Issue Date: December 21, 2010
Audit Memorandum
No.: 2011-NY-1004
File Size: 1.54MB
Title: The City of Binghamton, NY, Did Not Always Administer Its
Section 108 Loan Program in Accordance With HUD Requirements
We completed an audit of the operations of the City of Binghamton,
NY (City), pertaining to its administration of its Community Development
Block Grant (CDBG) Section 108 Loan Guarantee program. Our audit
objectives were to determine whether the City (1) administered its
Section 108 loan program effectively, efficiently, and economically
in accordance with applicable rules and regulations; (2) used Section
108 loan proceeds on eligible activities that met a national objective
of the program; and (3) expended additional CDBG funds for subsequent
Section 108 loan repayments and other related costs that were necessary,
reasonable, and in accordance with all applicable contracts, agreements
and Federal regulations.
The City did not ensure that its Section 108 loans and related
activities were administered effectively, efficiently, and economically
in accordance with applicable rules and regulations and that loan
proceeds were expended on eligible activities that met a national
objective of the program. In addition, the City did not ensure that
additional expenditures of CDBG funds for subsequent Section 108
loan repayments and other related costs were necessary, reasonable,
and in accordance with all applicable contracts, agreements, and
Federal regulations. Consequently, significant CDBG funds were disbursed
for Section 108 debt repayments, and future CDBG funds will be required
until the Section 108 debts have been fully paid. Therefore, the
ability to provide program benefit to low- and moderate-income residents
of the City has been diminished.
We recommend that the Director of HUD's Buffalo Office of Community
Planning and Development instruct the City to (1) establish a Section
108 repayment account and repay more than $1.5 million in hotel
sales proceeds that were used for City expenses from non-Federal
funds; (2) transfer the $81,561 in hotel sales proceeds that remains
in the City's trust account to the established Section 108 repayment
account; (3) submit documentation to justify the use of more than
$2.4 million in CDBG funds to pay for Regency Hotel Section 108
debt so that HUD can make an eligibility determination; and (4)
establish controls to ensure that Section 108 loan proceeds are
at all times adequately safeguarded, collateral for Section 108
loans is continually protected until all loan funds have been repaid,
the provisions of all Section 108 loan contracts and agreements
are followed and promptly enforced, and Section 108 loan activities
meet a national objective of the program.
Issue Date: September 30, 2010
Audit Memorandum
No.: 2010-NY-1809
File Size: 7MB
Title: Sterling National Mortgage Company, Inc., Great Neck, NY,
Did Not Properly Underwrite a Selection of FHA Loans
We conducted a review of Federal Housing Administration (FHA) loans
underwritten by Sterling National Mortgage Company, Inc. (Sterling),
an FHA direct endorsement lender. The review was conducted as part
of the Office of Inspector General's (OIG) 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
Sterling underwrote 20 loans in accordance with U.S. Department
of Housing and Urban Development (HUD)/FHA requirements. Sterling
officials did not underwrite 6 of the 20 loans reviewed in accordance
with HUD/FHA regulations. As a result, the FHA insurance fund suffered
actual losses of more than $429,703 on five loans and faces a potential
loss of $79,120 on one loan for total losses of more than $508,823.
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 and/or civil money penalties
against Sterling and/or its principals for incorrectly certifying
to the integrity of the data or that due diligence was exercised
during the underwriting of six loans that resulted in actual losses
of $429,703 on five properties and a potential loss of $79,120 on
one property for a total loss of $508,823. We also recommend that
HUD's Deputy Assistant Secretary for Single Family take appropriate
administrative action against Sterling and/or its principals for
the material underwriting deficiencies cited in this report once
the affirmative civil enforcement action is completed.
Date Issued: June 4, 2010
Audit Memorandum
No.: 2010-NY-1804
File Size: 1MB
Title: The Rochester Housing Authority, Rochester, NY, Had Financial
Control Weaknesses That Could Affect Its Capacity to Administer
Recovery Act Funds
As part of the Office of Inspector General's (OIG) obligation to
ensure accountability and transparency in the use of the American
Recovery and Reinvestment Act of 2009 (Recovery Act) funds, we performed
a capacity review to assess the Rochester Housing Authority's (Authority)
administration of its capital funding program. The Authority was
awarded $5.9 million in capital funds under the Recovery Act. Our
objective was to evaluate the Authority's capacity in the area of
internal controls, eligibility, financial controls, procurement,
and outputs/outcomes to effectively administer its Recovery Act
funds. Our review determined that the Authority had weaknesses in
its financial controls that if left unaddressed could lead to its
having a diminished capacity to effectively administer its supplemental
Recovery Act funds. Specifically, the Authority (1) charged ineligible
and unsupported expenses to its capital fund program; (2) failed
to reimburse eligible expenses from its capital fund program; and
(3) inaccurately allocated employee payroll expenses charged to
its capital fund program. Except for these issues, Authority officials
demonstrated a positive attitude toward establishing and implementing
additional financial controls, their procurement controls comply
with regulations and their capital program outputs are in accordance
with their established plans. Thus, overall, the Authority had the
capacity to effectively administer its capital fund program supplemental
funds provided under the Recovery Act according to applicable requirements.
We recommend that HUD (1) monitor and oversee the Authority's charges
and withdrawals for capital fund program administrative expenses
and ensure that only allocable 2009 payroll expenditures are charged
to the Authority's capital fund programs. This measure will assure
HUD that capital funds, including those provided under the Recovery
Act, will be disbursed in accordance with regulations. Further,
we recommend that HUD instruct the Authority to (2) ensure that
$379,953 in ineligible charges and withdrawals of capital funds
are properly accounted for and reimbursed to HUD from non-Federal
funds, (3) provide documentation to justify the $177,289 in unsupported
withdrawals so that HUD can make an eligibility determination. Any
unsupported costs determined to be ineligible should be reimbursed
to HUD from non-Federal funds, (4) provide documentation to HUD
to ensure that $2,811 in relocation expenses was reclassified and
charged to the Authority's operating fund and that $3,264 in eligible
modernization-related expenses is reimbursed from capital funds,
(5) establish and implement policies and procedures that will ensure
that allocation plan percentages are accurate, and vouchers are
supported, eligible, and in accordance with capital fund program
policies and procedures; and (6) review and revise its financial
controls for tracking capital fund expenditures to ensure that capital
fund program expenses are requested in a timely manner and that
all eligible expenses are included in voucher requests.
Date Issued: April 7, 2010
Audit Memorandum
No.: 2010-NY-1011
File Size: 788KB
Title: New Rochelle Municipal Housing Authority, New Rochelle,
NY, Had Weaknesses in Its Self-Sufficiency Grant Programs
We audited the New Rochelle Municipal Housing Authority's (Authority)
administration of its Resident Opportunities and Self-Sufficiency
(ROSS) and Housing Choice Voucher Family Self-Sufficiency grant
programs as part of the Office of Inspector General's (OIG) strategic
plan goals to improve the U.S. Department of Housing and Urban Development's
(HUD) fiscal accountability for its assisted housing programs. The
audit objectives were to determine whether the Authority expended
ROSS and Family Self-Sufficiency program funds for eligible costs
and implemented adequate controls over the programs to ensure compliance
with HUD regulations. Contrary to regulations, Authority officials
charged the grants ineligible and unsupported expenses related to
charges incurred before the execution of grant agreements and for
costs under another grant. As a result, HUD lacks assurance that
funds of $219,715 were spent for eligible purposes and expenses
charged totaling $100,637 were properly supported. In addition,
the Authority had control weaknesses in its procedures for administering
its Housing Choice Voucher and ROSS Family Self-Sufficiency programs
causing program participants to not be credited with the proper
escrow amount and noncompliance with program administrative requirements.
