Georgia Audit Reports

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Issue Date: November 24, 2010
Audit Memorandum No.: 2011-AT-1801
File Size: 150KB

Title: The City of Columbus, GA, Demonstrated the Capacity to Obligate Its NSP-1 Funds

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General conducted a review of the City of Columbus, GA's (City) Neighborhood Stabilization Program (NSP1) to determine whether the City had demonstrated the capacity to properly obligate all NSP1 grant funds and at least 25 percent of the grant toward occupants with incomes below 50 percent of the median income in the locality (LH25) set-aside by the September 5, 2010, statutory deadline. We reviewed 100 percent of the City's obligations toward its $3.1 million NSP1 grant and performed detailed testing of the procurements for its obligations toward the LH25. The City demonstrated the capacity to properly obligate its entire $3.1 million NSP1 grant by the September 5, 2010, statutory deadline. This capacity was evidenced by the City's substantial progress in committing its grant funds during our review. However, we identified two concerns regarding internal controls and entering obligations before contracts were fully executed.

• The City obligated $219,767 in acquisition, rehabilitation, and downpayment assistance costs for two properties that were improperly classified as LH25 set-asides. The properties were sold to individuals whose income exceeded the LH25 income requirements. We discussed this matter with the City during the review, and it reclassified the invalid LH25 obligations.

• The City could not locate the procurement records for the lead-based paint contract it awarded. It obligated and paid $29,612 for lead-based paint abatement services provided by a contractor that was under contract with the City. We discussed this matter with the City, and it agreed to locate and provide these documents to HUD's Office of Community Planning and Development for review.

• The City did not maintain up-to-date NSP-1 quarterly performance reports on its Web site. It had not posted its March 31, 2010, and June 30, 2010, quarterly performance reports on its Web site. We discussed this matter with the City and, it posted the missing quarterly reports on its Web site.

Overall, the City's actions taken or planned regarding the issues indicated its willingness to make necessary improvements.

Issue Date: November 22, 2010
Audit Report No.: 2011-AT-1002
File Size: 881KB

Title: The East Point Housing Authority Made Excessive Housing Assistance Payments for a Zero-Income Tenant and Its Units Did Not Meet Housing Quality Standards

HUD OIG performed an audit of the East Point Housing Authority (Authority) Housing Choice Voucher program. We selected the Authority due to the lack of onsite monitoring performed by the Office of Public Housing, Georgia State Office, over the past 10 years and the fact that the number of program tenants had more than doubled over the past few years. The purpose of the audit was to determine (1) whether the Authority established procedures to ensure that tenants were eligible for rental subsidies and that the amount of their subsidy calculation was properly supported and (2) whether its units met the U.S. Department of Housing and Urban Development's (HUD) housing quality standards.

The Authority generally computed accurate housing assistance payments. However, it made excessive housing assistance payments of $38,447 on behalf of a zero-income tenant who underreported her income and did not provide proof of financial assistance. Also, the Authority's physical inspection process was not effective. The inspections did not accurately identify the deficiencies. Also, the quality control inspections were not performed on a timely basis, and the results were not communicated to the inspector.

OIG recommended that the Director of HUD's Atlanta Office of Public Housing require the Authority to reimburse the Housing Choice Voucher program the $38,447 that was paid in ineligible housing assistance, implement its policies and procedures to ensure that its program operates in compliance with HUD's requirements, reinspect the units and ensure that all deficiencies identified have been corrected, evaluate the inspector's workload and make the necessary adjustments to ensure that housing quality standards deficiencies are properly identified and corrected, implement its policy and ensure that all quality control reviews are performed within the 3-month timeframe, and establish and implement procedures to ensure that its quality control review deficiencies are communicated to the inspector.

