Title: The City of Cincinnati, Ohio Lacked Adequate Controls over Its HOME Investment Partnerships Program

The U.S. Department of Housing and Urban Development's (HUD)audited the City of Cincinnati's (City) HOME Investment Partnerships Program (Program). The audit was part of the activities in our fiscal year 2007 annual audit plan. We selected the City based upon a request from Columbus Office of Community Planning and Development and our analysis of risk factors relating to Program grantees in Region V's jurisdiction. Our audit objectives were to determine whether the City effectively administered its Program and followed HUD's requirements. This is the first of two audit reports on the City's Program.

The City did not effectively administer its Program and violated HUD's requirements. It did not comply with HUD's regulations in providing housing rehabilitation assistance for owner-occupied single-family rehabilitation projects (projects) and/or downpayments, closing costs, homebuyer counseling, and home inspections for American Dream Downpayment Initiative (Initiative) activities. It inappropriately provided more than $225,000 in Program funds to assist three projects that either did not qualify as affordable housing or in which the household was not income eligible, inappropriately provided $41,000 in Initiative funds to assist five households in which they were not income eligible, and was unable to support its use of nearly $1.4 million in Program and Initiative funds for projects and activities.

We recommend that the Director of HUD's Columbus Office of Community Planning and Development require the City to reimburse its Program and Initiative from nonfederal funds for the improper use of funds, provide support or reimburse its Program and Initiative from nonfederal funds for the unsupported payments, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that more than $134,000 in Program and Initiative funds is appropriately used over the next year.

Issue Date: September 20, 2007
Audit Report No.: 2007-CH-1013
File Size: 188.26KB

Title: The Butler Metropolitan Housing Authority, Hamilton, Ohio, Lacked Adequate Controls over Its Homeownership Proceeds

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Butler Metropolitan Housing Authority's (Authority) 5(h) homeownership (5(h)) and its Turnkey III Homeownership Opportunity (Turnkey III) programs (programs). We selected the Authority based on a risk analysis showing that it may have improperly used the programs' funds. Our objectives were to determine whether the Authority properly accounted for and used its programs' proceeds in accordance with HUD requirements.

The Authority failed to properly account for nearly $400,000 of the programs' proceeds for more than five years because it commingled the proceeds with funds in its retained earnings account. The $400,000 consisted of more than $166,000 in 5(h) sales proceeds from four properties sold between May 1997 and October 1998 and nearly $232,000 in Turnkey III proceeds. It also did not use the 5(h) proceeds in a timely manner. As a result, the programs' proceeds were not used to assist low- and moderate-income families.

We informed the Authority's executive director, the director of HUD's Cleveland Office of Public Housing, and the director of HUD's Columbus Office of Fair Housing and Equal Opportunity of minor deficiencies through a memorandum, dated September 18, 2007.

We recommend that the director of HUD's Cleveland Office of Public Housing require the Authority to transfer from its retained earnings account to the applicable accounts the 5(h) and Turnkey III proceeds plus earned interest, submit a proposal(s) for HUD's approval on how the programs' proceeds will be used, and implement procedures and controls to ensure that the proceeds are used to support the development of affordable housing for low- and moderate-income families in accordance with HUD's requirements.

Issue Date: June 19, 2007
Audit Report No.: 2007-CH-1008
File Size: 667.28KB

Title: The Dayton Metropolitan Housing Authority, Dayton, Ohio, Did Not Effectively Operate Its Section 8 Housing Choice Voucher Program

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Dayton Metropolitan Housing Authority's (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2006 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region V's jurisdiction. Our objective was to determine whether the Authority administered its program in accordance with HUD's requirements.

The Authority's program administration regarding housing unit conditions, abatement of units that did not meet housing quality standards, housing assistance payments calculations, and adequate documentation to support the calculation of households' housing assistance payments was inadequate. Of the 59 housing units statistically selected for inspection, all 59 did not meet HUD's housing quality standards, and 56 had 214 violations that existed at the time of the Authority's previous inspections. The 56 units had between 1 and 11 preexisting violations per unit. Based on our statistical sample, we estimate that over the next year, HUD will pay nearly $1.8 million in housing assistance payments for units with housing quality standards violations.

Program rents were not abated for units that failed the Authority's quality control inspections. Five units that failed quality control inspections performed in December 2006 also failed quality control reinspections in January or February 2007. However, the Authority failed to abate the program rents for the five units, resulting in an improper payment of nearly $3,900 in housing assistance and administrative fees.

The Authority incorrectly calculated households' payments, resulting in nearly $39,000 in overpayments and more than $1,500 in underpayments for the period January 2005 through August 2006. Based on our statistical sample, we estimate that over the next year, the Authority will overpay more than $1 million in housing assistance and utility allowance payments. The Authority did not ensure that its households' files contained required documentation to support its housing assistance and utility allowance payments. Of the 67 files statistically selected for review, 37 did not contain documentation required by HUD and the Authority's program administrative plan to support more than $254,000 in housing assistance and utility allowance payments.

We informed the Authority's executive director and the director of HUD's Cleveland Office of Public Housing of minor deficiencies through a memorandum, dated June 7, 2007.

We recommend that the director of HUD's Cleveland Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $63,000 in program funds, provide documentation or reimburse its program more than $282,000 from nonfederal funds for the unsupported housing assistance payments and administrative fees, and implement adequate procedures and controls to address the findings cited in this audit report to prevent more than $2.8 million from being spent on units with material housing quality standards violations and excessive housing assistance.

Issue Date: April 30, 2007
Audit Report No.: 2007-CH-1007
File Size: 121.45KB

Title: Trumbull Metropolitan Housing Authority, Warren, Ohio, Did Not Ensure Its Nonprofit Followed HUD 's Section 8 Housing Requirements

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Trumbull Metropolitan Housing Authority's (Authority) activities with its related nonprofit organizations. The review of housing authorities' development activities is set forth in our fiscal year 2006 annual audit plan. We selected the Authority for audit because it was identified as having high-risk indicators of nonprofit development activity. Our objective was to determine whether the Authority's nonprofit received Section 8 housing assistance payments in accordance with HUD's requirements.

The Warren Housing Development Corporation (Corporation), a nonprofit entity created by the Authority, received more than $2.2 million in housing assistance payments from July 1, 2005, through February 28, 2007, contrary to HUD's requirements. The Corporation was created in May 1977 as a nonprofit instrumentality of the Authority. However, the Corporation revised its articles of incorporation in June 2005 and was no longer an instrumentality of the Authority. According to HUD's regulations at 24 CFR [Code of Federal Regulation] Part 880, the project must be owned by a public housing agency (instrumentality) throughout the term of the housing assistance payments contract. The Authority revised the Corporation's articles of incorporation on March 13, 2007, to reinstate the Corporation as an instrumentality of the Authority.

We recommend that the acting director of HUD's Columbus Office of Multifamily Housing require the Authority to implement procedures and controls to ensure that it follows HUD's requirements regarding Section 8 housing assistance payments to its instrumentality.

Issue Date: March 26, 2007
Audit Report No.: 2007-CH-1006
File Size: 3251KB

Title: Colony Mortgage Corporation, Supervised Lender, Fairview Park, Ohio, Did Not Always Comply with HUD's Requirements Regarding Underwriting of Loans and Quality Control Reviews

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited Colony Mortgage Corporation (Colony), a supervised lender approved to originate, underwrite, and submit insurance endorsement requests under HUD's single-family direct endorsement program. The audit was part of the activities in our fiscal year 2006 annual audit plan. We selected Colony for audit because of its high default-to-claim rate. Our objectives were to determine whether (1) Colony complied with HUD's regulations, procedures, and instructions in the underwriting Federal Housing Administration-insured loans and (2) Colony's quality control plan, as implemented, met HUD's requirements.

Colony approved 9 of 22 Federal Housing Administration loans reviewed that did not meet HUD's requirements. The nine loans went to claim between October 1, 2003, and September 30, 2005. Further, Colony incorrectly certified to the integrity of the data supporting the underwriting deficiencies or to the due diligence used in underwriting the nine loans. During the audit period, Colony's quality control plan did not fully comply with HUD's requirements, and its quality control reviews were not adequately performed. Its deficient quality control may have contributed to the underwriting deficiencies. For the loans in question, the risk to the Federal Housing Administration fund was increased.