We recommended that the Director, Office of Public Housing, New
York, instruct Authority officials to (1) repay from non-Federal
funds the $219,715 in ineligible expenses charged to the grant programs,
(2) provide support for or repay from non-Federal funds $100,637
related to the unsupported charges paid with ROSS and Housing Choice
Voucher program funds, (3) recoup a $265 overpayment from, and pay
$2,997 due to, FSS participants, and (4) develop procedures to ensure
compliance with all Family Self-Sufficiency program administrative
requirements.
Date Issued: April 7, 2010
Audit Memorandum
No.: 2010-NY-1010
File Size: 548KB
Title: New Rochelle Municipal Housing Authority, New Rochelle,
NY, Had Control Weaknesses in Its Low-Rent Housing Program
We audited the New Rochelle Municipal Housing Authority's (Authority)
administration of its Low-Rent housing program as part of the Office
of Inspector General's (OIG) strategic plan goals to improve the
U.S. Department of Housing and Urban Development's (HUD) fiscal
accountability for its assisted housing programs. The audit objectives
were to determine whether the Authority administered its low-rent
housing program in accordance with applicable regulations. The audit
disclosed that the Authority had weaknesses in the administration
of its low-rent program because it did not (1) properly determine
tenant eligibility; (2) ensure that program units were decent, safe,
and sanitary, and (3) support rent charged to an employee-tenant.
In addition, the Authority had weaknesses in its procurement, payroll,
and financial management functions because it (1) executed contracts
contrary to HUD and its own policy, (2) did not maintain adequate
support for payroll, and (3) expended and loaned funds among programs
contrary to regulation. As a result, the Authority lacked assurance
that low-rent program tenants were properly certified and resided
in units that were decent, safe, and sanitary, services were obtained
at the most economical and efficient price, payroll costs were eligible
and adequately supported, and funds were always expended in accordance
with HUD regulations.
We recommended that the Director, Office of Public Housing, New
York, instruct Authority officials to (1) strengthen controls over
low-rent tenant certification and unit inspection procedures to
ensure that tenant eligibility is properly determined and adequately
documented, and that annual inspections of low-rent units are conducted;
(2) establish procedures for the approval and calculation of rents;
(3) provide documentation to justify the rent charged to an employee-tenant
or pay the $57,252 that should have been collected; (4) strengthen
controls to ensure compliance with HUD procurement, payroll, and
financial management regulations; and (5) repay from non-Federal
funds the $38,355 expended for ineligible costs.
Date Issued: March 26, 2010
Audit Report
No.: 2010-NY-1009
File Size: 3MB
Title: Somerset Investors Corporation, Melville, NY, Did Not Always
Comply With HUD/FHA Loan Underwriting Requirements
We audited Somerset Investors Corporation (Somerset), dba Somerset
Mortgage Bankers, a Federal Housing Administration (FHA)-approved
direct endorsement lender located in Melville, NY. The audit objectives
were to determine whether Somerset (1) originated FHA-insured refinanced
loans in accordance with the requirements of the U.S. Department
of Housing and Urban Development (HUD)/FHA and (2) conducted quality
control reviews that complied with HUD/FHA requirements.
Somerset did not always originate refinanced loans in accordance
with HUD/FHA requirements. Specifically, 8 of 11 loans we reviewed
exhibited underwriting deficiencies significant enough to warrant
indemnification as did six loans subject to Somerset's quality control
review that we reviewed. Consequently, 14 mortgage loans with an
outstanding principal balance of over $4.6 million were approved,
which presented an unnecessary risk to the FHA insurance fund.
Somerset's written quality control plan complied with HUD/FHA requirements;
however, the quality control reviews conducted did not comply with
HUD's and its own quality control requirements regarding sample
size and reporting Consequently, assurance was lessened that Somerset's
quality control process would identify and address underwriting
problems in a timely manner and thus protect Somerset and FHA from
unacceptable risk.
We recommend that HUD require Somerset to (1) indemnify HUD for
potential estimated losses of nearly $2.8 million for 14 loans with
significant underwriting deficiencies, (2) strengthen controls over
its underwriting procedures to provide assurance that HUD/FHA requirements
are met, and (3) implement procedures to ensure that quality control
reviews comply with HUD/FHA requirements.
Date Issued: March 22, 2010
Audit Report
No.: 2010-NY-1008
File Size: 301.04KB
Title: The Lower Manhattan Development Corporation, New York,
NY, Generally Administered CDBG Disaster Recovery Assistance Funds
in Compliance With Regulations
We completed the fourteenth audit report in our ongoing review
of the Lower Manhattan Development Corporation's (the auditee) administration
of the $2.783 billion in Community Development Block Grant Disaster
Recovery Assistance funds provided to the State of New York in the
aftermath of the September 11, 2001, terrorist attacks on the World
Trade Center in New York City. During the audit period, April 1
through September 30, 2009, the auditee disbursed $38.8 million
of the $2.783 billion being administered.
The objectives of this audit were to determine whether the auditee
(1) disbursed Disaster Recovery Assistance funds in accordance with
the guidelines established under U.S. Department of Housing and
Urban Development (HUD)-approved partial action plans, (2) expended
Disaster Recovery Assistance funds for eligible administration and
planning expenses in accordance with applicable laws and regulations,
and (3) had a financial management system in place that adequately
safeguarded funds and prevented misuse. The auditee generally (1)
disbursed CDBG Disaster Recovery Assistance funds in accordance
with the guidelines established under HUD-approved partial action
plans and applicable laws and regulations, (2) expended CDBG Disaster
Recovery Assistance funds for eligible planning and administrative
expenses in accordance with applicable laws and regulations, and
(3) had a financial management system in place that adequately safeguarded
funds and prevented misuse. Therefore, for the disbursements reviewed
during the audit, HUD had assurance that the CDBG Disaster Recovery
Assistance funds were properly administered, and we had no recommendations.
Date Issued: March 12, 2010
Audit Memorandum
No.: 2010-NY-1803
File Size: 694KB
Title:The New York City Housing Authority Had the Capacity to
Administer Capital Funds Provided Under the American Recovery and
Reinvestment Act
We performed a review of the New York City Housing Authority's
(Authority) capacity to administer the approximately $423 million
in capital funds awarded under the American Recovery and Reinvestment
Act of 2009 (Recovery Act) in support of the Office of Inspector
General's (OIG) goal to report on Recovery Act recipients' capacity
to administer funds received. The objective of the review was to
determine whether the Authority's general, financial, and procurement
controls were adequate to provide assurance that it had the capacity
to effectively manage the Recovery Act funds.
Our limited review indicated that the Authority's general, financial,
and procurement controls were generally adequate to provide assurance
that it had the capacity to effectively manage its Recovery Act
funds. Authority officials had plans for using the funds in a timely
manner and had addressed previously reported weaknesses in its Capital
Fund program administration. To provide greater assurance that funds
are appropriately obligated and expended, we recommended that HUD
closely monitor the Authority to ensure that it will achieve planned
accomplishments within the prescribed timeframes and take action
necessary to ensure compliance with Recovery Act requirements.
