Maryland Audit Reports

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Issue Date: March 6, 2009
Audit Report No.: 2009-PH-1006
File Size: 371.17KB

Title: The Housing Authority of the City of Annapolis, Maryland, Did Not Comply with HUD and State of Maryland Lead-Based Paint Requirements in a Timely Manner

We audited the Housing Authority of the City of Annapolis' (Authority) management of lead-based paint in its public housing units in response to a citizen complaint. The audit objective was to determine whether the Authority complied with U.S. Department of Housing and Urban Development (HUD) and State of Maryland (State) requirements for inspecting and abating lead-based paint hazards in its public housing units.

The Authority did not comply with HUD and State lead-based paint requirements in a timely manner. HUD regulations required the Authority to complete lead-based paint inspections by September 15, 2000, and risk assessments by March 15, 2002, for all of its public housing units. The Authority did not comply with these requirements until April 2004. Further, it did not comply in a timely manner with the terms of an agreement with the Maryland Department of the Environment obligating it to comply with State lead paint requirements by February 2007. On December 31, 2008, the Authority submitted documentation to the State as evidence of its compliance with the agreement and the State's lead paint requirements.

We recommended that the director of HUD's Baltimore public housing program hub ensure that the documentation the Authority provided to the State in December 2008 brought the Authority into compliance with State lead paint laws and if it did not, reemphasize to the Authority its obligation to comply with the State lead paint laws. We also recommended that HUD direct the Authority to develop and implement a written policy and procedures for its ongoing maintenance and reevaluation program for units with lead-based paint, including maintaining supporting documentation.

Issue Date: September 13, 2008
Audit Report No.: 2008-PH-1013
File Size: 1.47MB

Title: The Housing Authority of Baltimore City, Maryland, Did Not Ensure That Its Program Units Met Housing Quality Standards under Its Moving to Work Program

We audited the Housing Authority of Baltimore City’s (Authority) administration of its leased housing under its Moving to Work Demonstration (Moving to Work) program based on our analysis of various risk factors relating to the housing authorities under the jurisdiction of the U.S. Department of Housing and Urban Development’s (HUD) Baltimore field office. This is the second audit report issued on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority ensured that its program units met housing quality standards.

The Authority failed to ensure that its program units met housing quality standards. We inspected 59 housing units and found that 57 units did not meet HUD’s housing quality standards. Moreover, 41 of the 57 units had health and safety violations that the Authority’s inspectors neglected to report during their last inspection and/or repair based on the outcome of their most recent inspection. The Authority spent $47,862 in program and administrative funds for these 41 units.

We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards, reimburse its program for the improper use of $47,862 in program funds for units that materially failed to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $3.5 million from being spent annually on units that materially fail to meet HUD’s housing quality standards.

Issue Date: April 30, 2008
Audit Report No.: 2008-PH-1008
File Size: 943.40KB

Title: The State of Maryland Did Not Always Administer Its HOME-Assisted Single-Family Owner-Occupied Rehabilitation Program in Accordance with Federal Regulations

We audited the State of Maryland's (State) HOME Investment Partnerships program (HOME) as part of our annual audit plan. We chose to audit the State's HOME-assisted single-family owner-occupied rehabilitation program based on deficiencies identified in a sample of work-write ups reviewed during a previous review of the State's HOME program. This audit is the second phase of our review of the State's HOME program. Our overall audit objective was to determine whether the State administered its HOME-assisted single-family owner-occupied rehabilitation program (program) in accordance with U.S Department of Housing and Urban Development (HUD) regulations and its own requirements.

The State did not ensure that its single-family owner-occupied rehabilitation projects (projects) met HUD regulations and/or the State's property standards. As a result, it used $42,290 in program funds for a project that did not meet federal regulations and was unable to support its use of $2.3 million in program funds for projects.

We recommend that the Director of HUD's Baltimore Office of Community Planning and Development require the State to reimburse its program $42,290 from nonfederal funds for the ineligible project, provide documentation to support its use of $2,071,462 or reimburse its program from nonfederal funds, ensure that housing rehabilitation work and required repairs are completed in accordance with HUD's or the State's standards or reimburse its program $205,372 from nonfederal funds, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that $74,648 in program funds is appropriately used over the next year for projects that comply with HUD's regulations and the State's standards.