We recommend that HUD's assistant secretary for housing-federal housing commissioner require Colony to reimburse HUD for any future net loss once the associated properties are sold, reimburse HUD nearly $199,000 for the loss incurred on four loans already sold and for one over-insured loan, improve its existing procedures and controls to ensure that its underwriters follow HUD's underwriting requirements, implement its revised quality control plan, and ensure that quality control reviews are performed in accordance with its revised plan. These procedures and controls should help ensure that more than $141,000 in Federal Housing Administration funds is protected from loss or misuse.

We also 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 against Colony and/or its principals for the nine incorrect certifications cited in this audit report.

Issue Date: March 15, 2007
Audit Report No.: 2007-CH-1004
File Size: 428KB

Title: The Columbus Metropolitan Housing Authority, Columbus, Ohio, Failed to Adequately Operate Its Section 8 Housing Choice Voucher Program

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the Columbus Metropolitan Housing Authority's (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2006 annual audit plan. We selected the Authority based upon our analysis of risk factors relating to the housing agencies in Region Vs jurisdiction. Our objective was to determine whether the Authority operated its program in accordance with HUD's requirements. This is the second of two audit reports on the Authority's program.

The Authority administered its Section 8 Project-Based Voucher program contrary to HUD's requirements. It did not perform environmental reviews, rent reasonableness determinations, and housing quality standard inspections in accordance with HUD requirements before executing housing assistance payments contracts. It paid housing assistance for units not under housing assistance payments contracts, underpaid housing assistance for program households, issued duplicate housing assistance payments for three units, and did not use the proper HUD form to execute housing assistance payments contracts.

The Authority did not administer its Family Self-Sufficiency program correctly and paid more than $431,000 in escrow payments to households contrary to federal requirements. It failed to complete required forms, include individual training and service plans in the contract of participation, ensure that participants sought and maintained suitable employment, ensure that participants identified and met interim goals, ensure that participants met interim goals before being issued early escrow payments, offer supportive services, and require participants to meet regularly to ensure that they met interim goals and final goals and properly changed goals.

The Authority did not comply with HUD's requirements and its own program administrative plan. It failed to remove from its program households that did not receive housing assistance payments for 180 days or more and made payments after households should have been terminated. It did not follow its plan regarding households with zero income, which requires the Authority to reverify zero-income households every 180 days. It also did not follow HUD's requirements concerning special admissions, waiting list reinstatements, third-party verifications, and other excluded sources of annual income and stated that it would pay owners a household's portion of unpaid rent.

We recommend that the director of HUD's Cleveland Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of funds, reimburse its Family Self-Sufficiency program from nonfederal funds for its improper use of contract and program funds, provide support or reimburse its program from nonfederal funds for the unsupported housing assistance payments, and implement adequate procedures and controls to address the findings cited in this audit report.

Title: Lucas Metropolitan Housing Authority, Toledo, Ohio, Did Not Effectively Operate Its Section 8 Housing Choice Voucher Program

Title: Pickaway Metropolitan Housing Authority, Circleville, Ohio, Improperly Used Homeownership Sales Proceeds to Fund Its Nonprofit Development Activities

Title: The Columbus Metropolitan Housing Authority, Columbus, Ohio, Did Not Effectively Operate Its Section 8 Housing Program

Title: The Youngstown Metropolitan Housing Authority in Youngstown, Ohio, Did Not Use Public Housing Operating Funds Effectively and Efficiently

Title: Huntington National Bank, Supervised Lender; Columbus, Ohio; Generally Complied with Requirements Regarding Submission of Late Requests for Endorsement and Underwriting of Loans

In addition, 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 against Huntington and/or its principals for incorrectly certifying that all payments due were made by the borrowers before or within the month due for 12 loans, the escrow account for taxes, hazard insurance, and mortgage insurance premiums was current for one loan submitted for Federal Housing Administration insurance endorsement when the escrow account was not current, and due diligence was used in underwriting five loans when it was not.

Issue Date: December 30, 2005
Audit Report No.: 2006-CH-1005
File Size: 761KB

Title: Fairfield Metropolitan Housing Authority; Lancaster, Ohio

We recommend that the director of HUD's Cleveland Public Housing Hub and/or the director of HUD's Columbus Office of Community Planning and Development require the Authority to (1) reimburse its HOPE 1 and 5(h) Homeownership Plan programs collectively more than $520,000 from nonfederal funds for the improper transfer of the sales proceeds to its Corporation, (2) reimburse HUD more than $23,000 from nonfederal funds for the McKinney grant funds used to rehabilitate the one property, and (3) implement procedures and controls to correct the weaknesses cited in this report.

Issue Date: November 17, 2005
Audit Report No.: 2006-CH-1002
File Size: 250.39KB

Title: The General Partner of The Sanctuary of Geneva, Ohio Improperly Used More Than $43,000 in Project Funds

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General reviewed the books and records of The Sanctuary (project), a 39-bed assisted living facility located in Geneva, Ohio. The review was part of our efforts to combat multifamily equity skimming on HUD's Federal Housing Administration insurance fund. We chose the project based upon its negative surplus-cash position since 2002 and indicators of diverted project funds or assets. Our objective was to determine whether the owner/management agent used project funds in compliance with the regulatory agreement and HUD's requirements.

Eld-Terra, Incorporated (general partner), the managing general partner of The Sanctuary of Geneva Limited Partnership (owner), improperly used $38,009 in project funds from February 2003 through January 2005 when the project was in a non-surplus-cash position. The inappropriate disbursements included $37,000 to the general partner to repay owner advances to the project and $1,009 in legal services for the general partner. The general partner also lacked documentation to support that an additional $5,475 in project funds was properly used. We provided the general partner a schedule of the improper disbursements.

We recommend that the director of HUD's Columbus Multifamily Housing Hub require the general partner to (1) reduce the project's management fee liability for the inappropriate payments, (2) provide documentation to support the unsupported payments or reduce the project's management fee liability for the appropriate amount, and (3) implement procedures and controls to ensure that future repayments of owner advances are made only from project surplus cash or with prior HUD approval and project funds are used according to HUD's requirements.

Issue Date: September 28, 2005
Audit Report No.: 2005-CH-1018
File Size: 251.78KB

Title: HUD 's Interest in $1 Million in Economic Development Initiative - Special Purpose Grant Funds Awarded to Mount Union College Was Not Secured; Alliance, Ohio

The U.S. Department of Housing and Urban Development's Office of Inspector General audited Mount Union College's (College) Economic Development Initiative - Special Purpose Grant (Grant). We initiated the audit in conjunction with our internal review of the U.S. Department of Housing and Urban Development's (HUD) oversight of Economic Development Initiative – Special Purpose Grants. The review is part of our fiscal year 2005 annual audit plan. We chose the College's Grant based upon a statistical sample of fiscal years 2002 and 2003 Economic Development Initiative – Special Purpose Grants, in which 90 percent or more in funds were disbursed. Our objectives were to determine whether the College used its Grant funds in accordance with HUD's requirements and recorded HUD's interest on the assisted property.

The College used the Grant funds in accordance with HUD's requirements. The College used $1 million in Grant funds to pay for architectural fees for the construction of Bracy Hall, a science facility. However, the College did not place a covenant on the property title for Bracy Hall assuring nondiscrimination based on race, color, national origin, or handicap. Further, HUD did not request the College to record HUD's interest on the property title for Bracy Hall.

We recommend that HUD's director of congressional grants require the College to record a covenant on the title assuring nondiscrimination based on race, color, national origin, or handicap and record a lien on the property title for Bracy Hall showing HUD's interest in the assisted property. If the covenant and lien are not recorded, the College should reimburse HUD $1 million from nonfederal funds for the Grant funds used to pay for Bracy Hall's architectural fees.

Issue Date: September 15, 2005
Audit Report No.: 2005-AT-1014
File Size: 347.94KB

Title: National City Mortgage Company, Miamisburg, Ohio

We audited loans National City Mortgage Company (National City) underwrote at the Altamonte Springs, Florida, and Alpharetta, Georgia, branch offices for seven loan correspondents that originated loans for properties located in central and northern Florida. National City is a nonsupervised direct endorsement lender with headquarters located in Miamisburg, Ohio. We selected the two branch offices and the seven loan correspondents because their default rates were significantly higher than the Florida average.