Date Issued: January 14, 2010
Audit Memorandum
No.: 2010-NY-1802
File Size: 1004.22KB
Title: Control Weaknesses at the Syracuse Housing Authority, Syracuse,
New York May Affect Its Capacity to Administer American Recovery
and Reinvestment Act Funds
As part of the Office of Inspector General's (OIG) obligation to
ensure accountability and transparency in the use of the American
Recovery and Reinvestment Act of 2009 (Recovery Act) funds, we performed
a capacity review to assess the Syracuse Housing Authority's (Authority)
administration of its capital funding program. The Authority was
awarded $4.5 million in capital funds under the Recovery Act. Our
objective was to evaluate the Authority's capacity in the area of
internal controls, eligibility, financial controls, procurement,
and outputs/outcomes to effectively administer its Recovery Act
funds. Our review determined that significant control weaknesses
diminished the Authority's capacity to effectively administer its
capital fund program in the areas of internal controls, eligibility,
financial controls, procurement, and output/outcomes. Specifically,
the Authority failed to (1) complete its 2002 CFFP in a timely manner,
and additional CFP grants remain open; (2) follow HUD-required contracting
and procurement regulations, thus limiting competition and potentially
causing excessive and/or ineligible costs; and (3) implement a proper
control environment, which contributed to management and financial
control deficiencies.
We recommend that HUD (1) closely monitor the operations of the
Authority to ensure compliance with all Capital Fund Financing Program
(CFFP), Capital Fund Program, and Recovery Act deadlines and objectives,
and (2) certify that the Authority's procurement practices meet
the federal procurement requirements. Further, we recommend that
HUD instruct the Authority to (3) immediately complete its 2002
CFFP bond program activities and use the remaining $1.3 million
for eligible improvements, (4) submit a viable plan to obligate
capital funds and supplemental Recovery Act funds, (5) establish
and implement operational procedures to ensure compliance with applicable
regulations for all future procurement activities, and (6) institute
effective management and financial controls to ensure successful
administration and completion of the Recovery Act program and objectives.
Date Issued: December 22, 2009
Audit Report
No.: 2010-NY-1006
File Size: 1.42MB
Title: SFDS Development Corporation, New York, New York, Had Weaknesses
in Its Financial Procurement and Administrative Controls
We audited the SFDS Development Corporation (agent), management
agent for three U.S. Department of Housing and Urban Development
(HUD) subsidized Section 202 elderly housing direct loan properties,
in response to a complaint to the Office of Inspector General (OIG)
Hotline that alleged misappropriation of HUD funds by the agent.
The objective of our review was to assess the merits of the complaint.
It was expanded to assess the agent's compliance with HUD financial,
procurement, and administrative regulations applicable to the Section
202 elderly housing program. The audit disclosed that weaknesses
in the agent's financial, procurement, and administrative controls
caused noncompliance with HUD regulations. Specifically, the agent
charged ineligible and unsupported expenses to the projects, failed
to make required deposits to, or seek HUD approval for withdrawals
from the replacement for reserve account, did not always conduct
unit inspections or procure services in a prudent manner, and failed
to file financial statements in a timely manner. As a result, the
projects were deprived of $177,406, and HUD lacked assurance that
$498,643 was disbursed for eligible expenses, units were properly
maintained, and services were obtained at the most economical price.
In addition, HUD was not made aware of the financial condition of
the projects in a timely manner.
We recommend that the Director of the New York Office of Multifamily
Housing instruct the owner/agent to repay ineligible costs charged
to the projects, provide documentation for unsupported costs, and
if support cannot be provided repay the amount with nonfederal funds,
and strengthen controls over financial, procurement, and administrative
functions.
Date Issue: December 22, 2009
Audit Memorandum
No.: 2010-NY-1801
File: Size: 216.34KB
Title: The City of Utica, New York, Has the Capacity to Administer
Lead-Based Paint Funds Provided Under the American Recovery and
Reinvestment Act of 2009
As part of the Office of Inspector General's (OIG) obligation to
ensure accountability and transparency in the use of the American
Recovery and Reinvestment Act of 2009 (Recovery Act) funds, we performed
a capacity review to assess the City of Utica, New York's (City)
administration of its lead-based paint hazard control program. The
City was awarded $2.04 million under the Recovery Act to carry out
lead-based paint hazard control activities in privately owned homes.
Our objective was to evaluate the City's capacity in the area of
internal controls, eligibility, financial controls, procurement,
and outputs/outcomes to effectively administer its lead hazard control
program funds provided under the Recovery Act in accordance with
applicable requirements. Based on our review, the City has the capacity
to effectively administer its lead hazard grant funds provided under
the Recovery Act. This memorandum contains no recommendations.
Date Issued: November 4, 2009
Audit Report
No.: 2010-NY-1003
File Size: 842.60KB
Title: The South Bronx Community Management Co., Inc., Bronx,
New York , Had Weaknesses in Its Administration of the Project Maria
Isabel
We audited the management agent operations of the South Bronx Community
Management Co., Inc. (agent), as they relate to the administration
of the U.S. Department of Housing and Urban Development (HUD)-Section
202 direct loan for elderly and handicapped housing project Maria
Isabel at the request of the HUD New York City Office of Multifamily
Housing. The audit disclosed that the agent generally complied with
HUD financial and unit maintenance standards regulations in its
administration of the project. However, various issues warrant HUD's
attention to provide greater assurance that the project is managed
in the most economical and efficient manner. Specifically, (1) tenant
accounts receivable and vendor accounts payable were not properly
reported, (2) prudent procurement practices were not always followed,
(3) advances were made by and partially repaid to the agent without
HUD approval, and (4) action to mitigate cash-flow problems was
not addressed in a timely manner, but has since been taken. As a
result, HUD was not made aware of the financial condition of the
project, and the project experienced serious cash-flow problems.
We recommend that the Director of HUD's New York Office of Multifamily
Housing instruct the agent and property owners to determine the
collectability of delinquent tenant accounts receivable and request
HUD approval to write off those accounts determined to be uncollectible,
strengthen procedures to ensure accurate reporting of accounts payable,
establish procedures to request approval for receiving and paying
agent advances, strengthen procedures to provide greater compliance
with HUD's and its own procurement procedures, and strengthen controls
to ensure that late fees are minimized and that actions to mitigate
cash-flow problems are addressed in a timely manner.
Date Issued: October 6, 20009
Audit Report
No.: 2010-NY-1001
File Size: 450.62KB
Title: The Lower Manhattan Development Corporation, New York,
New York, Generally Administered CDBG Disaster Recovery Assistance
Funds in Accordance with Regulations
We completed the thirteenth report in our ongoing audits of the
Lower Manhattan Development Corporation's (the auditee) administration
of the $2.783 billion in Community Development Block Grant Disaster
Recovery Assistance funds provided to the State of New York in the
aftermath of the September 11, 2001, terrorist attacks on the World
Trade Center in New York City. The auditee disbursed approximately
$50.3 million of these funds during our audit period, October 1,
2008 through March 31, 2009.
The objectives of this audit were to determine whether the auditee
(1) disbursed Disaster Recovery Assistance funds in accordance with
the guidelines established under U.S. Department of Housing and
Urban Development (HUD)-approved partial action plans, (2) expended
Disaster Recovery Assistance funds for eligible administration and
planning expenses in accordance with applicable laws and regulations,
and (3) had a financial management system in place that adequately
safeguarded funds and prevented misuse. The auditee generally administered
the grant funds we reviewed in accordance with HUD regulations,
expended funds for eligible planning and administrative expenses,
and continued to maintain a financial management system that adequately
safeguarded funds and prevented misuse. There were no recommendations.
