest. In addition, the Authority should establish and implement policies and procedures to ensure that public housing operating subsidies are used only for program purposes.

Issue Date: July 29, 2005
Audit Report No.: 2005-BO-1004
File Size:

Title: Housing Choice Voucher and Low-Income Public Housing Program Deficiencies at the Bridgeport Housing Authority, Bridgeport, Connecticut, Resulted in $3.8 Million in Questioned Costs

We audited the Bridgeport Housing Authority’s (Authority) Section 8 Housing Choice Voucher (Voucher) and low-income public housing programs. The audit was conducted because recent U.S. Department of Housing and Urban Development (HUD) rental integrity management reviews and independent public accountant audit reports identified program deficiencies. Our audit objective was to determine whether the programs were administered according to program requirements.

The programs were not administered according to program requirements. As a result, the Authority

• Mismanaged the $1.5 million purchase and renovation of additional Office space.
• Spent $2.6 million on the Pembroke green development project, of which $1.3 million failed to benefit eligible families.
• Improperly used $636,811 in low-income public housing funds for voucher program expenses.
• Improperly charged $409,311 in administrative costs to the Voucher program.
• Did not properly calculate and support housing assistance payments.

We identified questioned costs and opportunities for funds put to better use totaling $3.8 Million.

Issue Date: April 25, 2005
Audit Report No. 2005-BO-1003
File Size: 5.8MB

Issue Date: October 13, 2004
Audit Report No. 2005-BO-1001
File Size: 1.66MB

Title: Waterbury Housing Authority, Audit of Selected Programs
Waterbury, Connecticut

At the request of HUD’s Hartford Field Office, HUD's Office of Inspector General completed an audit of the Waterbury Housing Authority’s selected Programs. The selected Programs included: Capital Fund Program; disposition of the South End project; Public Housing Development Grant Program; Section 5(h) Homeownership Program; multifamily projects owned, managed, and administered by the Authority. The primary purposes of our audit were to determine whether the Authority: administered its selected Programs efficiently, effectively, and economically; and complied with the terms and conditions of its Annual Contributions Contract, applicable laws, relative directives, and HUD’s regulations.

The Housing Authority did not administer its selected Programs in an efficient, effective, and economical manner. Additionally, the Authority’s management controls were very weak to ensure that it complied with the terms and conditions of its Annual Contributions Contract, applicable laws, relative directives, and HUD’s regulations.

We recommend that HUD’s Acting Director of Public Housing Hub, Boston Regional Office, assures the Authority:

• reimburse the applicable Program over $676,000 from non-Federal funds for the inappropriate expenses cited in this report;
• provide documentation to support over $850,000 for the unsupported funds cited in this report or reimburse the applicable Program from non-Federal funds;
• recapture over $2.3 million in Program funds not used; and
• implement procedures and controls to correct the weaknesses cited in this report.

Issue Date: February 18, 2004
Audit Report No.: 2004-BO-1006
File Size: 1.84MB

Title: Nuestra Casa (also known as La Casa Elderly Housing) Project Number 017-EH125 Hartford, Connecticut

We performed an audit of Nuestra Casa (also known as La Casa Elderly Housing). Our report contains three findings with recommendations requiring action. Our review disclosed that Nuestra Casa's management agent: (1) Used the Operating Account to Fund Affiliates; (2) Charged Ineligible, Unsupported, and Unnecessary/Unreasonable Costs to the Project; and (3) Failed to Adequately Manage Project Operations.

Our audit determined that the management agent improperly managed project funds totaling $371,430 by: *Improperly transferring $244,103 in project funds to affiliates. *Spending $16,385 in project funds on other ineligible, unsupported, and unnecessary/unreasonable costs. *Circumventing HUD's Reserve Fund for Replacement (RFR) requirements leaving the RFR under funded by $110,942.

As a result, $371,430 in project funds is not available for the project's normal operations and maintenance. Therefore, HUD's and the residents' interests in the project are not sufficiently protected.

Title: Danbury Housing Authority Capital Fund Program Danbury, Connecticut

We performed an audit of the Danbury Housing Authority's Capital Fund Program (CFP). Our report contains five findings with recommendations requiring action. Our review disclosed that the Danbury Housing Authority: (1) Defaulted on their $11 Million General Obligation Bonds; (2) Lacked the Financial Viability to Obtain the $11 Million General Obligation Bonds; (3) Performed Inadequate Management Oversight of Authority Property and Financial Records; (4) Incurred Ineligible, Unsupported and Unreasonable Costs; and (5) Had Ineffective Procurement Practices.