Issue Date: September 29, 2010
Audit Memorandum No.: 2010-NY-1808
File Size: 23KB

Title: Pine State Mortgage Corporation, Atlanta, GA, Did Not Properly Underwrite a Selection of FHA Loans

We conducted a review of 20 Federal Housing Administration (FHA) loans underwritten by Pine State Mortgage Corporation (Pine State), an FHA direct endorsement lender. This review was conducted as part of our "Operation Watchdog" initiative to review the underwriting of 15 direct endorsement lenders at the suggestion of the FHA Commissioner. The Commissioner expressed concern regarding the increasing claim rates against the FHA insurance fund for failed loans. The objective of the review was to determine whether the underwriting for the 20 loans complied with U.S. Department of Housing and Urban Development (HUD)/FHA requirements. Pine State officials did not underwrite 14 of 20 loans reviewed in accordance with HUD/FHA regulations. As a result, the FHA insurance fund suffered actual losses of $1,030,786 on 13 loans and a potential loss of $64,416 on one loan for a total of $1,095,202.

We recommend that HUD's Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act (31 U.S.C Section 3801-3812) and/or, Civil Money Penalties (24 C.F.R. Part 30.35) against Pine State and/or its principals for incorrectly certifying to the integrity of the data or that due diligence was exercised during the underwriting of 14 loans that resulted in actual losses of $1,030,786 on 13 loans and a potential loss of $64,416 on one loan, which could result in affirmative civil enforcement action of approximately $2,295,404. We also recommend that HUD's Deputy Assistant Secretary for Single Family take appropriate administrative action against Pine State and/or its principals for the material underwriting deficiencies cited in this report once the affirmative civil enforcement action is completed.

Issue Date: September 24, 2010
Audit Memorandum No.: 2010-AT-1806
File Size: 107.46KB

Title: The City of Augusta, GA, Demonstrated the Capacity To Obligate Its NSP1 Fund

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General conducted a review of the City of Augusta, GA's (City) Neighborhood Stabilization Program (NSP1) to determine whether the City had demonstrated the capacity to properly obligate all NSP1 grant funds and at least 25 percent of the grant toward occupants with incomes below 50 percent of the median income in the locality (LH25) set-aside by the September 5, 2010, statutory deadline. We reviewed 100 percent of the City's obligations toward its $2.4 million NSP1 grant and performed detailed testing of the procurements for its obligations toward the LH25.

The City demonstrated the capacity to properly obligate its entire $2.4 million NSP1 grant by the September 5, 2010, statutory deadline. This capacity was evidenced by the City's substantial progress in committing its grant funds during our review.

However, we identified two concerns regarding internal controls and entering obligations before contracts were fully executed.

• The City did not have internal controls in place to perform continuous and routine monitoring of its obligation process to ensure that its obligations were processed as intended and were valid.

• The City entered its NSP1 obligations into the Disaster Recovery Grant Reporting database in June 2010 for its LH25 set-aside activities. At that time, the obligations were not valid because the contracts for those obligations had not been signed by all parties.

Overall, the City's actions taken or planned regarding the issues indicated its willingness to make necessary improvements.

Issue Date: August 23, 2010
Audit Report No.: 2010-AT-1010
File Size: 698KB

Title: The Housing Authority of DeKalb County Improperly Used Its Net Restricted Assets

HUD OIG performed an audit of the Housing Authority of DeKalb County's use of its net restricted assets based on a request from the Atlanta Office of Public Housing. The request indicated that a significant amount of net restricted assets was used to pay for items other than the required housing assistance payments. The purpose of the audit was to determine how the Authority expended its net restricted assets and what controls were in place to ensure that net restricted assets were not used for non-housing assistance payments.

The Authority used more than $2.5 million of its net restricted assets to pay ineligible program and administrative expenses for other assisted housing programs. The Authority did not (1) maintain separate bank accounts, (2) properly track its net restricted asset funds, and (3) have proper policies and controls in place. As a result, it misused net restricted asset funds that could have provided assistance to eligible families in its housing voucher program.