National City did not follow HUD requirements when underwriting 9 of the 19 Federal Housing Administration-insured loans reviewed for compliance. The loans contained deficiencies that affected the credit quality (insurability) of the loans. The loan underwriting deficiencies occurred because National City's underwriters did not adequately evaluate information presented by its loan correspondents for compliance with requirements before approving the loans. The underwriters also allowed questionable information to be entered into the systems used for automated underwritten loans. As a result, HUD insured nine loans that placed the Federal Housing Administration insurance fund at risk for $326,132 in questioned costs and $153,674 in funds to be put to better use.

We recommend that the assistant secretary for housing-federal housing commissioner take appropriate administrative action against National City. This action should, at a minimum, include requiring indemnification of $153,674 for two defaulted loans, $159,690 for claims paid on two loans, and reimbursement of $166,442 for losses incurred for five loans.

Issue Date: August 23, 2005
Audit Report No.: 2005-CH-1015
File Size: 929.29KB

Title: National City Mortgage Company, Non-Supervised Lender; Miamisburg, Ohio

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited National City Mortgage Company (National City), a nonsupervised lender approved to originate, underwrite, and submit insurance endorsement requests under HUD's single family direct endorsement program. The audit was part of the activities in our fiscal year 2005 annual audit plan. We selected National City for audit because of its high late endorsement rate. Our objective was to determine whether National City complied with HUD's regulations, procedures, and instructions in the submission of insurance endorsement requests.

National City did not always comply with HUD's requirements on late requests for insurance endorsement. National City submitted 2,071 late requests for endorsement out of 68,730 loans tested. The loans were either delinquent or otherwise did not meet HUD's requirements of six monthly consecutive timely payments subsequent to delinquency, but before submission to HUD. National City also incorrectly certified that both the mortgage and escrow accounts for 133 loans, and the escrow accounts for taxes, hazard insurance premiums, and mortgage insurance premiums for 497 loans were current when they were not. National City lacked adequate procedures and controls to ensure that it followed HUD's requirements regarding late requests for insurance endorsement. These improperly submitted loans increased the risk to the Federal Housing Administration insurance fund.

We recommend that HUD's assistant secretary for housing-federal housing commissioner require National City to indemnify HUD for any future losses on 529 loans with a total mortgage value of more than $63.5 million and take other appropriate administrative actions up to and including civil money penalties, and reimburse HUD more than $2.3 million for the actual losses it incurred on 57 loans since the properties associated with these loans were sold and for any future losses from nearly $3.2 million in claims paid on 45 insured loans with a total mortgage value of nearly $5 million once the associated properties are sold. We also recommend that HUD's assistant secretary for housing-federal housing commissioner take appropriate administrative action against National City for violating the requirements in effect at the time when it submitted 804 loans with a total mortgage value of more than $99.6 million without the proper six-month payment histories.

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 against National City and/or its principals for incorrectly certifying that the mortgage and/or the escrow accounts for taxes, hazard insurance premiums, and mortgage insurance premiums were current for 630 loans submitted for Federal Housing Administration insurance endorsement when the mortgage and/or escrow accounts were not current at submission.

Issue Date: May 31, 2005
Audit Report No. 2005-CH-1011
File Size: 833.53KB

Title: Stark Metropolitan Housing Authority; Canton, Ohio; The Authority Used Annual Contributions Contract Funds for Development Activities Outside Its Annual Contributions Contract

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General completed an audit of the Stark Metropolitan Housing Authority's (Authority) activities with its related nonprofit organizations. The review of housing authorities' development activities is set forth in our fiscal year 2005 annual audit plan. We selected the Authority for audit because it was identified as having high-risk indicators of nonprofit development activity. Our objectives were to determine whether the Authority: used annual contributions contract funds for non-annual contributions contract activities; accounted for the source and use of funds as required by its annual contributions contract with HUD; and encumbered HUD funds for the benefit of non-HUD development activity without specific HUD approval.

The Authority received more than $459,000 of HOME funds from Stark County between August 2001 and September 2002 to develop five low-income housing units. Two of the five units were for the Ruthe and Isadore Freed Housing Corporation (Freed), the Authority's nonprofit affiliate entity. The Authority administered these funds and deposited them into its general fund. The general fund is a pool of funds that consists mainly of federal operating subsidies for the Authority. However, the general fund also included proceeds from the sale of low-income homes. The Authority expended more than $696,000 from its general fund for the development of low-income housing units; however, the Authority could not provide documentation to support whether HUD operating subsidies or nonfederal funds in its general fund was expended.

Freed transferred more than $528,000 to the Authority, who deposited the funds into its general fund. The Authority has not demonstrated that these funds were reimbursed to its low-income housing program. The transfers made to Freed were in excess of the amount Freed had on deposit in the Authority's general fund for the period between December 2000 and March 2005.

Freed lacked the funds to transfer more than $168,000 to the Authority as of March 2005. The Authority also executed two loan agreements for the purchase of properties that encumbered $278,000 of its general fund, including low-income housing operating subsidies, without HUD approval. The agreements included provisions that allowed the lender to withdraw the funds on deposit if the loan payments were not made. In April 2004, the Authority secured $184,000 of the loan agreements with nonfederal funds.

We recommend that HUD's Director of Public Housing Hub, Cleveland Field Office, requires the Authority to (1) collect the more than $168,000 that Freed owes the Authority and reimburse its low-income housing reserve account, or reimburse its low-income housing reserve account from nonfederal funds if Freed cannot repay the Authority, (2) provide adequate documentation to support that the repayment of more than $528,000 from Freed Corporation was from nonfederal funds, or reimburse its low-income housing reserve account from nonfederal funds if adequate documentation is not provided, (3) provide adequate documentation to support that the encumbrance for $94,000 was removed and secured with nonfederal funds, and (4) implement procedures and controls to correct the weaknesses cited in this report. The procedures and controls should help ensure that more than $167,000 in future HUD funding received by the Authority will be appropriately used.

Issue Date: October 27, 2004
Audit Report No.: 2005-CH-1001
File Size: 348.9KB

Title: Prestige Mortgage Group, Inc.,
Non-Supervised Loan Correspondent, Springfield, OH

HUD's Office of Inspector General audited Prestige Mortgage Group, Inc. (Prestige), a non-supervised loan correspondent approved to originate FHA mortgage loans under HUD's Single Family Direct Endorsement Program. The audit was part of the activities in our fiscal year 2004 Annual Audit Plan. We selected Prestige for audit because of its high loan default rate. Our audit objectives were to determine whether Prestige (1) complied with HUD's regulations, procedures, and instructions in the origination of FHA-insured single-family mortgages and (2) implemented a quality control plan according to HUD's requirements.

Prestige did not adequately originate FHA-insured loans in accordance with HUD's requirements. Prestige It failed to exercise due diligence to always verify or support borrowers' income and sources of funds to close, and credit information. and In addition, Prestige did not always ensure that unbiased appraisals were provided, cash investment requirements were met, information on inconsistencies contained in loan documents were explained or resolved, face-to-face interviews with borrowers were conducted as claimed, and interested third parties were not handling key documentation. Further, Prestige charged borrowers for fees that were unjustified.

Prestige failed to adequately implement its quality control process according to HUD's requirements. It did not always review early payment defaults, perform quality control reviews on FHA loans in a timely manner, formally and consistently document the actions taken to resolve the deficiencies found during its reviews, and perform reviews of its branch office.

We recommend that HUD's Assistant Secretary for Housing-Federal Housing Commissioner and Chairman of the Mortgagee Review Board

• Requires Prestige's sponsors to indemnify HUD against future losses on the 25 loans totaling $1,890,739
• Determines the eligibility of the $13,543 of overages charged by Prestige, and
• Impose civil monetary penalties against Prestige and its sponsor(s) for the deficiencies cited in this audit report.