Issue Date: October 30, 2003
Audit Report No.: 2004-BO-1001
File Size: 114.8KB

Title: Housing Authority of the City of Hartford Disposition of Vacant Land at Charter Oak Terrace Hotline Case Number HL-03-0465

We performed a review of the Housing Authority of the City of Hartford's (the Authority) application to dispose of 49 acres of vacant land located at its Charter Oak Terrace public housing site. We initiated our review in response to a hotline complaint alleging that the Authority did not follow Federal regulations in its proposed leasing of the Charter Oak Terrace housing site. Our objectives were to determine the merits of the allegations made against the Authority and to identify areas or subjects warranting further review based on these allegations. Our review found that the Authority adhered to Federal regulations and additional work is not warranted.

Issue Date: May 16, 2003
Audit Report No.: 2003-BO-1003
File Size: 1.11MB

Title: City of Bridgeport
HOME Investment Partnership Program, Bridgeport, Connecticut

We performed an audit of the City of Bridgeport's (City) HOME Investment Partnership Program located in Bridgeport, Connecticut. The primary purpose of our audit was to determine if the program was operated in an efficient, effective, and economical manner, and if the City complied with HUD regulations and other applicable laws.

A draft discussion report was provided to the City on June 14, 2002. As a result of the issues disclosed in the discussion draft, the City provided a written response on August 14, 2002 and additional documentation thereafter. The Office of Inspector General (OIG) performed additional audit work based on the City's response and additional documents. This subsequent audit work resulted in the OIG questioning additional costs. An exit conference was held with the City on March 12, 2003. The City provided its final response to the OIG on April 25, 2003. Our final report contains one finding: Administration of HOME Program Needs Improvement. We identified $989,929 in unsupported costs.

Issue Date: March 7, 2003
Audit Report No.: 2003-BO-1001
File Size: 1.55MB

Title: Farmington Health Care Center
FHA Loan Number 017-22015
Farmington, Connecticut

We have completed an audit of the Farmington Health Care Center (FHCC) located in Farmington, Connecticut. The primary purpose of our audit was to assess the project's performance relating to: a) utilizing project funds appropriately; b) maintaining the property in a satisfactory physical condition; and c) other general management practices.

Issue Date: August 29, 2001
Audit Memorandum No.: 2001-BO-1006
File Size: 252KB

Title: State of Connecticut, HOME Investment Partnerships Program, Hartford, Connecticut

We performed a review of the State of Connecticut’s HUD HOME Investment Partnerships Program (HOME program) administered by the Department of Economic and Community Development (DECD). Our objective was to determine whether the DECD is administering its HOME program in compliance with HUD requirements and program objectives.

Our review disclosed that DECD used HOME funds in accordance with HOME program objectives and requirements pertaining to the selection, cost eligibility, and resale/recapture provisions. However, we determined that annual performance reviews are not consistently performed. We observed that tenant file records for one project were not in accordance with HOME requirements; one project was not completed in a timely manner in accordance with the written HOME assistance agreement; and one project was occupied in May of 1999, however, no annual performance monitoring reviews have been performed. HUD identified monitoring concerns in their previous monitoring reports dating back to 1999, and DECD concurred with our results. Consequently, there may be instances where decent, safe, sanitary, and affordable housing, with primary attention to rental housing, for very low-income and low-income families may be limited.

Issue Date: May 21, 2001
Audit Report No.: 2001-BO-1005
File Size: 1,492KB

Title: City of Meriden Housing Authority, Meriden, Connecticut

We performed an audit of the Low-Income Public Housing (LIPH) and Section 8 Programs of the Housing Authority of the City of Meriden, Connecticut (PHA). The purpose of our review was to determine if the PHA’s management of its public housing and Section 8 activities is effective and provides decent, safe and sanitary housing for its tenants.

Our review disclosed that the PHA has not strictly followed procurement requirements. Furthermore, the PHA has not administered its Section 8 Existing Certificate and Voucher programs in an efficient and effective manner.

Issue Date: January 5, 2001
Audit Report No.: 2001-BO-1002
File Size: 252KB

Title: Waller, Smith & Palmer, PC HUD Closing Agent New London, CT

We performed an audit of HUD’s closing agent, Waller, Smith & Palmer, P.C. (WSP), as part of a nationwide effort to review closing agents. The primary purpose of our audit was to determine whether WSP complied with the terms of its closing agent contract and HUD regulations.

HUD was overcharged $20,347 for wire transfer and closing agent fees. WSP overcharged HUD $1,960 to wire transfer the proceeds from 392 HUD property sales to the Department of the Treasury between March 16, 2000 and September 19, 2000. In addition, WSP overcharged HUD $18,387 by improperly charging the full closing agent fee for 42 of a sample of 69 third party closings rather than the required 50 percent of the full fee.