Issue Date: December 19, 2007
Audit Report No.: 2008-PH-1004
File Size:167.17KB

Title: The Housing Authority of Baltimore City, Baltimore, Maryland, Generally Had Adequate Controls over Its Tenant Files

We audited the Housing Authority of Baltimore City’s (Authority) administration of its leased housing under its Moving to Work Demonstration (Moving to Work) program. We conducted the audit based on our analysis of various risk factors relating to the housing authorities under the jurisdiction of the U.S. Department of Housing and Urban Development’s (HUD) Baltimore field office. This is the first of two audit reports to be issued on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority’s controls over its tenant files were adequate to ensure compliance with HUD requirements.

The Authority’s controls were generally sufficient to ensure that tenant files contained the required documentation according to HUD requirements. The Authority’s tenant files were orderly and contained certification and recertification documents in accordance with HUD requirements. However, in 7 of the 22 tenant files reviewed, the Authority incorrectly calculated housing assistance payments, resulting in $3,193 in overpayments and $2,596 in underpayments. The Authority was in the process of strengthening its controls for housing assistance payment determination to ensure that it made future housing assistance payments accurately and in accordance with HUD requirements.

We recommend that the Director of HUD’s Baltimore Public Housing Program Hub require the Authority to reimburse its program from nonfederal funds $3,193 for the overpayment of housing assistance and reimburse applicable tenants $2,596 for housing assistance underpayments, thereby putting these funds to better use. We further recommend that HUD conduct a followup review to ensure that the Authority’s planned process improvements are implemented to ensure accurate housing assistance payments in the future.

Issue Date: August 27, 2007
Audit Report No.: 2007-PH-1012
File Size: 650.31KB

Title: The State of Maryland Did Not Always Administer Its Homeownership Assistance Program in Accordance with Federal Regulations and Written Agreements

We audited the State of Maryland’s (State) HOME Investment Partnerships program (HOME) as part of our annual audit plan. Our audit objective was to determine whether the State administered its HOME-assisted single-family homeownership assistance program in accordance with federal regulations.

The State did not always administer its HOME-assisted single-family homeownership assistance program in accordance with federal regulations and written agreements. We found no violations of conflict-of-interest and modest home provisions, and the State adequately enforced the recapture provisions by securing liens against the assisted properties through deeds of trusts. However, the State did not have adequate internal controls to effectively monitor its subrecipients’ administration of the program. Specifically, the State did not adequately monitor its subrecipients’ performance to ensure that (1) records to support property standard compliance were maintained, (2) hazard insurance requirements were enforced, and (3) income eligibility was properly determined. These noncompliance deficiencies occurred because the State did not have the staffing capabilities to adequately monitor its program. As a result, it awarded $73,000 in unsupported HOME funds.

We recommend that the director of HUD’s Office of Community Planning and Development, Baltimore Field Office, require the State to submit all supporting documentation to HUD to support the $73,000 in HOME funds awarded. Any amounts determined to be ineligible should be repaid from nonfederal funds. Also, we recommend that the State establish and implement written monitoring policies to ensure adequate monitoring of its subrecipients’ compliance with all federal requirements and written agreements to include periodic in-house reviews and on-site monitoring of its subrecipients.

Issue Date: August 14, 2007
Audit Report No.: 2007-PH-1011
File Size: 498.66KB

Title: The Housing Commission of Anne Arundel County, Glen Burnie, Maryland, Did Not Always Operate Its Housing Choice Voucher Program in Accordance with Federal Regulations

We audited the Housing Commission of Anne Arundel County’s (Commission) housing choice voucher program (program) as part of our fiscal year 2007 audit plan. Our objective was to determine whether the Commission operated its program in accordance with HUD requirements and regulations. The Commission did not always operate its program in accordance with HUD requirements and regulations. It did not always ensure that its housing choice voucher housing stock met housing quality standards. Of the 61 housing choice voucher units statistically selected for inspection, 35 did not meet HUD’s housing quality standards and 30 had 117 material violations that existed on or before the Commission’s previous inspections.