OIG recommended that the Director of Public and Indian Housing require the Authority to (1) reconcile its books and records to determine the amount of net restricted asset funds used to pay program and administrative expenses for various housing programs, (2) reimburse the net restricted assets fund account from non-Federal funds the $2.5 million or the current amount owed from various housing programs, and (3) implement its established policy for the use of net restricted assets to ensure that net restricted assets are properly used and bank accounts remain separated for the various programs.

Issue Date: January 13, 2010
Audit Report No.: 2010-AT-1001
File Size: 1.62MB

Title: Mortgage Counseling Services, Inc., College Park, Georgia, Did Not Follow HUD Requirements in Originating and Closing Loans and Implementing Its Quality Control Program

HUD OIG performed an audit of Mortgage Counseling Services, Inc., a Federal Housing Administration approved non-supervised lender. The review was performed based on the lender's high default rates. The purpose of the audit was to determine whether the lender followed the U.S. Department of Housing and Urban Development's (HUD) requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) implementing a quality control program. Based on information received during the audit, we expanded our audit objectives to include reviewing the closing process to determine whether Mortgage Counseling Services complied with HUD requirements when closing loans.

Mortgage Counseling Services did not follow HUD requirements when underwriting 8 of 16 FHA loans. HUD insured the eight loans that unnecessarily placed the FHA insurance fund at risk for more than $433,000. Mortgage Counseling Services did not conduct its quality control reviews in a timely manner. In addition, the lender did not report a significant quality control violation to HUD. As a result, Mortgage Counseling Services did not ensure the accuracy, validity, and completeness of its loan originations. Also, Mortgage Counseling Services did not fully comply with HUD requirements in closing two loans. Specifically, the lender misrepresented a HUD-1 settlement statement to HUD. Finally, the lender collected an uncustomary and unreasonable appraisal fee after the loan closed. As a result, HUD could not be assured that loans were properly closed, and the noncompliance could result in an increased risk to the FHA insurance fund.

OIG recommended that the Deputy Assistant Secretary for Single Family Housing require Mortgage Counseling Services to indemnify HUD for the potential loss on the eight loans with material deficiencies, reimburse HUD for overinsuring one loan, and ensure that Mortgage Counseling Services conducts quality control reviews in a timely manner as required by HUD regulations. OIG also recommend that the Deputy Assistant Secretary for Family Housing take appropriate action against Mortgage Counseling Services for its noncompliance in closing two loans.

Issue Date: December 14, 2009
Audit Memorandum No.: 2010-AT-1802
File Size: 693.42KB

Title: The City of Atlanta, GA, Needs To Improve Certain Aspects of Its NSP To Meet the Program ’s 18-Month Obligation Deadline

The City of Atlanta (City) received a $12.3 million Neighborhood Stabilization Program (NSP) grant from HUD that was authorized under Title III of the Housing and Economic Recovery Act. Also, the City applied for an additional $57.9 million in NSP funds under the American Recovery and Reinvestment Act of 2009. We selected the City for review due to the amount of its NSP funding and because of performance concerns identified during our previous audit of the City's HOME Investment Partnerships Program (HOME). Our objective was to determine whether the City has the capacity to effectively and efficiently administer its NSP.

The City has developed the organizational structure needed to administer its NSP and has hired a sufficient number of qualified staff to implement the program. However, the City needs to expedite actions to meet the program's 18-month obligation deadline due to delays in executing implementation contracts and obligating funds, past performance problems that still require attention, procurement inconsistencies, and a lack of procedures for some components of its NSP.

We recommend that the Director of HUD's Atlanta Office of Community Planning and Development require the City to (1) expedite the implementation of the remaining $10.9 million approved for NSP activities to prevent further delays that may prevent its ability to timely obligate funds, (2) expedite execution of implementation contracts with developers or subrecipients, (3) review and verify the accuracy of evaluator scores for leveraged funds and fund commitments for all contractors and determine whether further action is needed, (4) amend executed contracts to include leveraged funds if the contractor(s) competed for funding based on the City's leveraging requirement, proposed to provide leveraged funds, and the City evaluated the contractor(s) proposal against other contractors, giving consideration to proposed leveraging (5) develop and implement procedures for land banking and (6) implement procedures for entering and monitoring obligations in HUD's reporting system, demolition, and tracking program income in HUD's reporting system.