Date Issued: September 8, 2009
Audit Memorandum
No.: 2009-NY-1801
File Size: 571.14KB
Title: The City of Little Falls, New York, Urban Renewal Agency,
Small Cities Community Development Block Grant and HOME Programs,
Complaint No. HL-09-0090
We conducted a review of the City of Little Falls, New York's (the
City) Small Cities Community Development Block Grant (CDBG), and
HOME Programs administered by its Urban Renewal Agency (URA). We
selected the City for review based on a hotline complaint that alleges
mismanagement of HUD funding for the CDBG and HOME programs administered
by the City and its URA. The objectives of the review were to determine
the merits of the hotline complaint, specifically whether the City
and its URA complied with HUD requirements while administering its
CDBG and HOME programs. The review determined that the City and
its URA have not complied with HUD requirements while administering
its CDBG and HOME programs; thus the allegations in the report have
all been substantiated. The City and its URA have begun to address
the allegations and are attempting to correct deficiencies that
exist within their HUD funded programs. However, the review of the
URA's operations determined that the agency's books and records
could not be relied upon to provide current or accurate data, and
are considered not auditable at this time.
We recommend that HUD instruct the State of New York's Office of
Community Renewal and Housing Trust Corporation to (1) coordinate
their efforts to conduct a comprehensive monitoring of the City
and its URA to ensure that they are adequately administering the
City's HUD-funded Small Cities CDBG grants and HOME program in compliance
with applicable HUD and State of New York requirements, (2) fully
reconcile the sources and uses of all grant funds for each CDBG
and HOME project and cash account that it administers, and develop
procedures to ensure that the appropriate cash accounts are used
for grant income and expense transactions, (3) account for, reconcile,
and report on all program income transactions, (5) develop administrative
control procedures to ensure compliance with all HOME program disbursement
and reporting requirements, and (6) establish procedures to ensure
the proper monitoring and maintenance of CDBG and HOME program activity
files.
Date Issued: July 31, 2009
Audit Report
No.: 2009-NY-1014
File Size: 1.13MB
Title: Lackawanna Municipal Housing Authority, Lackawanna, New
York, Needs to Improve Controls and Operational Procedures Regarding
Its Capital Fund Program
We completed an audit of the Lackawanna Municipal Housing Authority's
(Authority) administration of its capital fund program. The objectives
of our audit were to determine whether the Authority disbursed capital
funds and procured contracts in accordance with U.S. Department
of Housing and Urban Development (HUD) requirements.
The audit disclosed that the Authority disbursed capital funds
for questionable expenditures. Further, it did not follow HUD requirements,
its own procurement policy, and New York State General Municipal
Law when awarding contracts. Specifically, the Authority had no
basis for charging management improvement expenditures to its capital
fund program, charged the same expenses for multiple capital fund
drawdowns, could not support the eligibility of charges, and improperly
procured contracts and professional services. As a result, it lacked
assurance that expenditures were necessary or reasonable, and that
the services contracted for were provided as intended.
We recommend that the Director of HUD's Buffalo Office of Public
Housing instruct the Authority to (1) reimburse the capital fund
program from nonfederal funds the $7,535 in excess drawdowns and
the more than $2.6 million in costs associated with the lead abatement/modernization
contract; (2) provide supporting documentation to justify the eligibility
of $676,301 in questionable capital fund expenditures or reimburse
the program from nonfederal funds any amounts not supported; (3)
seek legal advice on whether the lead abatement/modernization contract
should be rescinded in the best interest of the Authority; and (4)
review and if appropriate, disapprove any future change orders associated
with the lead abatement / modernization contract.
Date Issued: May 27, 2009
Audit Report
No.: 2009-NY-1013
File Size: 946.81KB
Title: Lower Manhattan Development Corporation, New York, New
York, Administered Disaster Recovery Assistance Funds in Accordance
with HUD Regulations
We completed the twelfth report in our ongoing audits of the Lower
Manhattan Development Corporation's (the auditee) administration
of the Community Development Block Grant Disaster Recovery Assistance
funds provided to the State of New York in the aftermath of the
September 11, 2001, terrorist attacks on the World Trade Center
in New York City. During our audit period, April 1 through September
30, 2008, the auditee disbursed approximately $103.4 million of
the $2.783 billion funds appropriated. The objectives of this audit
were to determine whether the auditee (1) disbursed Disaster Recovery
Assistance funds in accordance with the guidelines established under
U.S. Department of Housing and Urban Development (HUD)-approved
partial action plans, (2) expended Disaster Recovery Assistance
funds for eligible administration and planning expenses in accordance
with applicable laws and regulations, and (3) had a financial management
system in place that adequately safeguarded funds and prevented
misuse.
The auditee administered the grant funds we reviewed in accordance
with HUD regulations, expended funds for eligible planning and administrative
expenses, and continued to maintain a financial management system
that adequately safeguarded funds and prevented misuse. However,
several issues require HUD's attention. Specifically, (1) the Chinatown
Clean Streets program subrecipient was reimbursed $508,361 for costs
that were not adequately supported at the time of audit, (2) $19,643
was disbursed for costs related to an auditee division for which
other sources of funding were available, and (3) the Affordable
Housing subrecipient monitoring procedures to increase assurance
of compliance with a 30-year affordability requirement had not been
finalized.
We recommend that HUD's General Deputy Assistant Secretary for
Community Planning and Development direct the auditee to (1) obtain
and review documentation substantiating the $508,361 reimbursed
to the Chinatown Clean Streets program subrecipient for its nonprofit
contractor's expenditures and recover any amounts not supported,
(2) reimburse $14,603 ($19,643 less $5,040 already recovered) to
the HUD CDBG Disaster Recovery Assistance fund from other than HUD
funds so that these funds can be available for administration and
planning expenses, and (3) ensure that its Affordable Housing program
subrecipient finalizes monitoring procedures to enhance controls
over compliance with the 30-year period affordability requirement.
Date Issued: May 20, 2009
Audit Report
No.: 2009-NY-1012
File Size: 1MB
Title: The City of Rome, New York, Did Not Administer Its Economic
Development Activity in Accordance with HUD Requirements
We completed an audit of the City of Rome, New York's (City), administration
of its economic development activity known as General Cable under
its Community Development Block Grant (CDBG) program. The objectives
of our audit were to determine whether the City (1) administered
this economic development activity effectively, efficiently, and
economically in accordance with applicable U.S. Department of Housing
and Urban Development (HUD) rules and regulations and (2) expended
related CDBG funds for eligible activities that met a national objective
of the program.
The audit disclosed that the City did not always carry out its
activities effectively, efficiently, and economically in compliance
with HUD regulations. Further, it expended CDBG funds for an activity
that did not meet a national objective of the program. Specifically,
the City failed to (1) develop a plan to ensure that the required
job creation goal would be achieved, (2) adequately address known
concerns about the activity's progress, and (3) maintain adequate
supporting documentation. As a result, no jobs were created, and
there was no assurance that activity costs were necessary, reasonable,
and in accordance with federal regulations. Consequently, the City
did not use CDBG funds to address community needs.
We recommend that HUD instruct the City to (1) implement procedures
and controls to ensure that funded economic development activities
are feasible and can be completed in a timely manner to meet a national
objective of the CDBG program, (2) establish a schedule for documenting
completion of the activity and the jobs retained and/or created
at the site, and (3) reimburse HUD any portion of the more than
$2.95 million in CDBG funds expended on the activity for costs that
do not qualify as meeting the job creation requirement.