Potentially HUD may have also been overcharged an additional $58,905. We question $54,540 in wire transfer fees charged during the period June 1, 1996 to March 15, 2000. We believe these fees were included in WSP’s closing agent fee, resulting in duplication of cost, which is a violation of Section 8 of the Real Estate Settlement Procedures Act (RESPA). Further, WSP may have charged HUD an additional $4,365 in excess of their closing agent fee for 27 closings, which occurred subsequent to their current contract.

Although prohibited by its contract, WSP collects a sixty percent title insurance premium fee split for each case whereby a title insurance policy was issued by WSP, on behalf of the specific title insurance company. In addition, WSP may be collecting duplicative fees for the same services required by both the closing agent contract and its agreements with title insurance companies. Section 8 of RESPA prohibits fee splitting and collecting unearned fees, including duplicative payments. Although RESPA allows fees to be collected for actual services rendered, WSP did not bill title insurance companies based on actual services rendered, but rather collected a fixed sixty percent fee for each title insurance policy issued. WSP staff advised that they believe Connecticut law permits them to collect a sixty percent fee for the issuance of a title insurance policy where WSP is the title insurance agent.

WSP did not comply with all of its closing agent contract requirements. Specifically, WSP did not always ensure that only allowable expenses were paid by HUD on the buyer’s behalf. Furthermore, WSP did not deposit sales proceeds timely; wire sales proceeds to the Department of the Treasury timely; or submit a complete closing package to CitiWest New England, Inc., Management and Marketing Contractor for HUD. We are recommending the Homeownership Center direct and ensure that WSP complies with the terms of their closing agent contract and HUD regulations.

We are recommending that the Homeownership Center require WSP to reimburse HUD a total of $20,347 for overcharges related to wire transfer and closing agent fees for the period March 2000 to September 2000. Additional overcharges for wire transfers since September 19, 2000 should be calculated and reimbursed. Support for $54,540 in wire transfer fees prior to March 15, 2000 should be obtained. Closing agent fees on the 27 closings occurring subsequent to the current contract effective date should also be reviewed. In addition, we are recommending the Homeownership Center require WSP to provide support for fees earned from title insurance companies and require WSP to claim only actual costs up to sixty percent of the premium to comply with regulations. Further, we are recommending the Homeownership Center instruct and ensure that WSP includes only allowable expenses in the amount HUD pays on the buyer’s behalf. Finally, we are recommending that the Homeownership Center instruct and ensure that WSP submits a complete closing package to HUD’s Designee, and comply with all sales closing requirements.

We discussed the findings in this report with WSP staff during the course of the audit. On November 20, 2000, we provided WSP a copy of the draft audit report for comment. We received WSP’s written response by letter dated December 7, 2000. Appropriate revisions were made where deemed necessary. We included WSP’s pertinent comments in the Findings section of this report. Due to its voluminous content, WSP’s entire response was forwarded to program staff under a separate letter. WSP’s letter forwarding their response is included in Appendix C.

Issue Date: January 5, 2001
Audit Memorandum No.: 2001-BO-1802
File Size: 51KB

Title: Department of Mental Health and Addiction Services and Continuum of Care Program Hartford, CT

We performed a review of the Continuum of Care Program (Supportive Housing and Shelter Plus Care Programs) administered by the Department of Mental Health and Addiction Services (DMHAS). Our objective was to determine whether the Continuum of Care Program was operated in accordance with DMHAS’ approved application and HUD regulations.

Our review disclosed that the Supportive Housing Program is operated in accordance with HUD regulations and requirements. However, our review of the Shelter Plus Care Program disclosed violations of HUD regulations and requirements. We determined that rental payments by SPC tenants exceed the contract rent; administrative fees may surpass the amount allowed; and the minimum number of grant participants are not served.

Issue Date: September 29, 2000
Audit Report No.: 00-BO-222-1005
File Size: 1,043KB

Title: CitiWest New England, Inc., Management and Marketing Contractor, Hartford, Connecticut

We performed an audit of HUD’s Management and Marketing Contractor, CitiWest New England, Inc. (CitiWest). The objective of our audit was to determine whether CitiWest is managing HUD single family properties in compliance with HUD policies, procedures, and regulations and with the terms and conditions of CitiWest’s Management & Marketing (M&M) Contract.

The report contains two findings. We found that CitiWest is not properly inspecting and maintaining HUD’s property inventory and that CitiWest is not complying with case management processing requirements cited in their M&M Contract.