Issue Date: September 29, 2009
Audit Report No.: 2009-AT-1013
File Size: 794.93KB

Title: The City of Atlanta Entered Incorrect Commitments into HUD ’s Integrated Disbursement and Information System for its HOME Program, Atlanta, Georgia

We audited the City of Atlanta's (City) HOME Investment Partnerships Program (HOME) because it has received more than $17 million in HOME funding since 2005. Our objective was to determine whether the City accurately entered commitments into the U.S. Department of Housing and Urban Development's (HUD) Integrated Disbursement and Information System (information system) for HOME-funded activities.

The City did not comply with HUD requirements for committing HOME funds within the 24-month statutory deadline. The audit identified more than $6.8 million in incorrect commitment entries that the City made to HUD's information system. The incorrect entries masked a shortfall of more than $3.9 million that is subject to recapture by HUD. The recaptures, which resulted from a failure of City staff to implement adequate controls, will deprive City residents of services that the HOME program was intended to provide. The incorrect commitments also undermined the integrity of the information system and of reports HUD generated from the system to monitor the City's compliance with the 24-month statutory commitment requirement.

We recommend that the Director of HUD's Atlanta Office of Community Planning and Development recapture more than $3.9 million in funds not committed by the 24-month statutory deadline. We also recommend that the Director require the City to implement controls to ensure that future HOME funds are committed by the required deadline, monitor commitments entered into the information system, and take appropriate action to promptly correct detected violations.

Issue Date: July 20, 2009
Audit Report No.: 2009-AT-1009
File Size: 676.78KB

Title: The Housing Authority of the City of Newnan, Georgia, Inappropriately Encumbered Assets and Advanced Funds to Support Its Nonprofit Organization

HUD OIG performed an audit of the Housing Authority of the City of Newnan's activities with its related nonprofit organization, the Newnan Housing Development Corporation. The review was performed based on concerns that the Authority encumbered its assets, used its federal funds to support nonprofit development activities, and had a conflict-of-interest transaction. The purpose of the audit was to determine whether the Authority inappropriately used funds and assets restricted by its annual contributions contract with the U. S. Department of Housing and Urban Development (HUD) to support the operations of its nonprofit organization and incurred costs for insurance that involved a conflict of interest.

The Authority inappropriately encumbered $649,976 in HUD-restricted funds in violation of its contract with HUD and also violated an agreement it made with HUD concerning the sale and disposition of Authority property. The Authority inappropriately used $221,531 of its public housing program funds for nonfederal development activities in violation of its annual contributions contract with HUD. In addition, it inappropriately used HUD funds to make 31 monthly payments on a $150,000 loan on behalf of its nonprofit organization. HUD granted a waiver for conflict-of-interest provisions and permitted the Authority to purchase insurance from a company that employed a board member.

OIG recommended that the Director of HUD's Atlanta Office of Public Housing require the Authority to develop a plan to bring it into compliance with HUD's requirements and if necessary, ensure that the lender formally releases the $673,859 of HUD-related funds as collateral; propose a legal solution regarding the ownership structure of the nonprofit organization and if a legal solution is not possible, repay its public housing program $221,531; implement adequate controls and procedures to ensure that it does not encumber or spend HUD assets on nonfederal activities without HUD approval; and develop and implement a strategic, comprehensive marketing plan for the nonprofit organization to ensure that it becomes financially sound.