Date Issued: May 15, 2009
Audit Report
No.: 2009-NY-1011
File Size: 1.59MB
Title: North Hempstead Housing Authority, Great Neck, New York,
Had Weaknesses in Its Housing Choice Voucher and Family Self-Sufficiency
Programs
We audited the North Hempstead Housing Authority's (Authority)
administration of its Housing Choice Voucher and Family Self-Sufficiency
to determine whether the Authority administered these programs in
compliance with HUD regulations. The Authority properly determined
Section 8 tenant eligibility and accurately calculated rental subsidies.
However, the Authority improperly selected both units and tenants
for project-based voucher assistance, incorrectly accounted for
portable administrative fees, did not adequately administer its
housing quality standards quality control inspection process, and
improperly calculated and funded Family Self-Sufficiency program
participants' escrow accounts.
We recommended that the Director, Office of Public Housing, New
York, instruct Authority officials to (1) develop an allocation
plan to ensure that project-based vouchers are issued in accordance
with regulations and that tenants for project-based voucher assistance
are properly selected, (2) pay portable administrative fees due
to receiving authorities and provide documentation to support fees
paid, (3) strengthen controls over its housing quality standards
quality control inspection process, and (4) fund underfunded Family
Self Sufficiency program participant escrow accounts, reimburse
graduated participants for escrow owed, and recoup funds from overfunded
accounts.
Date Issued: March 6, 2009
Audit Report
No.: 2009-NY-1009
File Size: 711.42KB
Title: The City of Yonkers, New York, Had Weaknesses in the Administration
of its Section 108 Loan Guarantee Program
We audited the City of Yonkers, New York's (the City) administration
of its Section 108 Loan Guarantee program to determine whether the
City disbursed Section 108 loan guarantee program funds for eligible
costs and adequately safeguarded funds and prevented misuse. The
audit disclosed that the City disbursed program funds for eligible
activities in accordance with HUD rules and regulations, and maintained
a financial management system that adequately safeguarded funds.
However, weaknesses in controls caused the City to not (1) adequately
document data on borrower compliance with job creation and retention
requirements, (2) consistently monitor and report on the use of
loan proceeds, (3) properly maintain its loan repayment account,
and (4) notify HUD when loan collateral was changed or loans defaulted.
These deficiencies occurred because City officials were unaware
of program requirements. As a result, the City lacked assurance
that loan job creation and retention goals were achieved, loan disbursements
were used for eligible purposes, and loan repayments will be sufficient
to meet the City's future loan repayment obligations. In addition,
HUD was not made aware of changes to loan collateral and defaulted
loans, which could have affected its financial interest.
We recommended that the director of HUD's New York Office of Community
Planning and Development instruct the City to strengthen its controls
to (1) monitor and verify loan recipients' compliance with job creation
and retention requirements, (2) obtain and review borrower documentation
for expenditure of loan proceeds to ensure loan proceeds are used
for eligible purposes, (3) properly maintain loan repayment records,
and (4) report changes in loan collateral and defaults to HUD.
Date Issued: February 24, 2009
Audit Report
No.: 2009-NY-1008
File Size: 1.36MB
Title: The City of Newburgh, New York, Did Not Always Administer
Its Community Development Block Grant Program In Accordance With
HUD Requirements
We completed an audit of the City of Newburgh, New York's administration
of its Community Development Block Grant (CDBG) program. The objectives
of our audit were to determine whether the City (1) administered
its CDBG program effectively, efficiently, and economically in accordance
with applicable rules and regulations, and (2) expended CDBG funds
for eligible activities that met a national objective of the program.
The audit disclosed that the City did not always carry out its
activities effectively, efficiently, and economically in compliance
with HUD regulations, and expended CDBG funds for activities that
did not meet a national objective of the program. Specifically,
the City routinely charged certain costs to the CDBG program without
adequate support or detail, could not adequately demonstrate that
CDBG program funds were used for eligible activities that achieved
program objectives, awarded a contract for consulting services without
ensuring compliance with federal procurement requirements, charged
costs to the CDBG program without evidence that all of the contract
services provided related to the City's CDBG program. As a result,
the City could not ensure that only reasonable and necessary administrative
costs were charged to its CDBG program.
We recommend that HUD instruct the City to (1) provide supporting
documentation to justify the eligibility of $894,793 in questionable
CDBG disbursements or reimburse the program from nonfederal funds
any amounts not supported, (2) establish procedures to ensure adequate
monitoring of subrecipient-administered activities, and (3) establish
procedures to ensure compliance with CDBG program requirements.
Date Issued: February 12, 2009
Audit Report
No.: 2009-NY-1007
File Size: 1.17MB
Title: The City of Rochester, New York's Management Controls Over
the Asset Control Area Program Needs Improvement To Comply With
All Requirements
We completed an audit of the City of Rochester's (City) asset control
area (ACA) program as part of a nationwide audit of the U.S. Department
of Housing and Urban Development's (HUD) monitoring of ACA participants.
The objective of the audit was to determine whether the City administered
its ACA program in compliance with program requirements to increase
homeownership for low and moderate income borrowers and contribute
to the revitalization of blighted communities.
The City's ACA program generally met the program objectives for
increasing homeownership for low and moderate income borrowers and
contributed to the revitalization of blighted communities, but was
not always administered in compliance with program requirements.
Specifically, the City did not (1) obtain HUD approval for a nonprofit
organization to participate in its ACA program; (2) resell ACA properties
within the required timeframe; (3) sell an ACA property within the
price limit imposed by HUD; (4) obtain HUD's approval for conflict-of-interest
issues; and (5) accurately calculate or report to HUD net development
costs for each ACA property.
We recommended that the Assistant Secretary for Housing-Federal
Housing Commissioner instruct the City to (1) develop procedures
to ensure that any nonprofit hired to administer or participate
in the ACA program is approved by HUD in accordance with ACA policies,
(2) ensure that ACA properties are resold within the established
timeframe, (3) buy down the mortgage for the ACA property that was
resold to the eligible purchaser for $4,700 more than the established
limit, (4) cease participation with individuals or entities that
have conflict-of-interest relationships unless HUD approval can
be obtained, (5) establish procedures to ensure accurate calculation
and reporting of net development costs and compliance with program
requirements, and (6) review the noncompliance issues identified
in the report and make a decision on whether to impose sanctions
in accordance with section 8 of the ACA standard operating procedures.
Dated Issued: January 26, 2009
Audit Report
No.: 2009-NY-1006
File Size: 122.90KB
Title: The City of Rome, New York, Did Not Always Administer Its
Community Development Grant Program in Accordance with HUD Requirements
We completed an audit of the City of Rome, New York's (City) administration
of its Community Development Block Grant (CDBG) program. The objectives
of our audit were to determine whether the City (1) administered
its CDBG program effectively, efficiently, and economically in accordance
with applicable rules and regulations and (2) expended CDBG funds
for eligible activities that met a national objective of the program.
The audit disclosed that the City did not always carry out its
activities effectively, efficiently, and economically in compliance
with HUD regulations. Further, it expended CDBG funds for activities
that did not meet a national objective of the program. Specifically,
the City did not (1) adequately monitor a subrecipient-administered
economic development revolving loan fund activity to ensure that
performance goals were achieved, (2) establish adequate administrative
and management controls to ensure that costs associated with a public
facilities subrecipient and self-administered street improvement
activities were eligible and met a national objective of the CDBG
program, and (3) establish adequate controls to ensure that performance
goals for subrecipient-supported activities were achieved. Consequently,
the City's revolving loan fund activity expended program funds in
an inefficient manner that did not effectively address program objectives,
and ineligible and unsupported costs were expended for the planned
renovation of a building previously owned by a subrecipient and
for the purchase of ornamental streetlights. In addition, no progress
had been made on a subrecipient rehabilitation and preservation
activity, and a national program objective was not met, thus depriving
other worthwhile activities of program resources. As a result, the
revolving loan fund activity was deprived of program income that
could have been used to make additional loans and create more jobs,
and the City's ability to administer its programs efficiently and
effectively and ensure that CDBG program objectives were met was
diminished.