Issue Date: August 9, 2004
Audit Memorandum No.: 2004-CH-1803
File Size: 55.9KB

Title: Somerset Point Nursing Home
Multifamily Equity Skimming
Shaker Heights, Ohio

HUD's Office of Inspector General reviewed the books and records of Somerset Point Nursing Home (Project) to determine whether the owner/management agent used the Project's funds in compliance with the Regulatory Agreement between HUD and the Somerset Point Limited Partnership and HUD's requirements. The Somerset Point Limited Partnership and/or Associated Motor Inns inappropriately used $329,255 of Project funds between December 1998 and October 2003. The inappropriate expenses included: $160,227 to repay advances made by SOMSOL, Inc.; $93,591 in excessive management fees paid to Associated Motor Inns; and $75,437 in legal fees unrelated to the Project's operations. We provided Associated Motor Inns, the Somerset Point Limited Partnership, and HUD's staff a schedule of the inappropriate expenses. The Project was in a non-surplus cash position and/or had defaulted on its FHA-insured mortgage when the funds were used. As a result, Project funds were not used efficiently and effectively, and fewer funds were available for the Project's normal operation and debt service.

We recommend that HUD's Director of Multifamily Housing Hub, Columbus Field Office, ensure that the Somerset Point Limited Partnership and/or Associated Motor Inns reimburses HUD for the inappropriate payments cited in this audit memorandum. We recommend that HUD's Director of Multifamily Housing Hub in conjunction with HUD's Office of Inspector General pursues double damages remedies if the Limited Partnership and/or Associated Motor Inns do not reimburse HUD for the inappropriate payments cited in this audit memorandum. We also recommend that HUD's Director of Departmental Enforcement Center: pursues administrative sanctions against the Limited Partnership and/or Associated Motor Inns for the inappropriate payments cited in this memorandum; and imposes civil money penalties against the Limited Partnership and/or Associated Motor Inns for the inappropriate payments cited in this audit memorandum while the Project was in a non-surplus cash position and/or in default on its FHA-insured mortgage.

Issue Date: December 5, 2003
Audit Memorandum No.: 2004-CH-1801
File Size: 111KB

Title: Carter Manor Apartments Multifamily Equity Skimming, Cleveland, Ohio

HUD's Office of Inspector General completed a review of the books and records of Carter Manor Apartments. We performed the review to determine whether the Project's funds were used in compliance with the Regulatory Agreement and applicable HUD policies and procedures. The review was performed based upon a request from HUD's Cleveland Office of Multifamily Housing Program Center. We did not conduct the review in accordance with Generally Accepted Government Auditing Standards.

We found that J.B. Tipton, Inc. and Carter Manor Apartments Limited Partnership violated the Regulatory Agreement by improperly disbursing Project funds for ineligible and unsupported costs. The inappropriate disbursements occurred when the Project was in a non-surplus cash position and/or after the Project defaulted on its HUD-insured mortgage. As a result, fewer funds were available for the Project's normal operations and debt service that resulted in a claim from HUD's FHA insurance fund.

We referred our draft audit findings to the United States Attorney's Office for the Northern District of Ohio for civil matters. HUD and the United States Attorney's Office executed a settlement agreement with the General Partner for Carter Manor Apartments Limited Partnership and the President of J.B. Tipton effective November 24, 2003. Under the terms of the settlement, the General Partner and J.B. Tipton, without any admission of wrong doing, agreed to pay HUD $275,000 on or before December 5, 2003. As part of the settlement, the General Partner and J.B. Tipton agreed not to participate in the Project for a period of five years starting July 1, 2004. The settlement agreement permitted the General Partner to retain a limited partnership share of no more than one percent in the Project.

We recommend that HUD's Director of Multifamily Housing Hub, Columbus Field Office, assure Carter Manor Apartments' General Partner and J.B. Tipton, Inc. pays HUD $275,000 as required by the settlement agreement.

Issue Date: September 30, 2003
Audit Memorandum No.: 2003-CH-1803
File Size: 99.7KB

Title: J.T. Eaton & Company, Civil False Claims,Twinsburg, OH

HUD's Office of Inspector General completed a review of J.T. Eaton & Company, Incorporated. The objectives of the review were to identify HUD subsidized housing authorities that purchased pest control products from J.T. Eaton and the amounts paid for those products. We performed the review at the request of the United States Attorney's Office for the Northern District of Ohio. We did not conduct the review in accordance with Generally Accepted Government Auditing Standards.

Of the 659 housing authorities we contacted, we received one positive response from the Lucas Metropolitan Housing Authority in Toledo, Ohio. In addition, we received positive responses from the New York City Housing Authority and the Wilmington Delaware Housing Authority after expanding our review. The responses demonstrated that between November 1, 1996 and January 12, 2001, the housing authorities paid more for animal repellants and pesticide products manufactured by J.T. Eaton than previously identified to the United States Attorney's Office. The United States Attorney's Office followed-up with the manufacturer and the suppliers we identified. Based on the follow-up, the United States Attorney's Office revised the estimate of HUD related damages from $33,736 to $79,298. The United States Attorney's Office negotiated a settlement agreement effective September 18, 2003 that includes a recovery for damages to HUD.

We recommend that HUD's Director of Field Operations for Public and Indian Housing follow-up with the United States Attorney's Office for the Northern District of Ohio to ensure that HUD receives $79,298 from the settlement agreement with J.T. Eaton.

Issue Date: April 25, 2003
Audit Report No.: 2003-CH-1016
File Size: 2.59MB

Title: City of Cleveland
Empowerment Zone Program, Cleveland, Ohio

HUD's Office of Inspector General completed an audit of the City of Cleveland's Empowerment Zone Program. Our audit objectives were to determine whether the City: (1) efficiently and effectively used HUD funds for its Program; and (2) accurately reported the Program's accomplishments to HUD. The audit was part of our Fiscal Year 2002 Annual Audit Plan. The audit was conducted based upon our survey results and two requests from Congress. The United States House of Representatives' Conference Report 107-272 directed HUD's Office of Inspector General to review the use of Zone funds and to report our findings to the Senate Appropriations Committee. The United States Senate's Report 107-43 also requested us to review the use of Zone funds and report our audit results to Congress.

We concluded the City did not maintain adequate oversight of its Program. Specifically, we determined:

* Controls over HUD funds were not adequate;
* Accomplishments were inaccurately reported;
* Zone residents were not benefiting from projects; and
* Program income was not properly managed.

Issue Date: March 28, 2003
Audit Report No.: 2003-CH-1014
File Size: 1.84MB

Title: Coshocton Metropolitan Housing Authority Public Housing Program
Coshocton, Ohio

HUD's Office of Inspector General completed an audit of the Coshocton Metropolitan Housing Authority's Public Housing Program. The review of the Housing Authority's Public Housing Program was conducted as part of a comprehensive review of the Authority. The comprehensive review was performed based upon a request from HUD's Columbus Field Office Coordinator of Public Housing Program Center. The objectives of the audit were to: (1) determine whether the Housing Authority had adequate management controls for safeguarding cash, other monetary assets, and inventory; (2) review for indicators of possible waste, loss, and misuse of cash, other monetary assets, and inventory; and (3) assess the appropriateness of the Housing Authority's procurement process.

The Housing Authority's management controls over cash, other monetary assets, and inventory were very weak. Specifically, the Authority: used $76,166 of its HUD funds for ineligible expenses; lacked documentation to support $165,972 in expenditures; and failed to implement adequate procedures and controls to safeguard its cash and other monetary assets against possible waste, loss, and misuse. The following items lacked adequate procedures and controls: personnel; Public Housing physical condition standards; cash receipts and disbursements; equipment; procurement; and financial and administrative processes.

We recommend that HUD's Acting Director of Troubled Agency Recovery Center, Cleveland Field Office, assure that the Authority implements procedures and controls to correct the weaknesses cited in this report. We also recommend that HUD's Acting Director of Troubled Agency Recovery Center: (1) takes administrative action against the Housing Authority's former Executive Director, current Director, and its Board of Commissioners for failing to administer the Authority according to Federal, State, and its own requirements; (2) takes the appropriate action against the Housing Authority for its default of Section 17(b)(3) of the Annual Contributions Contract; (3) conducts an election to determine whether the Public Housing residents want a transfer of the management to another entity as permitted by Section 25 of the Housing Act of 1937; and (4) determines the feasibility of the Housing Authority being combined with another Public Housing Authority as permitted by Section 13 of the Housing Act of 1937.