Issue Date: April 23, 2009
Audit Report No.: 2009-AT-1006
File Size: 410.84KB

Title: The Jonesboro Housing Authority Generally Complied with Housing Quality Standards Inspections Requirements Although Certain Weaknesses Existed, Jonesboro, Georgia

We audited the Jonesboro Housing Authority's (Authority) Section 8 Housing Choice Voucher program as part of the U.S. Department of Housing and Urban Development (HUD) Office of Inspector General's (OIG) annual audit plan. Our objective was to determine whether the Authority's Section 8 housing choice voucher units met HUD standards.

The Authority's Section 8 units generally met housing quality standards. Our inspection of 16 Section 8 units resulted in 11 that did not meet minimum housing quality standards, but only one unit was in material noncompliance. However, the Authority needed to improve it's; enforcement of certain housing quality standards requirements, tracking and timely performance of annual inspections, and abatement notification and timely follow-up inspections of units that fail their initial inspections. The violations resulted in the payment of more than $6,000 in ineligible housing assistance. The violations occurred because the Authority's oversight of the program and procedures for conducting, tracking, and following up on housing quality standards inspections had weaknesses.

We recommend that the director of the Office of Public Housing require the Authority to repay $6,663 from nonfederal funds for inappropriate housing assistance payments. We also recommend that the director require the Authority to establish and implement adequate controls and procedures for conducting, tracking, and following up on future housing quality standards inspections.

Issue Date: April 1, 2009
Audit Report No.: 2009-AT-1005
File Size: 314.88KB

Title: The City of Augusta, Georgia, Did Not Comply with HOME Monitoring Requirements

HUD OIG performed an audit of the City of Augusta's HOME Investment Partnerships program as part of the U.S. Department of Housing and Urban Development's annual audit plan. The purpose of the audit was to determine whether the City complied with HOME program requirements for monitoring (1) HOME community housing development organizations and subrecipients and (2) the use of CHDOs' proceeds. This is the second of two audit reports on the HOME program.

The City did not comply with the HOME requirements for performing its monitoring and follow-up reviews or have sufficient documentation to support that required reviews were conducted. In addition, it did not properly monitor the use of its community housing development organizations' proceeds. The City did not implement its procedures to ensure that the required monitoring and follow-up reviews were performed and documented. Also, City officials did not follow and enforce program monitoring requirements. HUD lacked assurance that HOME funds was spent for activities that were administered in compliance with program requirements, and community housing development organizations' proceeds and grant funds of $105,049 were used for eligible program costs.

OIG recommended that the Director of HUD's Atlanta Office of Community Planning and Development require the City to properly support or repay $105,049 in questioned costs because of program violations. We also recommend that the Director require the City to establish and implement proper controls and procedures to ensure compliance with all program requirements

Issue Date: February 10, 2009
Audit Report No.: 2009-AT-1002
File Size: 775.43KB

Title: The City of Augusta, Georgia Needs to Improve Controls Over its Community Development Block Grant Facade Program

HUD OIG performed an audit of the City of Augusta's Community Development Block Grant Façade Rehabilitation Grant program due to concerns of mismanagement and abuse regarding the City's program. The purpose of the audit was to determine whether the City's façade program complied with federal requirements and whether program activities met the national objectives of the CDBG program The City did not have adequate controls over its financial management of the façade program. A review of the City's program drawdown reports showed payments totaling $180,817 that were not recorded in the general ledgers. . In addition, HUD could not be assured that the remaining $270,175 in program funds would be accurately recorded or expended in a timely manner.

The City did not adequately monitor its façade program. It did not verify the program match requirements or complete facade grants in a timely manner. In addition, it did not ensure that program files were complete and contained all information required by its policies and procedures.

OIG recommended that the Director of HUD's Atlanta Office of Community Planning and Development require the City to (1) properly support or repay the façade program $180,817 from non-federal funds and establish controls to ensure that all program transactions are accurately recorded in the general ledgers and (2) establish controls to ensure that the remaining $270,175 in program funds is used for its intended purpose or reprogrammed to fund other eligible CDBG activities. OIG also recommend that the Director ensure that the City establishes controls to ensure that staff follows written policies and procedures for administering the façade program.