We recommend that HUD instruct the City to (1) reimburse the CDBG
program from nonfederal funds the $140,523 paid for ineligible program
expenditures, (2) provide supporting documentation to justify the
eligibility of $58,036 in questionable CDBG disbursements or reimburse
the program from nonfederal funds any amounts not supported, (3)
establish procedures to ensure adequate monitoring of subrecipient-administered
activities, and (4) comply with CDBG program requirements.
Date Issued: December 8, 2008
Audit Report
No.: 2009-NY-1004
File Size: 1.92KB
Title: the Economic Development Corporation, Newark, New Jersey
Did Not Administer Its Community Development Block Grant Program
in Accordance with HUD Requirements
We completed an audit of the Community Development Block Grant
(CDBG) program administered by the Economic Development Corporation
(Corporation), a subgrantee of Essex County Consortium (the County).
Our audit objectives were to determine whether the Corporation adequately
administered its CDBG program in accordance with applicable rules
and regulations. Specifically, whether it efficiently and effectively
disbursed CDBG funds, had a financial management system in place
to adequately safeguard the funds, and used CDBG funds to meet the
national objectives.
The Corporation did not adequately administer its CDBG program.
Specifically, it did not properly administer economic development
loan programs, did not carry out adequate technical assistance and
site search services, could not support that its activities met
the CDBG national objectives, and lacked evidence to justify its
CDBG administrative expenses. Also, the Corporation did not always
ensure that adequate financial records were maintained for its two
economic development loan programs, program income was properly
accounted for, and adequate budget and cost allocation procedures
were implemented.
We recommended that the Director of HUD's New Jersey Office of
Community Planning and Development instruct the County to require
the Corporation to develop and implement appropriate program plans
and controls to ensure that $662,184 in CDBG funds is used effectively
to make economic development loans, repay $100,000 for the ineligible
loan and $33,000 for the duplicate drawdown, obtain and submit all
supporting documentation showing the appropriateness and eligibility
of more than $1.6 million in administrative expenditures, develop
and implement proper financial controls to safeguard CDBG funds,
and establish adequate procedures to ensure that receipts and expenditures
of program income are properly recorded and reported. We also recommended
that the County discontinue further funding to the Corporation until
HUD determines that it has the capacity to carry out CDBG activities
in compliance with HUD regulations.
Date Issued: December 4, 2008
Audit Report
No.: 2009-NY-1003
File Size: 781.36KB
Title: the Lower Manhattan Development Corporation, New York,
New York, Community Development Block Grant Disaster Recovery Assistance
Funds
The eleventh in our series of ongoing audits of the Lower Manhattan
Development Corporation's (LMDC) administration of the $2.783 billion
in Community Development Block Grant Disaster Recovery Assistance
funds provided to the State of New York following the September
11, 2001, terrorist attacks on the World Trade Center in New York
City concluded that the auditee administered the grant funds we
reviewed in accordance with HUD regulations and continued to maintain
a financial management system that adequately safeguarded funds
and prevented misuse. However, two concerns were raised for HUD's
attention: the auditee (1) charged legal costs to the World Trade
Center Memorial and Cultural program as activity delivery costs
instead of as administrative and planning costs, and (2) had not
corrected draw downs inadvertently charged to the wrong program
budgets in HUD's Line of Credit Control System. As a result, the
auditee has fewer funds than would otherwise be available for the
World Trade Center Memorial and Cultural Program, and HUD's Line
of Credit Control System is reporting incorrect amounts for individual
budget line items.
We recommend that HUD's General Deputy Assistant Secretary for
Community Planning and Development direct the auditee to (1) provide
documentation for the rationale to classify legal costs as direct
program activity delivery costs instead of as administrative and
planning costs so that HUD can make an eligibility determination,
and (2) enhance its procedures to allow for correction of misclassifications
within HUD's Line of Credit Control System as funds are drawn down.
Date Issue November 25, 2008
Audit Report
No.: 2009-NY-1002
File Size: 2.15MB
Title:The New York City Housing Authority, New York, New York,
Had Administrative Weaknesses in Its Capital Fund Program
We performed an audit of the New York City Housing Authority's
(Authority) administration of its capital fund program as part of
the Office of Inspector General's (OIG) strategic plan goals to
improve the U.S. Department of Housing and Urban Development's (HUD)
fiscal accountability. We selected the Authority based on the size
of its capital fund program, more than $2 billion authorized and
more than $1.3 billion expended in fiscal years 2001 through 2006,
and our preliminary analyses of this activity in HUD's Line of Credit
Control System. The audit disclosed that there were weaknesses in
the Authority's controls over the obligation and disbursement of
capital funds. Specifically, the Authority (1) lacked adequate documentation
to support that all funds were obligated within prescribed timeframes,
(2) charged capital funds for routine maintenance costs that should
have been charged to the low-rent housing program, and (3) executed
contracts with timeframes that exceeded those authorized by its
procurement policy. These deficiencies occurred because the Authority
did not have adequate procedures in place to (a) document that all
capital grant funds were properly obligated within prescribed timeframes,
(b) charge routine maintenance to the low-rent housing program,
and (c) ensure that procurement terms complied with regulations.
As a result, the Authority lacked support that $82 million was properly
obligated, improperly charged $590,363 in routine maintenance expenses
to the capital fund program, and executed contracts with terms that
exceeded its policy limitations.
We recommend that the Director of HUD's New York Office of Public
Housing instruct the Authority to (1) provide support that $82 million
in capital funds were obligated within prescribed timeframes, (2)
reimburse $590,363 to the capital fund program from the low-rent
housing program for the routine maintenance costs charged, and (3)
strengthen procurement controls to ensure compliance with its policy.
Date Issue: November 7, 2008
Audit Report
No.: 2009-NY-1001
File Size: 3.16MB
Title: the City of Newburgh, New York, Needs to Make Improvements
in Administering Its Section 108 Loan Guarantee Program
We completed an audit of the City of Newburgh, New York's (City)
administration of its Section 108 Loan Guarantee program. The objectives
of our audit were to determine whether the City ensured that (1)
Section 108 loans and related activities were administered in compliance
with CDBG program objectives and (2) subsequent CDBG funds used
for Section 108 loan repayments were necessary, reasonable, and
in accordance with all applicable contracts, agreements, and federal
regulations.
The audit disclosed that contrary to the loan agreement and regulations,
the City failed to ensure that all Section 108 Loan Guarantee funds
and related project costs pertaining to the Front Street Marina
redevelopment project were proper, necessary, and fully supported.
Specifically, the City (1) failed to enforce loan agreement provisions
and adequately pursue loan collateral to satisfy the debt, (2) did
not ensure that all funding sources were supported and documented,
(3) unnecessarily used CDBG funds to repay the loan and deprived
its activity from receiving program income, and (4) overpaid the
developer for duplicate costs. Consequently, the City's CDBG program
was deprived of funds that could have been used for other activities,
and Economic Development Initiative (EDI) funds were improperly
expended.
