Nevada Audit Reports

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Issue Date: August 17, 2009
Audit Report No.: 2009-LA-1015
File Size: 140.73KB

Title: Washoe County HOME Consortium, Reno, Nevada, Neighborhood Stabilization Program

We performed a limited review of the Washoe County HOME Consortium (Consortium) because it received an allocation of more than $4.6 million in Neighborhood Stabilization Program (NSP) funding as a subgrantee of the State of Nevada. Our objective was to determine whether the Consortium had sufficient capacity and had established adequate methodologies to implement the NSP requirements in accordance with U.S. Department of Housing and Urban Development (HUD) rules and regulations. The Consortium generally had sufficient capacity and adequate methodologies in place to implement the NSP requirements in accordance with HUD rules and regulations.

Specifically, (1) it had structured its policies and procedures to conform to NSP requirements; (2) the homeownership, rental, and downpayment assistance activities were underway; and (3) it had established adequate monitoring to track progress.

Washoe County HOME Consortium has applied for additional funding for NSP under the American Recovery and Reinvestment Act of 2009 and based on our review, should have the capacity to manage the additional funds requested.

Issue Date: September 3, 2008
Audit Report No.: 2008-LA-1801
File Size: 103.40KB

Title: Actions under Program Fraud Civil Remedies Act First Source Financial USA Henderson, Nevada

We completed a review of First Source Financial USA (First Source), a former nonsupervised loan correspondent approved to originate FHA-insured loans. The objective was to determine whether First Source originated FHA loans and had a quality control plan that complied with HUD rules and regulations. We reviewed 20 loans amounting to more than $2.5 million that were in claim status. Our review disclosed that First Source: (1) allowed nonemployees and unapproved branches to originate and process FHA loans; (2) originated and processed FHA loans with false information and known misrepresentations; and (3) allowed questionable lending practices by collecting unearned fees. We recommended civil money penalties, debarments, and repayment of $159,663 in losses HUD incurred on six of the loans. Based on our review, HUD’s Office of General Counsel initiated administrative sanctions under the Program Fraud Civil Remedies Act of 1986. To date, this action has resulted in several judgments totaling $635,498 and other settlements totaling $340,000, as well as other sanctions that remain in process at the time of this report.

Issue Date: September 4, 2007
Audit Report No.: 2007-LA-1015
File Size: 231.46KB

Title: The Housing Authority of the North Las Vegas, Nevada Significantly Underleased Its Section 8 Housing Choice Voucher Program

We audited the Housing Authority of the City of North Las Vegas, Las Vegas, Nevada (Authority), based on HUD's concerns regarding the administration of its Section 8 Housing Choice Voucher program funds. The objective of the audit was to determine whether the Authority administered its Section 8 Housing Choice Voucher program funds in accordance with HUD requirements. Our audit found the Authority did not follow HUD requirements when administering its Section 8 Housing Choice Voucher program funds. Although the Authority had $4.4 million in program funds and related interest to house additional eligible participants, its Section 8 program was significantly underleased. We attributed this to the Authority's inadequate management of its Section 8 Housing Choice Voucher program. As a result, eligible Section 8 participants were denied the opportunity to seek safe, decent, and quality housing under the Section 8 Housing Choice Voucher program.

We recommend that HUD require the Authority to implement adequate controls and procedures to ensure it does not underlease its Section 8 Housing Choice Voucher program.

Issue Date: July 21, 2006
Audit Report No.: 2006-LA-1017
File Size: 62.86KB

Title: The Housing Authority of the City of Las Vegas, Nevada, Did Not Comply with Contracting and Grant Use Requirements

Based on a complaint from a member of the Housing Authority of the City of Las Vegas' Board of Commissioners, we reviewed the Authority's contracts with Abt Associates. Our objective was to determine whether the Authority followed federal procurement and contracting requirements when it hired Abt. The Authority awarded three contracts totaling $473,499 to Abt in 2004 and 2005 in violation of federal requirements and its own policies and procedures for procurement, contracting, and contract administration. The Authority also improperly retained investment earnings totaling $84,569 from improperly drawn down replacement housing factor grant funds for fiscal years 2000 and 2001.

We recommend HUD require the Authority to provide adequate support of cost reasonableness or reimburse the program from nonfederal funds in the amount of $473,499, and reimburse the federal government for the $84,569 in interest earned on the grant funds. We also recommend HUD take appropriate administrative sanctions against responsible Authority officials, and provide contract and procurement training to both the board and Authority officials.

Issue Date: September 23, 2005
Audit Report No.: 2005-LA-1010
File Size: 251.36KB

Title: First Magnus Financial Corporation Did Not Comply with Federal Housing Administration Guidelines When Underwriting Five Mortgage Loans and Implementing Its Quality Control Program

We completed a review of five Federal Housing Administration loans sponsored by First Magnus' branch office in Las Vegas, Nevada. During a prior review of a Federal Housing Administration-approved loan correspondent, we identified loans sponsored by First Magnus that did not appear to be originated according to U.S. Department of Housing and Urban Development (HUD) regulations. As a loan sponsor, First Magnus is responsible for approving the loans; therefore, we reviewed underwriting deficiencies with First Magnus to determine whether it complied with HUD requirements.

Our audit disclosed that First Magnus did not comply with HUD requirements because it approved loans for borrowers who were ineligible for Federal Housing Administration insured mortgages. Loan files contained false and otherwise questionable documentation. First Magnus also did not perform quality control reviews during the time that four out of five loans in our sample were closed. The quality control plan at that time was not fully implemented and as a result, placed the Federal Housing Administration insurance fund at risk.