The Commission paid housing assistance of $116,522 for the 30 units with material violations. We estimated that over the next year, HUD will pay more than $2.1 million in housing assistance payments for units with material housing quality standards violations. The Commission also did not always properly perform rent reasonableness determinations for units it owned and, therefore, could not support housing assistance payments of $733,354. Lastly, the Commission did not properly administer its family self-sufficiency program and as a result, did not ensure that $215,293, which it paid to program participants, was proper.

We recommend that the director of HUD’s Baltimore Public Housing Program Hub require the Commission to reimburse its program from nonfederal funds for the improper use of $116,522 paid for 30 units with 117 material violations of housing quality standards, provide documentation or reimburse its program $733,354 from nonfederal funds for unsupported housing assistance payments, and $215,293 for improper escrow payments made to participants of the family self-sufficiency program. We also recommend that the director of HUD’s Baltimore Public Housing Program Hub require the Commission to ensure that program housing units inspected during the audit are repaired to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that program units meet housing quality standards to prevent an estimated $2.1 million from being spent on units with material housing quality standards violations.

Issue Date: December 20, 2006
Audit Report No.: 2007-PH-1004
File Size: 196.46KB

Title: The City of Baltimore, Baltimore, Maryland, Generally Administered Uses of Block Grant Funds Reviewed in Accordance with Applicable Requirements

We audited the City of Baltimore’s (City) Community Development Block Grant (Block Grant) program as part of our annual audit plan. The purpose of the audit was to determine whether the City properly administered certain uses of its Block Grant funds. We wanted to determine whether the City implemented adequate procedures to oversee four of its subrecipients and whether the City’s internal Code Enforcement Division had a reasonable method for determining and recording staff costs related to its Block Grant program.

The City generally administered the particular uses of the Block Grant funds reviewed in accordance with applicable requirements. It generally implemented adequate procedures to oversee the four subrecipients reviewed. In addition, the City’s internal Code Enforcement Division ensured that staff costs related to the Block Grant program were reasonably determined and recorded. Further, the City as a whole had a reasonable method for determining and recording indirect costs associated with its Block Grant program. However, we identified minor deficiencies associated with the City’s tools for measuring subrecipients’ accomplishments and with one subrecipient’s manual method of tracking some of its services provided, which we found susceptible to human error.

We do not recommend corrective action because the U.S. Department of Housing and Urban Development’s (HUD’s) Baltimore Office of Community Planning and Development, in a prior review of the City, noted the same deficiencies we identified and is currently working with the City to rectify them. Also, at the time of our review, the subrecipient for which we noted the deficiency was in the process of implementing an automated system to improve tracking of the services it provides.

Issue Date: March 23, 2006
Audit Report No.: 2006-PH-1009
File Size: 238.93

We recommend that HUD require the Authority to provide adequate management oversight to ensure its Section 8 waiting list is updated and purged on an annual basis and its Section 8 applications are maintained in a permanent file in order of date and time of the application.

Title: 1st Preference Mortgage Corporation, York, PA, and Greenbelt, MD, Did Not Originate All Federal Housing Administration Loans in Accordance with HUD Requirements

We audited the York, Pennsylvania, and Greenbelt, Maryland, branch offices of 1st Preference Mortgage Corporation (1st Preference), a nonsupervised mortgage company approved to originate Federal Housing Administration single-family mortgage loans. We selected these branch offices because their average default rates were above the states’ average default rates. Our audit objective was to determine whether 1st Preference acted in a prudent manner and complied with the U.S. Department of Housing and Urban Development’s (HUD) regulations, procedures, and instructions in the origination of Federal Housing Administration loans.

1st Preference’s York, Pennsylvania, and Greenbelt, Maryland, branch offices did not originate 38 percent of the Federal Housing Administration loans selected for review in accordance with HUD’s loan origination requirements. Of the 16 loans we selected to review, the branch offices did not fully comply with Federal Housing Administration requirements for six loans valued at $561,506. 1st Preference did not exercise due diligence in the review of assets and gifts obtained during the loan closing process. These deficiencies were caused by a lack of due professional care at the branch offices and contributed to an increased risk to the Federal Housing Administration insurance fund. In addition, 1st Preference did not complete timely quality control reviews or site reviews of its branch offices or document the review of loans that went into early default. These deficiencies occurred because 1st Preference did not have adequate internal controls in place to ensure the reviews were completed in a timely manner or that the reviews of the branch offices and defaulted loans were documented. As a result, 1st Preference did not identify or correct problems with the accuracy, validity, and completeness of its loan origination in a timely manner.

