Maine Audit Reports

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Issue Date: January 27, 2009
Audit Memorandum No: 2009-BO-1801
File Size: 168.27KB

Issue Date: November 6, 2008
Audit Report No. 2009-BO-1002
File Size: 557.67KB

Title: Orchard Court Multifamily Project, Located in Bath, Maine, Was Not Properly Managed in Accordance with HUD Regulations

We audited the Orchard Court project, located in Bath, Maine, in response to a referral received by the Office of Inspector General’s (OIG) Office of Investigation (Region 1). The referral indicated a potential inappropriate use of project funds by the Orchard Court Housing Corporation (project owner) and/or the management agent. Our overall objective was to determine whether the project owner and/or management agents operated the project in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The project owner and/or prior management agents failed to operate the Orchard Court project in accordance with HUD regulations. The owner and/or prior management agents did not comply with HUD requirements with regard to maintaining vacancies at a reasonable rate; making payments that were eligible, reasonable, adequately supported; following proper procurement procedures; maintaining the project in good physical condition; and ensuring that tenants qualified for subsidized rental housing. As a result, the project had $265,226 in vacancy losses and incurred ineligible, unreasonable, and unsupported costs of $511,727.

The project owner and a prior management agent executed two interest-bearing promissory notes in violation of the regulatory agreement, and a “Letter of Agreement” that may have violated the Project Owner’s/Management Agent’s Certification (Certification). The two notes allowed for the inappropriate accrual of interest in the amount of $56,086. Further, accounting records were incomplete, inaccurate or unavailable. The project’s current certified public accounting firm refused to prepare the project’s 2007 financial statements because it considered the project’s records not auditable. The project also lacked controls over the calculation of management fees and bad debts.

We recommend that the Director of the Office of Housing require the project owner to reimburse or require the responsible management agents to reimburse the project $49,270 for ineligible administrative, site supervisor, HUD 202, and site management fees paid to mangement agents; eliminate from the project’s accounting records $151,436 in accrued administrative, maintenance, site management, other administrative, and HUD 202 fees that are ineligible project costs; and request from responsible management agents supporting documentation for the $265,412 in unsupported costs charged to the project so that the eligibility of these costs can be determined. For any amounts determined to be ineligible, the project owner should repay or seek reimbursement from responsible management agent to pay the project from non-project funds; and remove $56,086 in interest accrued on the notes payable of $303,653 from the accounting records. In addition, HUD should consider pursuing administrative sanctions against the project owner and three prior management agents, including recovering management fees paid and removing payables representing unpaid management fees from the project’s accounting records.

Issue Date: January 18, 2008
Audit Report No. 2008-BO-1003
File Size: 242.08KB

Title: The Maine State Housing Authority, Augusta, Maine, Needs to Improve Controls over Its Administration of the HOME Program

We audited the HOME Investment Partnerships program (HOME) administered by the Maine State Housing Authority, Augusta, Maine (Authority), as part of our annual audit plan. The Authority received more than $21 million in U.S. Department of Housing and Urban Development (HUD) funding for its federal HOME program from 2005 to 2007. Our audit objective was to determine whether the Authority administered its HOME program in compliance with HUD regulations. We focused on whether the Authority (1) had adequate internal controls over its management process, accounting, and data processing; (2) used HOME program funds for eligible activities and adequately supported expenditures; (3) had adequate monitoring practices; and (4) properly accounted for HOME program income.

The Authority generally administered its HOME program in accordance with HUD regulations. It had adequate internal controls over its accounting and data processing and properly accounted for HOME program income. However, we identified two areas in which the Authority needs to improve its management controls, including improving its monitoring practices and ensuring that HOME program funds are used for eligible activities. Specifically, the Authority failed to track the status of outstanding housing quality standards deficiencies it found during annual compliance reviews and ensure that corrective actions were taken in a timely manner. The Authority also failed to ensure that two homes met HUD health safety standards before disbursing HUD funds to assist homebuyers. These deficiencies occurred because the temporary transition of personnel assigned to perform monitoring duties and the heavy workload of the Authority’s only inspector for the Home Repair and Maine American Dream Initiative (MADI) programs impeded efforts to address corrective action items in a timely manner. Also, the Authority was unaware that the two homes failed to meet HUD standards because it did not maintain inspection reports, relying on the community action agency’s (CAA) certifications that homes met HUD standards. As a result, several homeowners were living in homes that were not decent, safe, and sanitary. Also, the Authority’s disbursement of $13,686 to two homebuyers for homes that were not decent, safe, and sanitary was not the best use of funds.

Issue Date: August 28, 2006
Audit Report No. 2006-BO-1011
File Size: 1.02MB

Title: The Portland Housing Authority, Portland, Maine, Did Not Use Reserve Funds or Properly Allocate Employee Costs, Resulting in Questioned Costs of More Than $850,000

We reviewed the Section 8 Housing Choice Voucher program (Voucher program) at the Portland Housing Authority (Authority) as part of our fiscal year 2006 annual audit plan. Our objective was to determine whether the Authority properly administered its Voucher program in accordance with its annual contributions contracts and U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority generally administered its Voucher program in accordance with its annual contributions contracts and HUD requirements. However, it did not use its Section 8 administrative fee reserves in a timely manner or properly allocate salary and employee benefits expense to the Voucher program.