We recommend that the assistant secretary for housing - federal housing commissioner, take appropriate administrative action against First Magnus. The action, at a minimum, should include requiring First Magnus to repay $204,826 in claims and losses incurred on four loans, and indemnify HUD $127,893 for any future losses associated with one loan that is presently in foreclosure.

Issue Date: May 12, 2005
Audit Report No.: 2005-LA-1003
File Size: 638.55KB

Title: The Federal Housing Administration Loan Origination Process at First Source Financial USA, Henderson, NV, Did Not Fully Comply with HUD Requirements

We have completed an audit of First Source Financial USA (First Source) a non-supervised loan correspondent headquartered in Henderson, Nevada. The overall audit objective was to determine whether First Source approved FHA insured loans in accordance with the HUD/FHA requirements, which require adherence to prudent lending practices. Additionally, we wanted to determine whether First Source implemented an acceptable quality control plan. Our audit disclosed that First Source:

• Allowed nonemployees and unapproved branches to originate and process FHA-insured loans,
• Originated and processed FHA-loans with false information and known misrepresentations, and
• Allowed questionable lending practices by collecting unearned fees.

This was caused by First Source's failure to use due care, poor quality control procedures, disregard for HUD requirements, and lack of oversight and effective controls. As a result, there were excessive defaults and foreclosures, increased risk to FHA insurance funds, and actual losses of over $159,000.

We recommended First Source: (1) pay civil money penalties for originating and processing loans with nonemployees, having unapproved branches, co-brokering FHA loans for another mortgage company, allowing loan officers to simultaneously work for real estate companies, and RESPA violations, (2) repay $159,663 in losses HUD incurred on 6 loans, and (3) refund unearned yield spread premiums.

Issue Date: June 17, 2004
Audit Report Number 2004-LA-1004
File Size: 587KB

Title: Sahara Mortgage Company Non-Supervised Mortgagee, Las Vegas, Nevada

We completed an audit of Sahara Mortgage Company, a non-supervised mortgagee located in Las Vegas, Nevada. We selected Sahara for audit because of its high early default rate. The objective of the audit was to determine if Sahara originated Federal Housing Administration (FHA) insured mortgages in accordance with prudent lending practices and HUD requirements. Our audit report contains four findings on: (1) predatory lending practices, (2) approval of unqualified borrowers, (3) FHA properties obtained by Sahara's President for investment purposes, and (4) the quality control plan not adequately implemented. We recommended: (1) administrative actions against Sahara, up to and including removal from the FHA program; (2) repayment of overcharges and sustained losses of $14,157; (3) indemnification on defaulted properties not yet sold totaling $329,762 and future losses totaling $1,518,704; (4) Sahara pay off the properties obtained for investment; and (5) if Sahara is allowed to continue originating loans, quality control reviews and corrective actions must be taken.

Issue Date: June 9, 2003
Audit Related Memorandum 2003-LA-1801
File Size: 397KB

Title: The Housing Authority of the City of Las Vegas

At the request of the Director of the Office of Public Housing, San Francisco, we reviewed procurement activities at the City of Las Vegas Housing Authority (LVHA). We reviewed 16 LVHA procurement actions. Our objective was to review all four HUD-approved procurement methods: sealed bids, competitive proposals, noncompetitive proposals and small purchase procedures. We concluded that in some cases, policies and procedures were not adequate to ensure compliance with federal regulations, contracts were awarded without competition, and services in excess of the small purchase limit were obtained without a contract. Also, when contracts did exist, the terms were often not enforced or included open-ended escape clauses that favored the contractor. Our review of the 16 procurement actions identified ineligible costs totaling $57,000 and unsupported costs totaling $101,705. We are recommending that HUD ensure that: (1) LVHA revises its procurement policy to comply with applicable Federal and HUD policies and adhere to the policies, (2) LVHA adopts contract administration procedures to ensure payments for services are in accordance with contracts, (3) LVHA repays ineligible and unsupported costs from non-federal funds, and (4) LVHA removes specific inappropriate clauses from its current and future contracts.

Issue Date: March 28, 1996
Audit Related Memorandum 96-SF-212-1805
File Size: 36KB

Title: Lakeridge Apartments East, Reno, NV

We identified no violations of HUD requirements involving the matters raised in the request except for the delinquency on the HUD-held mortgage.

Issue Date: February 23, 1996
Audit Report Number 96-SF-204-1003
File Size: 118KB

Title: HA of the City of Las Vegas, Las Vegas, NV

This report recommends actions necessary to improve the Authority's current operations. But it also raises questions about past operations - and the integrity of the audit resolution process. This report includes deficiencies we have addressed to HUD management for more than seven years. In 1989, we reported material deficiencies in Authority operations - including the need for the Authority to repay $6 million to HUD or its own low-rent program (Report No. 89-SF-209-1004). In 1992 we performed a corrective action verification and found that these deficiencies remained (Report No. 93-SF-209-1801). In 1996, many of the same deficiencies remain - including the $6 million debt. On February 8, 1996, we met with the Authority's Executive Director and the Pacific/Hawaii Director of Public Housing. In that meeting, the Authority identified current efforts to improve operations and discussed its workout plan that provides for repayment of more than $7 million (including the overdue $6 million) debt within two years.