Issue Date: October 20, 2008
Audit Report No.: 2009-AT-1001
File Size: 305.36KB

Title: The Housing Authority of the City of Conyers, Georgia, Did Not Maintain Adequate Controls over its Federal Funds

HUD OIG performed an audit of the Housing Authority of the City of Conyers' administration of its disbursements and procurement procedures. The Georgia State Office of Public Housing requested the audit due to concerns regarding the use of its funds and violation of its procurement procedures The purpose of the audit was to determine whether the Authority used its federal funds in compliance with HUD regulations and other requirements.

The Authority used $891,468 in federal funds to pay ineligible and unsupported costs. It did not establish effective controls to protect its assets. The Authority's board did not ensure that the former executive director expended funds in accordance with Authority and HUD requirements, adequately documented expenditures, and followed procurement policies.

OIG recommended that the Director of HUD's Atlanta Office of Public Housing require the Authority to repay $185,764 to its public housing operating and capital improvement programs for ineligible payments made to or on behalf of the former board chairman, support $182,369 in payments made to or on the behalf of the former executive director and the former lease enforcement officer, provide documentation to support $523,335 in payments made for various purchases or repay its public housing program, review and implement internal controls for purchasing goods and services, and ensure that its board performs its oversight duties in a responsible manner. OIG also recommended that the Acting Director of the Departmental Enforcement Center, in coordination with the Director of the Office of Public Housing, take appropriate administrative action against the Authority officials responsible for the improper disbursements.

Issue Date: July 25, 2008
Audit Report No.: 2008-AT-1010
File Size: 198.56KB

Title: Meridian Lending, Inc., Monroe, Georgia, Did Not Follow HUD Requirements in Originating Two Insured Loans

HUD OIG audited Meridian Lending, Inc., a Federal Housing Administration (FHA)-approved direct endorsement lender. The objectives were to determine whether it followed the U.S. Department of Housing and Urban Development's (HUD) requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) implementing a quality control program.

Meridian did not follow HUD requirements in originating two of the eight FHA-insured loans reviewed. As a result, Meridian placed HUD's insurance fund at risk for as much as $271,750. In addition, Meridian did not review its early defaulting loans in a timely manner and did not review all early defaulting loans. As a result, the lender adversely impacted the goals of HUD's quality control program, which is designed to protect the lender and HUD from unacceptable risk.

OIG recommended that the Assistant Secretary for Housing-Federal Housing Commissioner require Meridian to indemnify HUD for the potential loss on the loan with a significant deficiency and reimburse HUD for the claim loss on the other loan. Also require Meridian to conduct its quality control reviews in a timely manner and reviews all early defaulting loans as required by HUD regulations.

Issue Date: June 9, 2008|
Audit Report No.: 2008-AT-1009
File Size: 872.84KB

Title: The City of Augusta, Georgia, Controls Over Its HOME Program Were Inadequate

HUD OIG audited the City of Augusta's HOME Investment Partnerships program. The audit was part of the activities in the fiscal year 2007 annual audit plan. The objectives were to determine whether the City complied with HOME program requirements for commitments, production and completion of project activities, and eligibility and support of project costs.

The City's controls over its HOME program were inadequate. As a result, more than $1 million in HOME funds that involved questioned costs and funds that were subject to recapture. Specifically, the City did not (a) properly commit $755,284, (b) have proper documentation and analysis to support approvals and effectively address project performance delays, (c) ensure proper support of more than $196,657, (d) ensure the eligibility of $92,129 for affordable housing compliance, and (e) properly maintain and manage program staff.

OIG recommended that the Director of HUD's Atlanta Office of Community Planning and Development require the City to properly support or repay more than $566,697 in questioned costs and recapture more than $477,373 because of program violations. We also recommend HUD require the City to establish and implement proper controls and procedures to ensure compliance with program requirements.