In addition, the City did not achieve the primary objective of
job creation for the industrial park project, loan proceeds remained
unused in a bank account for more than seven years, possible collateral
or program income for loan repayment was not pursued, and the City
did not ensure that the industrial site was feasible for commercial
development and job creation. As a result, the failure of the industrial
park project had and will continue to have a large negative impact
on the City's CDBG program, as CDBG funds were used to repay the
Section 108 debt and additional CDBG funds were scheduled to retire
the debt. Thus, the CDBG program will be hindered from effectively
using future CDBG funds to provide maximum benefit to low- and moderate-income
residents.
We recommend that HUD instruct the City to (1) enforce the loan
provisions on the marina redevelopment project within 90 days or
reimburse the CDBG program from nonfederal funds the $449,817 used
for debt repayment, (2) take appropriate actions against the marina
developer and ensure that nonfederal funds are used to repay the
remaining $1.3 million in future loan obligations, (3) reimburse
the EDI program from nonfederal funds the $144,341 paid for ineligible
duplicate costs, (4) establish a plan for the industrial park site
within 90 days or reimburse the CDBG program from nonfederal funds
the approximate $1.8 million used for debt repayment, and (5) reprogram
the approximate $1.7 million in CDBG funds currently scheduled to
be used for future repayments of the industrial park project loan.
Date Issued: November 6, 2008
Audit Report
No.: 2009-NY-0801
File Size: 492.88KB
Title: Deconstruction Activity Costs under the World Trade Center
Memorial and Cultural Program are Impacting Other Approved Programs
As part of the tenth of our ongoing audits of the Lower Manhattan
Development Corporation's (LMDC) administration of Community Development
Block Grant Disaster Recovery Assistance funds, we reviewed the
nature of costs incurred under the activity entitled "World Trade
Center Memorial and Cultural" program related to the deconstruction
of the Deutsche Bank building in New York City. The review raised
concern about funding of the deconstruction activity; specifically,
that escalating costs since July 2007 have resulted in LMDC reallocating
$67.5 million of HUD funds from other previously approved activities
and LMDC officials maintained that, as of September 30, 2007, it
had disbursed $27.1 million more than its share of applicable costs.
In addition, other costs which LMDC had paid may qualify for cost
sharing. As a result, other programs previously approved by HUD
have been impacted, and more HUD funds than may have been necessary
were used to pay for deconstruction activity.
We recommend that HUD's assistant secretary for community planning
and development instruct LMDC to (1) provide an updated accounting
of deconstruction costs, both aggregate and non-aggregate, and an
estimate of anticipated additional expenditures in each of these
categories so that HUD may assess the extent to which additional
funds may need to be reprogrammed for deconstruction activity, (2)
periodically provide HUD a report on the status of efforts to resolve
the escrow account underfunding, and (3) provide documentation to
support why funds disbursed for the initial building characterization
study and air monitoring should not be classified as aggregate deconstruction
costs. In addition, we recommend that the assistant secretary for
community planning and development closely monitor the remaining
disbursement of HUD funds under this activity.
Date Issued: August 26, 2008
Audit Report
No.: 2008-NY-1010
File Size: 911 KB
Title: Wells Fargo Bank NA, Rochester, New York, Branch Office,
Did Not Always Comply with HUD/FHA Loan Origination Requirements
We completed an audit of Wells Fargo Bank NA, Rochester, New York,
Branch Office (Wells Fargo), a national bank and supervised lender.
The audit objectives were to determine whether Wells Fargo (1) approved
insured loans in accordance with U.S. Department of Housing and
Urban Development (HUD)/Federal Housing Administration (FHA) requirements,
which include following prudent lending practices, and (2) developed
and implemented a quality control plan that complied with HUD requirements.
The audit disclosed that Wells Fargo did not always comply with
HUD underwriting requirements. Consequently, 16 of the 20 loans
reviewed exhibited significant underwriting deficiencies such as
minimum cash investment not met, inaccurate calculation of income,
inadequate verification of debt, inadequate review of appraisals,
and over insured loans. In addition, 8 of the 16 loans contained
origination deficiencies, such as inadequate gift fund verification,
inadequate assets available to close, questionable clear title to
the property, ineligible prior mortgage late payments, inadequate
compensating factors, and various borrower credit issues. These
deficiencies occurred because Wells Fargo lacked adequate controls
to ensure that loans were processed in accordance with HUD requirements.
As a result, mortgage loans were approved for potentially ineligible
borrowers, causing the HUD/FHA insurance fund to assume an unnecessary
insurance risk. Wells Fargo also failed to ensure that its quality
control plan was properly implemented in accordance with HUD and
its own quality control requirements. Consequently, the effectiveness
of its quality plan, which was designed to ensure accuracy, validity,
and completeness in its loan underwriting process, was lessened.
We recommend that the Assistant Secretary for Housing – Federal
Housing Commissioner require Wells Fargo to reimburse HUD for the
loss incurred on one loan with significant underwriting deficiencies,
indemnify HUD against future losses on 15 active loans with significant
underwriting deficiencies, establish procedures to ensure that HUD
underwriting requirements are properly implemented and documented,
and implement procedures to ensure compliance with HUD and its own
quality control requirements.
Issue Date: June 19, 2008
Audit Report
No.: 2008-NY-1008
File Size: 642.08KB
Title: Tuckahoe Housing Authority, Low-Rent Housing and Nonprofit
Entity Activities, Tuckahoe, New York
We audited the Tuckahoe Housing Authority (Authority) to assess
the merits of a complaint and determine whether the Authority administered
its low-rent housing program and nonprofit entity activities in
accordance with the annual contributions contract and other U.S.
Department of Housing and Urban Development (HUD) regulations. The
audit disclosed that the Authority did not adequately administer
its low-rent program and nonprofit entity activities in accordance
with regulations as a result of weaknesses in financial and management
controls. These conditions occurred because Authority staff was
unfamiliar with HUD regulations. As a result, the Authority incurred
ineligible costs of $64,314 and unsupported and unnecessary costs
of $198,243. In addition, the Authority's nonprofit entity encountered
delays in the construction of a planned senior citizen complex on
land approved for disposal by HUD in 1999 for that purpose, and
now expects to break ground by November 2008.
We recommend that the HUD Director, Office of Public Housing, New
York City field office, instruct the Authority to reimburse ineligible
expenses of $64,314, provide documentation to substantiate unsupported
costs of $182,547, and provide justification for unnecessary costs
of $15,696 so that HUD can determine the reasonableness or necessity
of the costs. We also made recommendations to strengthen financial
and operational controls to better ensure compliance with HUD regulations
and policy.
Issue Date: May 21, 2008
Audit Report
No.: 2008-NY-1006
File Size: 1.32MB
Title: The City of Troy, New York, Did Not Always Administer Its
Community Development Block Grant Program in Accordance with HUD
Requirements
We completed an audit of the operations of the City of Troy, New
York (the City), pertaining to its administration of its Community
Development Block Grant (CDBG) program. The objective of our audit
was to determine whether the City administered its CDBG program
in an effective and efficient manner in compliance with applicable
HUD rules and regulations.
The audit disclosed that the City generally complied with HUD program
requirements when administering its overall CDBG program; however,
for certain areas, it did not always carry out its activities in
an efficient and effective manner and comply with HUD regulations.
Specifically, the City did not establish adequate 1) procedures
to ensure that its housing rehabilitation program was administered
in accordance with program regulations; 2) procedures to ensure
that costs for its street improvement activities were allowable
and supported by adequate documentation; 3) administrative controls
to ensure that costs associated with its public facilities activities
were eligible, necessary, and supported by sufficient documentation;
and 4) controls to ensure that program labor costs were adequately
supported and that costs incurred were current and accurately recorded.