Issue Date: March 27, 2003
Audit Memorandum No.: 2003-CH-1013
File Size: 536KB

Title: Coshocton Metropolitan Housing Authority's Public Housing Drug Elimination Program
Coshocton, Ohio

HUD's Office of Inspector General completed an audit of the Coshocton Metropolitan Housing Authority's Public Housing Drug Elimination Program for Fiscal Year 1998. The review of the Housing Authority's Drug Elimination Program was conducted as part of a comprehensive review of the Authority. The comprehensive review was performed based upon a request from HUD's Columbus Field Office Coordinator of Public Housing Program Center.

The objectives of the audit were to: (1) determine whether the Housing Authority had adequate management controls for safeguarding cash, other monetary assets, and inventory; and (2) review for indicators of possible waste, loss, and misuse of cash, other monetary assets, and inventory.

The audit identified that the Housing Authority: (1) drew down $15,284 of Public Housing Drug Elimination Program Grant funds in excess of actual Program expenses; (2) used $5,760 in Program funds to pay two resident security guards who had criminal histories, had no previous experience providing security services, and did not receive any security services training; and (3) failed to monitor and evaluate the Program's activities to ensure that they achieved their intended objectives. Our report contains four recommendations to address the issues identified in this audit.

We recommend that HUD's Acting Director of Troubled Agency Recovery Center, Cleveland Field Office, assure that the Authority implements procedures and controls to correct the weaknesses cited in this report. Attached is the PDF file that contains the audit memorandum report.

Issue Date: March 25, 2003
Audit Memorandum No.: 2003-CH-1012
File Size: 337KB

Title: Coshocton Metropolitan Housing Authority's Tenant Opportunities Program, Coshocton, Ohio

HUD's Office of Inspector General completed an audit of the Coshocton Metropolitan Housing Authority's administration of its Resident Council's Tenant Opportunities Program for Fiscal Year 1998. The audit was conducted as part of a comprehensive review of the Housing Authority. The comprehensive review was performed based upon a request from HUD's Columbus Field Office Coordinator of Public Housing Program Center.

The objectives of the audit were to: (1) determine whether the Housing Authority had adequate management controls for safeguarding cash, other monetary assets, and inventory; and (2) review for indicators of possible waste, loss, and misuse of cash, other monetary assets, and inventory.

The audit identified that the Authority: (1) requested $41,827 in Tenant Opportunities Program funds from HUD without supporting documentation to show the funds were for reasonable and necessary Program expenses; and (2) drew down $4,796 of Program funds in excess of actual Program expenses.

We recommend that HUD's Acting Director of Troubled Agency Recovery Center, Cleveland Field Office, assure that the Authority implements procedures and controls to correct the weaknesses cited in this report.

Issue Date: March 24, 2003
Audit Memorandum No.: 2003-CH-1011
File Size: 559KB

Title: Coshocton Metropolitan Housing Authority Comprehensive Improvement Assistance Program
Coshocton, Ohio

HUD's Office of Inspector General completed an audit of the Coshocton Metropolitan Housing Authority's Comprehensive Improvement Assistance Program for Fiscal Years 1997, 1998, and 1999. The audit of the Housing Authority's Program was conducted as part of a comprehensive review of the Authority. The comprehensive review was performed based upon a request from HUD's Columbus Field Office Coordinator of Public Housing Program Center.

The objectives of the audit were to: (1) determine whether the Housing Authority had adequate management controls for safeguarding cash, other monetary assets, and inventory; (2) review for indicators of possible waste, loss, and misuse of cash, other monetary assets, and inventory; and (3) assess the appropriateness of the Housing Authority's procurement process.

The audit identified that the Housing Authority did not: (1) ensure that $287,224 of Comprehensive Improvement Assistance Program funds were used according to HUD's regulations; (2) ensure that $36,408 of Program funds were used in accordance with its Board approved operating budget; (3) procure goods and services in accordance with HUD's regulations; and (4) perform contractor employee wage surveys for its Program.

We recommend that HUD's Acting Director of Troubled Agency Recovery Center, Cleveland Field Office, assure that the Authority implements procedures and controls to correct the weaknesses cited in this report.

Issue Date: March 21, 2003
Audit Report No.: 2003-CH-1010
File Size: 821KB

Title: Coshocton Metropolitan Housing Authority, Section 8 Housing Program, Coshocton, Ohio

HUD's Office of Inspector General completed an audit of the Coshocton Metropolitan Housing Authority's Section 8 Housing Program located in Coshocton, Ohio. Our audit was conducted as part of a comprehensive review of the Housing Authority. The objective of our audit was to determine whether the Housing Authority managed its Section 8 Program efficiently and effectively. The audit was performed based on a request from HUD's Columbus Field Office Coordinator of Public Housing Program Center.

The Housing Authority's management controls over its Section 8 Housing Program were weak. The Authority lacked adequate procedures and controls over Housing Quality Standards and administrative processes. Specifically, we identified the following weaknesses in the Housing Authority's Section 8 Housing Program:

* The Housing Authority's Section 8 units contained health and safety violations. A HUD Construction Analyst inspected a sample of 34 Section 8 units. A total of 521 Housing Quality Standards' violations were found in 33 of the 34 (97 percent) Section 8 units inspected;
* The Housing Authority did not review or adjust its Section 8 utility allowances. The Authority also lacked documentation to support how its Section 8 utility allowances were determined. Federal regulations require housing authorities to document how utility allowances are determined and to review the allowances annually to determine whether adjustments are needed; and
* The Housing Authority did not follow HUD's regulations or its Section 8 Administrative Plan regarding rent reasonableness. The Authority did not properly complete rent reasonableness certifications for Section 8 units placed under contract and did not maintain adequate records of market rate units for rent reasonableness comparisons.

We recommend that HUD's Acting Director of Troubled Agency Recovery Center, Cleveland Field Office, assure that the Authority implements procedures and controls to correct the weaknesses cited in this report.

Title: City of Cincinnati Enpowerment Zone Cincinnati, Ohio

Title: City of Cleveland Heights Housing Preservation Program, Cleveland Heights, Ohio

Title: Jewish Community Federation of Cleveland Special Purpose Grant OH12-SPG-505 Cleveland, Ohio

HUD's Office of Inspector General completed an audit of Jewish Community Federation of Cleveland's Special Purpose Grant. We initiated the audit based upon a request from HUD's Director of the Cleveland Multifamily Housing Program Center. The objectives of our audit were to determine whether the Federation: used its Grant funds in an efficient and effective manner; and complied with the terms of its Grant Agreement. We found that Jewish Community Federation of Cleveland did not administer its Special Purpose Grant in full compliance with Federal requirements and its Fiscal Standards Policy. Specifically, the Federation: · Did not obtain computer consulting services for the Grant through open and free competition; · Failed to execute a written contract for its computer consulting services received for the periods December 1998 through January 2000 and August 2000 through September 2001; and · Lacked adequate documentation to support an additional $44,720 in computer consulting services paid to its consultant as a reasonable expense of the Grant. As a result, HUD lacks assurance that Grant funds were used efficiently and effectively, and the Federation's procurement of computer consulting services was not subject to open and free competition.

Date Issued: September 24, 2002
Audit Memorandum No.: 2002-CH-1802
File Size: 146KB

Title: Congressionally Requested Audit of Section 514 Outreach and Training Assistance Grants Awarded to Coalition on Homelessness and Housing in Ohio; Columbus, Ohio Grant Numbers FFOT00031OH and FFOT98023OH

We completed an audit of Coalition on Homelessness and Housing in Ohio's Section 514 Outreach and Training Assistance Grants awarded under the Multifamily Assisted Housing Reform and Affordability Act of 1997. The objectives of the audit were to determine whether the Coalition had: management controls in place to ensure that Section 514 Grant funds were used for eligible activities; and expended the Grant funds for any lobbying activities.

We found no material reportable conditions based upon our audit objectives. The Coalition properly managed the two Outreach and Training Assistance Grants and assured that Grant funds were used for eligible purposes. The Coalition had adequate controls in place to preclude paying lobbying expenses with Grant monies. The Coalition used American Fundware software system to track each employee's time spent on each activity, including lobbying. The system was set up so that each Grant had its own account number detailing how the funds were spent.