We recommend that the assistant secretary for housing – federal housing commissioner request 1st Preference to develop internal procedures to more closely monitor its origination and underwriting procedures. In addition, we recommend that 1st Preference strengthen its internal control procedures to ensure reviews are completed in a timely manner and reviews of the branch offices and defaulted loans are documented.

Issue Date: September 30, 2005
Audit Report No.: 2005-BO-1008
File Size: 4.02MB

Title: Suburban Mortgage Associates, Inc., Bethesda, MD, Cost HUD $14 Million an Additional $26.2 Million at Risk

We audited specific HUD insured mortgages originated and serviced by Suburban Mortgage Associates, Incorporated, of Bethesda, MD. Our audit objective was to assess the performance of Suburban Mortgage in carrying out its origination and servicing functions through a review of Suburban Mortgage’s HUD-insured loans. We found significant irregularities in how Suburban Mortgage originated and serviced six HUD-insured loans to affiliated entities by failing to perform its fiduciary responsibilities. We identified four HUD-insured loans that Suburban Mortgage originated to identity-of-interest entities. Suburban Mortgage also originated a HUD-insured loan to a property that its executive vice president formerly owned. Additionally, Suburban Mortgage originated a HUD-insured loan to a property whose owners had other business ventures with its executive vice president. Appendix C delineates the relationships between these entities. As of January 24, 2005, three affiliated entities had defaulted on their loans. Suburban Mortgage requested assignment of the three defaulted loans to HUD. HUD paid Suburban Mortgage’s claim for two of the defaults. These two defaults caused HUD a combined net loss of $14 million. The third defaulted loan has an unpaid principal balance of $12.6 million. As of April 29, 2005, HUD notified Suburban Mortgage the claim for insurance was denied for this loan. The risk of loss on this defaulted loan and two other identity-of-interest loans could cause HUD to lose an additional $26.2 million. We also found that Suburban Mortgage’s servicing failures contributed to unnecessary interest and penalties of $229,673 from the late payment of real estate taxes.

We recommend that HUD: (1) require reimbursement of $229,673 for the unnecessary charges allowed by Suburban Mortgage, and (2) terminate the $26.2 million in HUD-insured loans to the remaining three identity-of-interest properties. In addition, we recommend that HUD take appropriate administrative sanctions against Suburban Mortgage and its principals for its failure to perform its mortgage-related fiduciary duties.

Issue Date: February 16, 2005
Audit Report No.: 2005-PH-1006
File Size: 2.23MB

Title: Mortgagee Review of the Peoples National Bank Branch Office, Towson, MD, Determined That Peoples National Bank ’s Loan Origination Process and Quality Control Plan Did Not Comply With HUD Regulations and Requirements

We audited the Towson branch of Peoples Mortgage Corporation (Peoples), a nonsupervised branch approved to originate Federal Housing Administration single family mortgage loans, because it had a high default rate. Our objectives were to determine whether Peoples complied with the U.S. Department of Housing and Urban Development’s (HUD) regulations, procedures, and instructions in the origination of Federal Housing Administration loans and whether Peoples’ quality control plan, as implemented, met HUD requirements.

Peoples’ Towson branch office did not originate all Federal Housing Administration loans in accordance with HUD’s loan origination requirements. Of the 26 loans we selected for review, the branch office did not fully comply with Federal Housing Administration requirements for 14 of the loans valued at $2,425,471. Peoples did not exercise due diligence in the review of assets and gifts or resolve signature, Social Security number, and employment inconsistencies. These deficiencies were caused by a lack of management oversight and contributed to an increased risk to the Federal Housing Administration Insurance Fund.