As a result, the City's ability to administer its programs efficiently
and effectively and ensure that CDBG program objectives were met
was diminished.
We recommend that HUD instruct the City to (1) reimburse the CDBG
program from nonfederal funds the $186,088 paid for ineligible program
expenditures, (2) provide supporting documentation to justify the
eligibility of more than $1.2 million in CDBG disbursements or reimburse
the program from nonfederal funds any amounts not supported, and
(3) establish adequate procedures to ensure compliance with CDBG
program requirements.
Issue Date: March 31, 2008
Audit Report
No.: 2008-NY-1004
File Size: 269.07KB
Title: Lower Manhattan Development Corporation, Community Development
Block Grant, Disaster Recovery Assistance Funds, New York, New York
This is the tenth report in our ongoing audits of the Lower Manhattan
Development Corporation's (the auditee) administration of the Community
Development Block Grant Disaster Recovery Assistance funds provided
to the State of New York. During our audit period, April 1, 2007,
through September 30, 2007, the auditee disbursed approximately
$132.7 million of the $2.783 billion funds appropriated. The objectives
of this audit were to determine whether the auditee (1) disbursed
Disaster Recovery Assistance funds in accordance with the guidelines
established under U.S. Department of Housing and Urban Development
(HUD)-approved partial action plans, (2) expended Disaster Recovery
Assistance funds for eligible administration and planning expenses
in accordance with applicable laws and regulations, and (3) had
a financial management system in place that adequately safeguarded
funds and prevented misuse.
The auditee generally disbursed the $132.7 million in Disaster
Recovery Assistance funds in accordance with HUD-approved action
plans, expended funds for eligible administration and planning expenses
in accordance with applicable laws and regulations, and maintained
a financial management system that adequately safeguarded funds
and prevented misuse. However, an internal control weakness existed
in the management of grant repayments in the Employment Training
Assistance Program. The subrecipient that administered the program
credited 10 grant recipient repayments to the wrong HUD grant and
did not return recovered funds to HUD's Line of Credit Control System
in a timely manner. We recommend that HUD's General Deputy Assistant
Secretary for Community Planning and Development require the auditee
to strengthen controls to ensure that future grant repayments to
the Employment Training and Assistance Program are properly recorded
and credited to the correct HUD grant.
Issue Date: January 23, 2008
Audit Report
No.: 2008-NY-1003
File Size: 504.66KB
Title: The City of New York's Department Housing Preservation
and Development, New York, New York, Had Administrative Weaknesses
in Its HOME Program
We completed an audit of the City of New York's Department of Housing
Preservation and Development (the City), New York, New York to evaluate
its administration of the HOME Investment Partnerships Program (HOME).
The audit objectives were to determine whether the City (1) properly
committed and disbursed HOME funds; (2) adequately monitored its
community housing development organizations, projects, and contractors;
and (3) correctly reported its match contributions.
The audit disclosed that the City generally committed and disbursed
HOME funds in accordance with HOME regulations; however, there were
weaknesses in its monitoring procedures. As a result of these weaknesses,
the City lacked assurance that its community housing development
organizations were properly organized and operated effectively,
data in HUD's Integrated Disbursement and Information System accurately
reflected the status of its HOME funds, and HOME-funded projects
being monitored met the statutory HOME eligibility requirements
throughout the affordability periods. In addition, while the City
met its HOME match requirements and reported a substantial balance
of match contributions made in excess of the required amounts, erroneous
calculations of the match contributions resulted in $34.1 million
of ineligible match carried forward as a balance for use in future
years.
We recommend that the Director of HUD's New York Office of Community
Planning and Development require the City to (1) implement procedures
to recertify its community housing development organizations and
evaluate their performance, (2) enter information into HUD's Integrated
Disbursement and Information System to reflect the current status
of seven old projects that have not been closed out, (3) implement
procedures to ensure that all completed projects are monitored for
the specified affordability period, (4) remove $34.1 million in
ineligible match from its 2007 HOME Match Report, and (5) establish
procedures to accurately report the value of match contributions
for each of its programs.
Issue Date: December 5, 2007
Audit Report
No.: 2008-NY-1002
File Size: 1.12MB
Title: Richard A. Hutchens Associates, Management Agent, Buffalo,
New York, Used Project Funds for Ineligible and/or Unsupported Cost
We completed an audit of Richard A. Hutchens and Associates (agent)
pertaining to its management of the financial operations of Cayuga
Village and Touraine Apartments. The objectives of our audit were
to determine whether the agent used project funds in accordance
with the regulatory agreement and HUD requirements. Specifically,
to determine whether the agent (1) provided adequate documentation
to support the reasonableness of payments made to an identity-of-interest
company, (2) made loans and withdrawals of residual receipts that
were authorized, and (3) disbursed project funds for expenditures
that were reasonable and necessary.
The audit disclosed that the agent did not use project funds in
accordance with its regulatory agreement and HUD requirements. The
agent did not solicit competitive bids or maintain adequate documentation
to support $987,697 in repair and maintenance costs paid to an identity-of-interest
company. Further, the agent made $505,342 in unauthorized loans
and withdrawals of residual receipts. In addition, the agent improperly
disbursed $142,785 in project operating funds to pay expenses that
were questionable and did not make a required $7,902 payment to
the residual receipts account or make a required equity payment
in a timely manner.
We recommend that HUD instruct the owner and agent to develop procedures
to ensure compliance with all terms of its regulatory agreement.
Further, we recommend that HUD require the owner and agent to 1)
reimburse the projects for the ineligible costs associated with
unauthorized loans and withdrawals from residual receipts, an improper
salary advance, and excessive fees; and 2) submit supporting documentation
to justify all unsupported costs, so that HUD can make an eligibility
determination, and reimburse the projects from nonproject funds
all amounts determined to be ineligible.
Issue Date: November 8, 2007
Audit Report
No.: 2008-NY-1001
File Size: 352.19KB
Title:The City of New Rochelle, New Rochelle, New York Had Administrative
Control Weaknesses in Its HOME Program
We completed an audit of the City of New Rochelle, located in New
Rochelle, New York, in order to evaluate its administration of the
HOME Investment Partnerships Program (HOME). The objectives of the
audit were to determine whether the City of New Rochelle (1) committed
and expended HOME funds in accordance with HUD rules and regulations,
(2) disbursed funds for only eligible activities, and (3) used funds
for eligible administrative and planning costs. The review generally
covered the period between January 1, 2004 and December 31, 2006.
The audit disclosed that the City of New Rochelle generally committed
and disbursed HOME funds in accordance with HOME regulations; however,
there were weaknesses in its administrative controls. These weaknesses
resulted in unsupported costs of $12,000, inadequate monitoring
of the City of New Rochelle's community housing development organization,
delays in closing out activities in HUD's Integrated Disbursement
and Information System, and uncertainty about the number of HOME
units to be included in the City of New Rochelle's senior rental
housing. Consequently, the City of New Rochelle lacked assurance
that all funds expended were adequately supported, its community
housing development organization functioned effectively, and the
senior rental housing project would comply with HOME requirements.
We recommend that the director of the New York City Office of Community
Planning and Development instruct the City of New Rochelle to: (1)
submit supporting documentation for the $12,000 in unsupported disbursements
or repay the amount from nonfederal funds, (2) strengthen controls
over its community housing development organization monitoring and
procedures to close out activities in HUD's Integrated Disbursement
and Information System, and (3) clarify the number of HOME units
to be included in its senior rental housing development.
Archived Audit Reports
Audit Reports issued between 1995 and September 30, 2007 are available
on our Archives
website.
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