Date Issued: August 2, 2001
Audit Memorandum No.: 2001-CH-1802
File Size: 35KB

Title: Apex Management Company, Multifamily Equity Skimming, Dayton, Ohio

We completed an audit of the books and records of Apex Management Company. We performed the audit to determine whether Apex Management used Crescent Square and Grand Apartments funds in compliance with the Regulatory Agreements and other agreements, and applicable HUD policies and procedures. The review was part of our Operation Safe Home initiative.

We found that Apex Management Company, the former management agent of Crescent Square and Grand Apartments Projects, improperly disbursed $224,439 of the Projects' funds for ineligible or unsupported costs and ineligible distributions over four years, in violation of the Regulatory Agreements. Specifically, Apex Management paid $138,698 for ineligible costs and distributions and $85,741 for unsupported costs. We also found that Apex: submitted false 1993 and 1994 certified financial reports to HUD for the Projects; did not maintain the Projects in a decent, safe, and sanitary manner; and failed to maintain sufficient funds to cover the Projects' security deposits owed to tenants. As a result, the Projects defaulted on their HUD-insured mortgages and deferred maintenance allowing the Projects to deteriorate.

Using the procedures developed under Operation Safe Home, we referred our draft audit findings to the United States Attorney's Office for the Southern District of Ohio for civil matters. HUD and the United States Attorney's Office executed a settlement agreement with Apex Management Company's former officials effective June 21, 2001. Under the terms of the settlement, Apex Management's former President and Manager, without any admission of wrong doing, agreed to pay HUD $50,000 in six installment payments. The first installment payment of $25,000 was received on July 13, 2001. Additional installments of $5,000 each are due on the first of each month between August 2001 and December 2001. As part of the settlement, Apex's former President and Manager agreed not to participate in any HUD funded program for eight years and agreed not to participate as a contractor in any Federal Government contract or in any Federally sponsored program for three years. We will continue to monitor Apex's installment payments under the Settlement Agreement.

Date Issued: May 3, 2001
Audit Report No.: 2001-CH-1006
File Size: 324KB

Title: Alliance Community Hospital, Special Purpose Grants, Alliance, Ohio

We completed an audit of three Special Purpose Grants awarded to the Alliance Community Hospital. The three Grants were: OH12-SPG-32 for $1,250,000; OH12-SPG-509 for $1,500,000; and OH12-SPG-517 for $500,000. The objectives of our audit were to determine whether: the Special Purpose Grants funds were used efficiently and effectively; and the Hospital complied with the terms of the Grant Agreements. The audit was conducted in response to a request from HUD's Director of the Cleveland Multifamily Program Center.

The Hospital generally administered two of the three Special Purpose Grants (OH12-SPG-32 and OH12-SPG-509) correctly. However, the Hospital did not use funds from Special Purpose Grant OH12-SPG-517 efficiently and effectively and failed to comply with the Grant Agreement.

Date Issued: March 22, 2001
Audit Report No.: 2001-CH-1005
File Size: 268KB

Title: London Metropolitan Housing Authority, Safeguarding Monetary Assets and Inventory, London, Ohio

We completed an audit of the London Metropolitan Housing Authority. The objectives of our audit were to: (1) determine whether the Housing Authority had sufficient controls for safeguarding cash and other monetary assets and inventory; (2) review for indicators of possible waste, loss, and misuse of cash or other monetary assets and inventory; and (3) establish, if appropriate, the amount of any misappropriations, their causes, and the individuals involved. The audit was conducted in response to a request from the Coordinator of HUD's Ohio State Office Public Housing Program Center.

The Housing Authority's controls over cash and other monetary assets and inventory were weak. The Authority: improperly paid the Executive Director $3,699 for time she did not work for the Authority or time she spent on activities not related to the Authority's operations; failed to maintain accurate payroll records regarding three employees' vacation time; used $2,879 of Public Housing Drug Elimination Program funds to pay the City of London for baseline police services and equipment that the City was required to provide at no cost to the Authority; did not review or adjust its utility allowances for over eight years; lacked documentation to support how its current utility allowances were determined; did not sufficiently segregate the duties of its employees responsible for cash receipts, tenant accounts, cash disbursements, and accounting transactions; failed to maintain complete and accurate books of account regarding its equipment, did not conduct an inventory of non-expendable equipment; improperly disposed of used equipment; and lacked an acceptable cost allocation plan to support the allocation of costs among its programs.

Date Issued: March 9, 2001
Audit Report No.: 2001-CH-1004
File Size: 172KB

Title: Youngstown Metropolitan Housing Authority Comprehensive Audit, Youngstown, OH

The Housing Authority's procurement process was generally performed correctly and the Authority had sufficient controls over inventory. However, the Authority lacked sufficient controls over safeguarding cash and other monetary assets. Specifically, the Authority: used $44,216 of Public Housing Drug Elimination Program funds to pay the City of Youngstown for baseline police services that the City was required to provide at no cost; was under charged $32,586 for supplemental police services by the City; lacked documentation to support that $8,210 in police services paid were reasonable and necessary expenses of the Authority; failed to sufficiently pursue amounts owed to it by current and former Section 8 tenants; did not properly account for $32,300 of former Section 8 tenant accounts receivable; and lacked an acceptable cost allocation plan to support the allocation of indirect costs among its programs. While we found that the Authority's controls over Section 8 tenant accounts receivable were poor and offered the opportunity for its employees to misuse or divert funds, we found no evidence that funds were diverted.

The Housing Authority: (1) used $44,216 of Public Housing Drug Elimination Program funds to pay the City of Youngstown for baseline police services that the City was required to provide at no cost; (2) was under charged $32,586 for supplemental police services by the City; and (3) failed to maintain documentation to support that $8,210 in police services paid were reasonable and necessary expenses of the Authority. The Authority did not have sufficient procedures and controls over the supplemental police services. As a result, HUD funds were not efficiently and effectively used.

The Housing Authority did not follow its Section 8 Administrative Plan or HUD's Consolidated Annual Contributions Contract regarding Section 8 tenant accounts receivable. Specifically, the Authority did not: sufficiently pursue amounts owed to it by current and former Section 8 tenants; and properly account for $32,300 of former Section 8 tenant accounts receivable. The Authority's former top management's failure to aggressively pursue delinquent accounts and to recognize that failure to do so increased the risk of collection losses.

The Housing Authority did not have an acceptable cost allocation plan to support the allocation of indirect costs among its programs. Specifically, the Housing Authority's cost allocation plan did not address employees' salaries. The Authority also failed to properly allocate non-salary costs to its Comprehensive Grant Program, Development Program, Public Housing Drug Elimination Program, Major Renovation of Obsolete Public Housing Program, Economic Development Social Services Program, or its Service Coordinators Program. Employees' salaries were allocated to the Housing Authority's various programs based upon unsupported estimates. Housing authorities must allocate indirect costs to benefiting grant programs based upon specific methods, such as a time study. The Housing Authority's former Executive Director could not explain the basis used for allocating the non-salary indirect costs. As a result, neither HUD nor the Housing Authority had assurance that costs charged to the Authority's various programs were reasonable in relation to the benefits they derived from the indirect costs.

We recommend that HUD's Director of the Public Housing Hub, Cleveland Area Office, assure that the Housing Authority implements controls to correct the weaknesses cited in this report.

We presented our draft findings to the Housing Authority's Executive Director and HUD's staff during the audit. We held an exit conference with the Authority on January 9, 2001. The Authority agreed to implement corrective action to address the findings.

Date Issued: January 10, 2001
Audit Report No.: 2001-CH-1801
File Size: 54KB

Title: Cuyahoga County Community Development Block Grant Program Revolving Loan Fund, Cleveland, Ohio

We completed a review of Cuyahoga County's Revolving Loan Fund backed by the County's Community Development Block Grant Program. We initiated our review based upon an anonymous complaint to our Hotline. The complainant alleged that the County misused Block Grant funds for the Loan Fund to pay expenses of the Special Purpose Grant for the Bellefaire Residential Treatment Center for Children. The objectives of our review were to determine whether the complainant's allegations were substantiated and whether HUD's rules and regulations for the Revolving Loan Fund were followed.