Further, Peoples’ quality control plan and the corresponding contract for quality control reviews did not contain requirements to identify patterns of early defaults or to perform onsite reviews at branch locations. If Peoples had included these elements in its plan and contract, it would have discovered the deficiencies in the Towson office sooner. After bringing these matters to its attention, Peoples corrected its loan origination process and its quality assurance plan.

We recommend that the Assistant Secretary for Housing – Federal Housing Commissioner require Peoples to take immediate action to correct the branch operational deficiencies not in compliance with HUD branch requirements. We also recommend that HUD request indemnification from Peoples on 14 Federal Housing Administration loans valued at $2,369,959, which it issued contrary to HUD’s loan origination procedures.

Issue Date: December 4, 2004
Audit Report No.: 2005-PH-1004
File Size: 1.6MB

Title: Corrective Action Verification Review of the Housing Authority of Baltimore City, Baltimore, MD, Section 8 Certificate and Voucher Programs

Issue Date: September 10, 2004
Audit Report No.: 2004-PH-1012
File Size: 2.30MB

Title: Mortgage America Bankers, LLC, a Non-Supervised Loan Correspondent, Kensington, Maryland

We completed a review of Mortgage America Bankers, LLC (Mortgage America), an FHA-approved non-supervised loan correspondent whose main office is located in Kensington, Maryland. The objectives of our audit were to determine whether Mortgage America complied with HUD mortgagee approval requirements; complied with HUD regulations, procedures, and instructions in originating FHA-insured loans selected for review; and Mortgage America’s quality control plan was developed and implemented according to HUD regulations.

We found that Mortgage America’s office operations did not comply with HUD/FHA mortgagee approval requirements, failed to justify loan overages and premium rate mortgages, and did not adequately develop and implement a quality control plan that meets HUD requirements. These deficiencies are a result of either Mortgage America’s disregard for or lack of knowledge of HUD/FHA mortgagee approval requirements. As a result, Mortgage America received $61,138 in ineligible fees and $27,718 in unsupported fees. In addition, it originated $2,983,501 in questioned loans.

We recommend Mortgage America to take immediate action to implement a quality control plan that meets all HUD requirements and correct its ongoing operational and loan origination deficiencies that do not comply with HUD/FHA loan correspondent approval requirements. We also recommend that HUD consider taking appropriate administrative action against Mortgage America for its continual failure to comply with HUD requirements.

Issue Date: June 29, 2004
Audit Report No.: 2004-PH-1009
File Size: 1.97MB

Title: First Funding, Incorporated, a Non-Supervised Loan Correspondent
Largo, Maryland

We completed an audit of First Funding, Incorporated (First Funding), an FHA-approved non-supervised loan correspondent whose office is located in Largo, Maryland. We selected First Funding for review because of its high default rate. The objectives of our audit were to determine whether: First Funding’s quality control plan was developed and implemented according to HUD regulations; and First Funding complied with HUD regulations, procedures, and instructions in the origination of FHA-insured loans selected for review.

We found First Funding had not adequately developed and implemented a quality control plan that meets HUD regulations, its office operations did not comply with HUD-FHA approval requirements and First Funding did not exercise due diligence in their loan origination processes. Specifically, First Funding did not meet its ten percent sample requirement for quality control reviews for three months, review loans that defaulted within the first six months, nor did they review ten percent of the rejected loans. In addition, First Funding charged unjustified fees, did not review borrower’s liabilities, credit characteristics or verify sources of funds. These deficiencies occurred because First Funding’s staff was not fully versed on HUD’s requirements. Consequently, mortgage loans of questionable eligibility were approved for FHA insurance and borrowers may have incurred unwarranted costs. First Funding could not support $6,058 in overages and $371,743 of funds could have been put to better use.

We recommend First Funding to take immediate action to implement a quality control plan that meets all HUD requirements and correct its ongoing operational deficiencies that do not comply with HUD-FHA loan correspondent approval requirements. We also recommend that HUD consider taking appropriate administrative action against First Funding for its continual failure to comply with HUD requirements.