In February 2003, the Authority transferred Section 8 administrative fee reserves to its local programs account, but as of March 2006, it had not used $647,814 of these reserve funds for program or other housing purposes. This occurred because the Authority (1) did not implement its Board resolution donating $550,000 to the Authority’s non-profit entity, the Portland Housing Development Corporation (PHDC), (2) lacked specific plans to use available funds, and (3) was unaware that reserve funds must be expended to be considered used. The Authority also undercharged its Voucher program by $158,034 in salary and employee benefits expense because its cost allocation procedures improperly charged the program costs to its Public Housing Capital Fund (Capital Fund) program when the Voucher program had funding shortfalls. The Authority agreed to establish quantifiable and verifiable procedures, which should reduce future Capital Fund program costs by $44,336 during the next 12 months.

We recommend that the director of the Office of Public Housing, Boston, Massachusetts, require the Authority to (1) repay to its Section 8 program the unused portion of $647,814 in administrative fee reserve funds transferred to its local programs account and provide supporting documents for verification of the $158,034 in transferred reserve funds to the Capital Fund program, (2) identify current and valid uses for the remaining Section 8 administrative reserves ($489,780), and (3) establish and implement formal written procedures to properly allocate costs to the benefiting programs, thereby reducing future Capital Fund program expenses by $44,336. In addition, we recommend that HUD verify the repayment of $158,034 to the Authority’s Capital Fund program for ineligible administrative expenses.

Issue Date: November 4, 2003
Audit Memorandum No.: 2004-BO-1002
File Size: 532.2KB

Title: Family Living Adult Care Center FHA Project Number 024-22019
Biddeford and Saco, Maine

Our review disclosed that the Family Living project has suffered serious financial problems, including a default on the HUD-insured mortgage, and had ceased being a profitable entity. These problems were caused by questionable cash distributions (withdrawals) from the project bank accounts by the Owner. We consider these distributions, totaling $455,439, to be “equity skimming” and to be in violation of applicable Federal statutes and HUD regulations. By means of these distributions, the Owner diverted project funds from June 2000 to February 2002 to other businesses he owned and for personal expenses.

Issue Date: October 26, 2000
Audit Related Memorandum No.: 01-BO-202-1801
File Size: 42KB

Title: Review of Complaint, Waterville Housing Authority, Waterville, Maine

As requested by the Office of Public Housing, we performed an audit survey of the Waterville Housing Authority’s (WHA) Operations. Our objectives were to determine the validity of a complaint identifying six issues brought by a former WHA employee, and to identify any other indicators of problems or deficiencies in WHA’s operations, particularly those conditions that may be indicators of fraud, waste and mismanagement.

Our review determined that, of the problem areas identified by the complainant, only one remained unresolved; the controlling and safeguarding of fixed assets. WHA’s internal controls in this area are inadequate and need to be improved.

Issue Date: September 25, 2000
Audit Related Memorandum No.: 00-BO-255-1803
File Size: 248KB

Title: Review of Program Recipients’ Complaints, State of Maine FIX ME Program, Maine State Housing Authority, Augusta, Maine

In response to several complaints received from program recipients (homeowners), we performed a review of the Maine State Housing Authority’s (MSHA) FIX ME Program. Our objective was to evaluate MSHA’s administration of the program.

Our review identified deficiencies in the following areas: contractors did not obtain the required local building permits and local building inspections, work write-ups/cost estimates were not prepared by CAP agencies, one CAP agency did not properly document the required inspections of repair work, and MSHA’s monitoring reviews of CAP agencies (which administer the day to day operations of the program) were limited in scope and did not disclose the type of problems identified by the complainants. In our opinion, the overall design and structure of the FIX ME Program allowed these problems to occur because of a lack of adequate controls. MSHA needs to improve and standardize their procedures, and establish clear lines of accountability to prevent similar problems from recurring.

Issue Date: June 16, 1999
Audit Report No.: 99-BO-202-1002
File Size: 84KB

Title: Westbrook HA HOPE I Implementation Grant Westbrook, ME

We conducted an audit of the Westbrook Housing Authority in specific relation to its HOPE 1 Implementation Grant Program. The purpose of our review was to determine whether the Housing Authority provided adequate accountability for awarded Federal funds; maintained records which identify the source and application of Federal funds; and carried out its home ownership activities as described in its HUD approved grant application.

Our audit disclosed a significant portion of HUD's HOPE 1 Implementation Grant award of $717,000 to the Housing Authority was not needed to accomplish the goal of home ownership. We found that the Housing Authority is nearing completion of their home ownership program and has sold over 75 percent of the units; however, only 13 percent of grant funds were used toward accomplishing this goal. We further found that the Housing Authority did not use sale proceeds of $420,000 to accomplish stated objectives in their grant application; that grant funds and sale proceeds were commingled with the low income housing general fund; and that such funds were used for unauthorized and unrelated purposes including non-federal assisted housing programs.