The County did not follow Federal requirements when it used Community Development Block Grant funds to pay administration and construction expenses of the Special Purpose Grant for the Bellefaire Residential Treatment Center for Children. Contrary to the Office of Management and Budget's requirement, the County used $308,495 of Block Grant funds to pay the expenses of the Special Purpose Grant because the County could not draw down the Special Purpose Grant funds. HUD did not permit the County to draw down the Special Purpose Grant funds because the County did not submit the required closeout documents. The Business Services Manager for the County's Department of Development said she was not aware that the County's use of Community Development Block Grant funds to pay the expenses of the Special Purpose Grant was not in accordance with Office of Management and Budget Circular A-87. As a result, HUD's funds were not used efficiently and effectively.

Date Issued: November 16, 2000
Audit Report No.: 01-CH-243-1001
File Size: 478KB

Title: City of Ironton Community Development Block Grant Program, Ironton, OH

We completed an audit of the City of Ironton's Community Development Block Grant Program. The audit resulted from a complaint to our Hotline. The complainant's allegations were that the City misused Community Development Block Grant funds and did not follow proper procurement practices when awarding contracts paid with Block Grant funds. The complainant based his allegation that Block Grant funds were misused on information from HUD's 2020 Internet map which provides a general description and location of where HUD funds were spent. The objectives of our audit were to determine whether the complainant's allegations were substantiated and whether HUD's rules and regulations were properly followed.

HUD's 2020 map did not accurately show the locations where HUD funds were used in the City of Ironton. Nonetheless, we found that the City did not follow HUD's, the State of Ohio's, and/or the City's own requirements regarding the use of HUD funds (Community Development Block Grant and HOME). We also found that the City and/or the Housing Standards Officer for the Ironton-Lawrence County Area Community Action Organization, which the City contracted with to administer its Community Development Block Grant Program, did not properly administer the City's HUD funded rehabilitation activities.

We recommend that the HUD's Ohio State Office Director of Community Planning and Development, in conjunction with officials from the State of Ohio, assure that the City implements controls to correct the weaknesses cited in this report. We also recommend the Office of Community Planning and Development ensures that the City takes appropriate action on all other concerns addressed in this report.

Date Issued: June 15, 2000
Audit Report No.: 00-CH-255-1003
File Size: 552KB

Title: State of Ohio, Community Housing Improvement Program, Columbus, Ohio

We completed an audit of the State of Ohio's Community Housing Improvement Program. The audit was conducted as a result of our review of the Community Housing Improvement Program for Fairfield County, a State subrecipient. The audit objectives were to determine whether the State had adequate controls for monitoring its Program subrecipients and whether HUD's rules and regulations were properly followed.

The State did not have adequate controls over its Community Housing Improvement Program. The State's subrecipients we reviewed inappropriately used $463,904 of HUD funds to provide housing rehabilitation assistance that was not in accordance with HUD's regulations, the State's requirements, and/or the subrecipients' Policies and Guidelines for the Program. The inappropriate disbursements included: $290,555 for housing rehabilitation work that was improperly performed or not provided; $172,181 for rehabilitation work that exceeded our estimates of reasonable costs; and $1,168 to correct items that did not meet the State's Residential Rehabilitation Standards after HUD funds were used to pay for the deficient housing rehabilitation work.

We also found that the State's subrecipients: (1) did not include $1,534 of needed housing rehabilitation work in the specifications for three contracts; (2) incorrectly certified that the housing rehabilitation services provided to 42 houses met the State's Residential Rehabilitation Standards when they did not; (3) did not take action to repair items identified by the State that did not meet the State's Standards; (4) failed to follow HUD's regulations or the State's requirements for full and open competition regarding the procurement of housing rehabilitation and consulting services; and (5) did not ensure its contracting policies met HUD's requirements for the award of fixed-price or cost-reimbursement type contracts.

Date Issued: March 31, 2000
Audit Report No.: 00-CH-201-1002
File Size: 85KB

Title: Cuyahoga Metropolitan HA, Title V Account, Cleveland, OH

We completed an audit of the Cuyahoga Metropolitan Housing Authority's Title V account. The review was conducted based upon news reports that funds were inappropriately paid from the account. The objective of our audit was to determine whether the Authority's use of funds from the Title V account was proper.

Based upon our review of the Housing Authority's Title V account, we found that the Authority did not follow HUD's requirements, Office of Management and Budget Circular A-87, State of Ohio law, and the Authority's policies regarding the use of Title V funds.

We also found that the Housing Authority did not follow its Annual Contributions Contract with HUD regarding the deposit of low-income housing monies.

Date Issued: January 13, 2000
Audit Related Memorandum No.: 00-CH-211-1807
File Size: 27KB

Title: MJM Management Company, Multifamily Equity Skimming,Cleveland, OH

We completed an audit of the books and records of MJM Management Company. We performed the audit to determine whether MJM Management used project funds according to the Regulatory Agreement and other agreements, and applicable HUD policies and procedures. The review was part of our Operation Safe Home initiative.

We found that MJM Management Company paid $164,842 of Silver Meadows' Project funds for ineligible loan related payments and asset management fees. MJM believed it could make the ineligible payments because the Project's Owner had invested more in the Project than HUD required. The Regulatory Agreement and HUD requirements restrict Project disbursements to payments necessary for operating and repairing the Project and restrict distributions to owners to the amount of surplus cash. The payments of $164,842 were not necessary for the operation and repair of the Project, and the Project had negative surplus cash. The payment of the ineligible expenses reduced the amount of money available for the operation and repair of the Project.

Date Issued: November 30, 1999
Audit Related Memorandum No. 00-CH-211-1803
File Size: 27KB

Title: RLJ Management Company, Fee-Splitting Agreement, Gahanna, Ohio

We completed a review of the books and records of RLJ Management Company. We performed the audit to determine the reasonableness of the management fees paid to RLJ Management for five HUD-insured Projects. The review was part of our Operation Safe Home initiative and was conducted based upon information received from our Pacific/Hawaii District Office regarding Insignia Financial Group's fee-splitting agreements.

We concluded that RLJ Management Company improperly used $53,024 of the five Projects' funds to pay a fee for managing the Projects. The payments were made to Security Properties and then to Insignia Financial Group, who were Co-General Partners of the HUD-insured Projects. RLJ Management did not disclose the unauthorized payments to the Co-General Partners in the Projects' audited financial statements. As a result, RLJ Management Company did not follow HUD's requirements and Federal laws.

Date Issued: September 15, 1999
Audit Report No. 99-CH-255-1803
File Size: 251KB

Title: Fairfield County Community Housing Improvement Program, Lancaster, Ohio

We completed a review of Fairfield County's Community Housing Improvement Program. The review resulted from a citizen complaint to Congressman Christopher Shays. The objectives of our review were to determine whether the complainant's allegations were valid and whether HUD's rules and regulations were properly followed.

The complainant's specific allegations were that the County: (1) used the incorrect income limits for its HUD funded activities; (2) provided benefits to individuals who exceeded the Program's income requirements; (3) served individuals that lived outside of the County's target area; (4) provided services to individuals, but the services were not according to the Program's guidelines; and (5) did not make its rules and regulations available to Program applicants. The complainant also alleged that the County's Housing Inspector inappropriately steered the Program's participants to certain contractors.

We found that Fairfield County inappropriately used $169,044 of HUD funds to provide housing rehabilitation assistance that was not in accordance with HUD's regulations, the State of Ohio's requirements, and/or the County's Policies and Guidelines for the Program. The inappropriate disbursements included: $10,201 for housing rehabilitation work that was improperly performed or not provided; $2,716 for rehabilitation work that was excessively paid; $106,052 in housing assistance to six households without property hazard insurance and/or without recorded mortgage liens, deed restrictions, or covenants on the assisted properties; $33,625 to assist two households, who were not "very low-income", with housing rehabilitation services; and $16,450 to provide rehabilitation assistance to a household that was not located in the required target area.