Issue Date: September 4, 2003
Audit Memorandum No.: 2003-PH-1004
File Size: 542.5KB

Title: Review of the HOPE VI Relocation Process at the Housing Authority of Baltimore City, Baltimore, Maryland

As part of the Homeownership and Opportunity for People Everywhere (HOPE VI) audit of the Housing Authority of Baltimore City (Authority), we completed a separate review of the relocation process for the Authority’s HOPE VI Program. The primary objective of our review was to determine if the Authority followed HUD requirements when relocating tenants from the HOPE VI developments. Specifically, we wanted to determine if the Authority; (1) provided relocated tenants appropriate housing opportunities, (2) provided relocation assistance to the tenants during their move, and (3) established a process for occupancy in the new developments in accordance with the HUD-approved Relocation Plan.

Generally, we found the Authority did an adequate job in assisting the tenants from six HOPE VI developments in finding alternative housing, and improved its process to ensure displaced tenants receive priority in occupying completed HOPE VI units. However, during our review we did identify a number of deficiencies in the Authority’s administration of its relocation process. Specifically, we found the Authority did not follow HUD Handbook 1378 when it processed relocation payments. This caused the Authority to make $64,215 in relocation assistance overpayments and $20,705 in underpayments to a number of tenants. Also, weaknesses in the Authority’s contract administration resulted in its moving contractor over-billing the Authority $23,533, and the Authority paying $9,949 in property damage claims from tenants that the contractor should have been responsible for.

We made a number of recommendations to assist the Authority in improving its relocation process.

Issue Date: September 4, 2003
Audit Report No.: 2003-PH-1003
File Size: 2.39MB

Title: Housing Authority of Baltimore City's HOPE VI Program, Baltimore, Maryland

We completed an audit of the Housing Authority of Baltimore City’s (Authority’s) Homeownership and Opportunity for People Everywhere (HOPE) VI Program. The objective of the audit was to determine if the Authority implemented its HOPE VI Grants effectively, efficiently, economically and in accordance with the Grant Agreements and applicable rules and Regulations.

We found the Authority did not implement its HOPE VI Grants effectively, efficiently, and economically and in accordance with the Grant Agreements and applicable rules and Regulations. Specifically, the Authority’s: procurement and contract administration practices violated Regulations; managers did not maintain accurate financial records as required; and administration of the Community and Supportive Services Program was not effective. This occurred primarily because a prior Executive Director did not establish the proper internal control environment under which the Program was administered. As a result, many deficiencies in the Authority’s operations were noted, among the most notable being the Authority spent $28,532,646 above the Total Development Cost (TDC) limits on two developments. The Authority’s former Executive Director provided misleading information to HUD and did not fully disclose other information related to the development activities. Because HUD relied on the former Executive Director’s assertions, it did not have all the facts and granted waivers to exceed development standards and award contracts.

We recommended that HUD take administrative action against the former Executive Director and the Authority reimburse HUD $2,067,637 for ineligible costs. We also made a number of recommendations to improve the Authority’s administration of its HOPE VI Program.

Issue Date: September 30, 2002
Audit Memorandum No. 2002-PH-1007
File Size: 1,494KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to Legal Aid Bureau, Incorporated, Grant Number FFOT98012MD Baltimore, Maryland

Pursuant to Section 1303 of the 2002 Defense Appropriations Act (Public Law 107-117), we completed an audit of the Legal Aid Bureau, Incorporated’s (Grantee) Outreach and Technical Assistance Grant (OTAG). The primary objective of our review was to determine whether the Grantee expended Section 514 grant funds for only eligible activities as identified in the OTAG agreement and in accordance with U.S. Department of Housing and Urban Development (HUD) and other Federal requirements to further the Mark-to-Market Program. Also, the review was conducted to determine whether the Grantee used grant funds to pay expenses associated with lobbying activities. Federal regulations specifically prohibit the use of grant funds for lobbying activities.

The audit identified that the Grantee assisted ineligible projects; could not provide adequate support for $107,834 in disbursements it made for salaries and fringe benefits; and did not properly support $51,121 in indirect costs. In addition, the grantee charged an additional $1,044 of ineligible expenditures to the grant. We also noted the grantee did not comply with other requirements of the Office of Management and Budget’s (OMB) Circular A-122, Cost Principles for Non-Profit Organizations, which included using grant funds to participate in various lobbying activities. Accordingly, we made recommendations that will correct the above deficiencies and will improve the Grantee’s controls over administering OTAG funds.