Issue Date: July 5, 2000
Audit Report No.: 00-BO-204-1004
File Size: 1,318KB

Title: Housing Authority of the City of Bridgeport Bridgeport, Connecticut

We performed an audit of the Low-Income Housing Program and Section 8 Program operated by the Housing Authority of the City of Bridgeport. Our objectives were to determine if the Authority was operating its program in an efficient, effective and economical manner; and was complying with the terms and conditions of its Annual Contributions Contract, applicable laws, and HUD regulations.

Our audit disclosed that the Authority did not operate in an efficient, effective and economical manner; and did not always comply with the terms of its Annual Contributions Contract and HUD regulations. In each area reviewed (occupancy, procurement, obtaining replacement units, and internal control) we found substantial deficiencies in the Authority's operations that had existed for a number of years.

Date Issued: June 14, 2000
Audit Memorandum No: 00-BO-219-1801
File Size: 45KB

Title: Computer Learning Center Greater Hartford Realty Management Corporation, Hartford, Connecticut

We have determined that GHRM has not implemented its Computer Learning Center in accordance with its approved proposal and HUD regulations. Although the cost was expended in accordance with the HUD approved budget, GHRM did not prepare status reports or evaluations of the Center’s progress and there are no outside resources other than the funds authorized by HUD from insured and/or assisted housing projects managed by GHRM. The Computer Learning Center still operates on a limited basis, although HUD has no assurances of the Center’s success in achieving its objective to provide resident education and social advancement.

Date Issued: June 12, 2000
Audit Report No: 00-BO-202-1003
File Size: 378KB

Title: Housing Authority of the City of New Britain, New Britain, Connecticut

We performed a review of the Low-Income Public Housing and Section 8 Programs of the Housing Authority of the City of New Britain, Connecticut (PHA). The objective of our review was to determine if the PHA is operating its programs in an efficient and effective manner.

The report contains two findings. We found that the PHA incurred substantial unnecessary legal expenses, and they need to improve certain aspects of its administration and management operations.

Date Issued: December 22, 1998
Audit Memorandum No: 99-B0-183-1801
File Size: 107KB

Title: Analysis of Project Funds West Street Apartments New Haven, Connecticut

Per your request, we examined the Project's three bank accounts to determine the disposition of funds from September 1, 1996 to July 24, 1998. Our review identified $1,871,062.09 disbursed to a total of 103 payees. Payees who received a total disbursement of less than $750 were not reviewed, ($11,864.90). Because of the inadequate accounting records, we could only substantiate $195,086.81 as eligible project related expenses. As a result, $1,664,110.38 should be considered as a possible diversion from Project operations during this period. In our prior review, we identified $347,254.84 as unauthorized distributions to the Owner, thus, we suggest you seek damages for equity skimming in the amount of $2,011,365.22.

The Owner was unable to demonstrate that the disbursements made during this period of time were incurred in accordance with the Regulatory Agreement. In addition, the Owner needs to account for $16,723 in tenant rents and $16,442 in negative rents owed tenants. If these amounts are not substantiated, you should also seek damages against the Owner for these potential diversions.

Issue Date: May 7, 1998
Audit Report No: 98-BO-249-1004
File Size: 177KB

Title: City of New Haven, New Haven, CT

This report contains one finding. We are recommending that the City evaluate the Subgrantee's performance to assure the accountability of program funds and institute controls to assure the program is cost effective.

Issue Date: October 28, 1997
Audit Report No.: 98-BO-204-1002
File Size: 82KB

Title: HOPE VI Grant Program, New Haven, CT

The PHA did not establish accountability over its HOPE VI Program funds. The PHA operated without effective managerial and internal control systems over its HOPE VI Program expenditures; operated without maintaining adequate documentation to support expenditures of $3.4 Million charged to its HOPE VI Program; and transferred the management of its HOPE VI Program to the Elm Haven Homes Partnership (EHHP) without an approved contract and proper oversight.

Issue Date: October 6, 1997
Audit Report No.: 98-BO-209-1001
File Size: 73KB

Title: Public Housing, New Haven, CT

On June 2, 1997, we issued an interim report (97-BO-101-0804) pertaining to the PHDEP's law enforcement activities. That report disclosed the PHA failed to establish fiscal accountability and effective managerial and internal controls in regards to the program's law enforcement expenditures totalling $949,944. Since this time, the PHA has changed its management and is in the process of establishing accountability and controls over the PHDEP expenditures.

In view of the lack of controls disclosed in this report, it is imperative that the PHA take immediate corrective actions to assure that the remaining unexpended funds are controlled, properly accounted for and used in an economical and effective manner.