Issue Date: September 30, 2002
Audit Memorandum No. 2002-PH-1006
File Size: 1,480KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to Legal Aid Bureau, Incorporated, Grant Number FFOT0020MD Baltimore, Maryland

Pursuant to Section 1303 of the 2002 Defense Appropriations Act (Public Law 107-117), we completed an audit of the Legal Aid Bureau, Incorporated (Grantee) Outreach and Technical Assistance Grant (OTAG). The primary objective of our review was to determine whether the Grantee expended Section 514 grant funds for only eligible activities as identified in the OTAG agreement and in accordance with U.S. Department of Housing and Urban Development (HUD) and other Federal requirements to further the Mark-to-Market Program. Also, the review was conducted to determine whether the Grantee used grant funds to pay expenses associated with lobbying activities. Federal regulations specifically prohibit the use of grant funds for lobbying activities.

The audit identified that the Grantee could not provide adequate support for $90,904 in disbursements it made for salaries and fringe benefits, and did not properly support $22,676 in indirect costs. In addition, the grantee charged $3,198 of ineligible expenditures to the grant. We also noted the grantee did not comply with other requirements of the Office of Management and Budget’s (OMB) Circular A-122, Cost Principles for Non-Profit Organizations, which included using grant funds to participate in lobbying activities. Accordingly, we made recommendations that will correct the above deficiencies and will improve the Grantee’s controls over administering OTAG funds.

Issue Date: December 21, 2001
Audit Memorandum No. 2002-PH-1003
File Size: 103KB

Title: City of Baltimore Home Program Baltimore, Maryland

We completed a limited review of the City of Baltimore HOME Program. We performed the review to determine whether the City is administering its HOME Program in compliance with HUD requirements.

Generally, we found the City is administering its HOME Program in compliance with HUD requirements. However, we did identify a number of areas where the City needs to make improvements in its administration of the Program. Specifically, the City needs to better monitor HOME loans and prospective program income; improve its fiscal management of HOME administrative costs and matching funds requirements; and increase its surveillance over HOME Program activities to ensure program objectives are met, property condition standards in assisted rental housing units are met, and Community Housing Development Organizations are properly certified. Details of our review can be found under the "Results of Review" section of this memorandum.

Issue Date: March 28, 2001
Audit Memorandum No. 2001-PH-1003
File Size: 324KB

Title: Housing Authority of Baltimore City, Section 8 Certificate and Voucher Programs, Baltimore, Maryland

We conducted an audit of the Housing Authority of Baltimore City’s (HABC) Section 8 Certificate and Voucher Programs. The purpose of our review was to determine whether the HABC was effectively and efficiently managing its Section 8 Program according to terms and conditions of its Consolidated Annual Contributions Contract (ACC) and applicable Federal regulations.

We found the HABC is not properly administering its Section 8 Program according to the terms and conditions of its ACC and applicable Federal regulations, and is in fact, in substantial default of its contract with HUD. Specifically, the HABC does not: have a financial management system that accurately accounts for and reports the results of Section 8 activities; operate its Section 8 Program according to HUD guidelines; fully utilize available Section 8 resources; and have a management information system that timely gathers, tracks, records, and reports critical program data to HABC management and HUD. Further, as detailed throughout this report, the HABC has demonstrated it does not currently have the capacity to successfully develop and implement appropriate systems and procedures to correct identified systemic deficiencies in its Section 8 Program. As a result of the HABC’s mismanagement of its Section 8 Program, more than 2,000 families on the HABC’s waiting list of 16,000 households are not being provided available program benefits; and existing program recipients and landlord/owners are not being properly serviced by the HABC. The primary issue areas are summarized below, and detailed in the Finding section of this report.

Issue Date: January 24, 2001
Audit Memorandum No. 2001-PH-1801
File Size: 266KB

Title: Housing Authority of Baltimore City (HABC) Thompson Court Decree

We found the HABC has made little progress in implementing the terms and conditions of the Section 8 component of the Decree to provide desegregated housing opportunities to families residing in Baltimore City public housing, public housing applicants and Section 8 families on the waiting list. Specifically, the HABC had planned to lease the entire 1,342 Special Section 8 Vouchers over a six-year period, or approximately 225 vouchers per year since the Decree was executed in 1996. However, based on records provided by the HABC and its mobility counselor, we found the HABC had assisted no more than 51 families in moving from impacted to non-impacted areas. Further, we found the HABC misreported the actual number of families assisted in its Fiscal Year 2000 PHA Plan submitted to HUD, stating they had served 285 families.

The HABC’s inability to meet Decree requirements occurred because they did not:

• procure the Mobility Services Contractor concurrent with the relocation of the displaced residents from the four high-rises;

• monitor the performance of the mobility counselor;

• maintain accurate records on the number of families assisted; and

• provide any centralized point of contact with overall responsibility to oversee and coordinate the implementation of the Decree.

As a result of not complying with the terms and conditions of the Thompson Court Decree, public housing families continue to be racially and economically segregated within defined areas of the City of Baltimore.

Issue Date: September 29, 1998
Audit Memorandum No. 98-AO-211-1805
File Size: 59KB

Title: Multifamily Equity Skimming Review Heather Hills Apartments, Temple Hills, MD

We determined that Tarragon Realty Advisors, Inc., violated paragraph 6(b) of the Regulatory Agreement by withdrawing $274,123 in project funds while the project was in a nonsurplus cash position. Paragraph 6(b) specifically prohibits the use of project funds for any purpose other than paying reasonable operating expenses and necessary repairs when the project is in a nonsurplus cash position. During 1997, unauthorized distributions to the general partner totaled $274,123. However, because total current obligations exceeded total cash by $189,703, only that amount should be returned to the project.

The unauthorized cash distributions were made because management's accounting practices allowed the commingling of funds from the Heather Hills project with funds from nonHUD properties. The accounting procedures provided that, from the first through the tenth of the month, project cash account balances exceeding $5,000 were withdrawn from all projects, deposited into one account, and used to pay operating expenses. From the eleventh to the end of the month, a minimum balance of $2,500 was maintained. After operating expenses were paid, the remaining balance was used to pay the owner's expenses or was distributed to the owner. Heather Hills is the only HUD project among the 46 projects involved, and the same accounting practices were used for all projects. This practice violates paragraph 6(e) of the Regulatory Agreement which states that distributions can only be made semiannually or annually. They are not to be made monthly.

Finally, the tenant security deposits account was not funded at December 31, 1997. In response to the Independent Accountant's 1997 audit, management agreed to fund the securities deposit account as deposits are collected from new tenants. However, the corrective action does not resolve the deficiency. To comply with the regulatory agreement, the tenant security deposits account must be fully funded.

Issue Date: August 15, 1996
Audit Report Number 96-PH-214-1021
File Size: 142KB

Title: Emerald Properties, Bethesda, MD

We determined that the Agent/Owners maintained all six HUD-insured projects in good physical condition. However, deficiencies were noted in management's operations as they relate to cash withdrawals and the expenditure of project funds.

Issue Date: March 19, 1996
Audit Related Memorandum No. 96-PH-201-1015
File Size: 296KB

Title: Housing Authority of Baltimore City

Based on our review, we make the following additional recommendations related to the Authority's procurement activities. Staffing & Training of Procurement Personnel - Perform an assessment of the staffing and training needs for the Authority's Purchasing Department to assure the Authority is adequately staffing this critical function. Retain Threshold at $25,000 - Require the Authority to maintain its threshold at the current level of $25,000 until the Authority has cleared all the findings reopened in recommendation 1B above and your monitoring reviews indicate the Authority is operating its procurement activities properly. Use Enforcement Remedies To Obtain Compliance - We also recommend that your office make appropriate use of the enforcement remedies outlined in 24 CFR Part 85.43. We recognize that with the number of procurement transactions executed, errors and omissions can occur, however, any indications of the Authority's unwillingness to address staffing levels, or other indicators of intent to circumvent procurement procedures, should prompt HUD to take action to disallow the cost of that procurement, as provided by Part 85.43.