We also found that the County and/or its Housing Inspector: (1) did not include $1,534 of housing rehabilitation work in the specifications for three contracts; (2) incorrectly certified that the housing rehabilitation services provided to seven houses met the State's Residential Rehabilitation Standards when they did not; (3) failed to follow HUD's regulation or the State's requirements for full and open competition regarding the procurement of housing rehabilitation and consulting services; and (4) did not ensure its contracting policies met HUD's requirements for the award of fixed-price or cost-reimbursement type contracts. Since the County awarded housing rehabilitation contracts without full and open competition, we questioned the County's use of $159,438 in HUD funds provided to 14 households. As a result, HUD funds were not used efficiently and effectively.

Issue Date: October 9, 1998
Audit Report No. 99-CH-202-1001
File Size: 497KB

Title: Springfield Metro. HA, Springfield, Ohio

We found the Authority's operations were not being administered in an efficient and economic manner, and in accordance with program requirements and the Annual Contributions Contract. The Executive Director did not always follow HUD's requirements or the Authority's own policies; and the Board of Commissioners did not always assure that the Authority's operations were carried out in an efficient and economic manner. The Authority had frequent turnover of key management personnel, and did not have a plan to facilitate continuity of operations.

Specifically, the Authority did not:

(1) follow proper payment procedures and the Executive Director did not exercise sound judgment when he approved disbursements of $38,437 for ineligible and unsupported expenses;

(2) maintain an acceptable occupancy level because the Authority did not give priority to preparing vacant units for re-rental. The Executive Director allowed maintenance employees to be used for non-maintenance functions;

(3) conduct quality control reviews of Section 8 units inspected by its inspectors and assure that its inspectors were properly trained;

(4) follow proper procurement practices because the Executive Director had not assigned one specific upper level management official to be responsible for the practices;

(5) use $95,558 of modernization grant funds in an efficient manner;

(6) correctly charge all physical and management improvement costs to the benefiting programs;

(7) follow HUD's travel policy requirements;

(8) adequately document the method it used to allocate its indirect costs to the various programs; and

(9) not maintain an adequate system of internal controls to safeguard its assets.

Issue Date: June 2, 1998
Audit Report No. 98-CH-211-1810
File Size 35KB

Title: Burton Plat Apts., Dayton, OH

We concluded that Burton Plat had violated several provisions of the Regulatory Agreement. Specifically, Burton:

- made ineligible distributions totaling $233,400 when the Project had no surplus cash.
- did not establish a separate bank account for tenant security deposits.
- did not submit audited financial statements as required or submitted them late.
- did not obtain HUD approval for two transfers of physical assets and for rent increases.

Issue Date: April 24, 1998
Audit Report No. 98-CH-210-1908
File Size: 20KB

Title: Lutheran Soc. Svcs. Mgmt. Agent, Dayton, OH

We determined that Lutheran Social Services used projects' funds in compliance with the Regulatory Agreements and other HUD requirements and tenants who received Section 8 subsidies were eligible. Lutheran Social Services was also currently calculating tenant rents properly and receiving proper subsidy payments. However as of February 28, 1998, the Management Agent owed HUD $12,269 and was paying HUD $100 per month as a result of incorrect tenant rent calculations that occurred prior to 1995 for residents of Ohio House and Valley House.

Issue Date: January 23, 1998
Audit Related Memorandum 98-CH-204-1807
File Size: 51KB

Title: Columbus HA, Columbus, OH

We found no evidence that the Housing Authority paid the current Coordinator of the supplemental police services for services that he did not perform or performed while he was on-duty for the City of Columbus' Division of Police between January 1995 and September 1997. Since the Housing Authority's records were missing for 1994, we were unable to determine whether the current Coordinator was paid for services that he did not perform or performed while he was on-duty for the City for the three months he was the Coordinator in 1994. In addition, because the Columbus Metropolitan Housing Authority did not maintain adequate documentation, we were unable to determine whether the former Coordinator was paid for services that he did not perform or performed while he was on-duty for the City for the time he was Coordinator between March 1992 and October 1994. As shown in the two findings which follow, we determined that the Housing Authority did not always follow its policies and procedures and HUD's requirements. Specifically, the Housing Authority did not: (1) adequately maintain the records for the supplemental police services; and (2) follow its and HUD's contracting requirements for police services.

Issue Date: December 4, 1997
Audit Related Memorandum 98-CH-203-1803
File Size: 118KB

Title: HA, Columbus, OH

We found that the Housing Authority properly calculated its Section 8 administrative fees. The Authority also properly reported its Section 8 expenses to HUD. Based upon our interviews, we found no evidence that the Housing Authority inappropriately steered Section 8 tenants from landlords. The Housing Authority was approved to use tax credits for its Rosewind development. The State of Ohio allows housing authorities to receive tax credits to fund construction costs. HUD encourages housing authorities to obtain alternative sources of funding since funding from HUD has been reduced. However, as shown in the six findings which follow, we determined that the Authority did not always follow its policies and procedures and HUD's requirements. Specifically, the Authority did not: properly disburse its Section 8 administrative fees because it lacked an acceptable cost allocation plan; properly identify the cause of Housing Quality Standards violations; conduct initial inspections timely; ensure Section 8 contract rents were reasonable; process requests for annual rent increases; and always identify the Housing Quality Standards violations.

Issue Date: September 24, 1997
Audit Case Number 97-CH-241-1011
File Size: 83KB

Title: City of Cleveland, Cleveland, OH

We concluded that Hough did not fully comply with Federal Regulations regarding the Community Development Block Grant Program and Empowerment Zone Program. Hough did not pass $29,381 it received from the City of Cleveland to third parties for which payments were intended. In addition, Hough did not provide us adequate documentation to support payments totalling $13,274. These problems occurred prior to the establishment of Hough's current internal control system. After March 1, 1996, Hough improved its system of internal controls when it hired a local certified public accounting firm as its fiscal officer. Hough also hired a checking service to make all of Hough's payments and provide cash analysis and reports.

Issue Date: January 21, 1997
Audit Case Number 97-CH-214-1004
File Size: 182KB

Title: Jena Apts, Cincinnati, OH

From January 1, 1994 through December 31, 1995, Jena Apartments paid $24,265 for ineligible salaries. According to the Regulatory Agreement and other HUD requirements, the salaries should have been paid from the management agent's fee. Because of these ineligible payments, less money was available for maintaining the project and correcting its physical deficiencies.

Issue Date: December 18, 1996
Audit Case Number 97-CH-204-1003
File Size: 513KB

Title: Columbus Metropolitan HA, Columbus, OH

The Authority followed Federal procurement procedures in awarding the contract. The Columbus Metropolitan Housing Authority's rehabilitation of Lincoln Park Apartments was not in a workmanlike manner and in accordance with specifications. The staff of HUD's Ohio State Office's Multifamily Housing Division inspected the contractor's work and estimated the cost of defective work at $414,898. The cost of change orders were within reason.

Issue Date: April 26, 1996
Audit Report Number 96-CH-205/218-1007
File Size: 92KB

Title: Capital City Community Urban Redevelopment, Westerville, OH

Capital City incorrectly used $75,713 of the HOPE 2 project's sales proceeds. The funds were used to pay for realty services that Adrian Inc., an identity-of-interest firm, was to provide as part of Capital City's match to the HOPE 2 Grant. Capital City also charged the HOPE Grants $51,902 of unsupported and ineligible costs. As a result, fewer funds were available to help improve the conditions of the intended beneficiaries, low-income persons.

Issue Date: December 22, 1995
Audit Related Memorandum 96-CH-212-1805
File Size: 4KB

Title: Broadview Health Center, Columbus, OH

We have closed out our audit of the Broadview Health Center in Columbus, Ohio. After we presented the project's owner with our draft finding describing improper use of Project funds, he refinanced the project with a conventional mortgage and cancelled the FHA mortgage insurance.

Issue Date: October 24, 1995
Audit Related Memorandum 96-PH-214-1801
File Size: 3KB

Title: Nelson & Associates, Cincinnati, OH

Our review disclosed that the Agent paid ineligible salary and benefits of $75,559 and $14,337 respectively from project operating funds of the three West Virginia projects. The costs supplemented salary and benefits for the Senior Site Manager. The costs were charged contrary to HUD requirements and should have been paid from the management fee. The West Virginia State Office was aware of the practice.

Issue Date: October 17, 1995
Audit Report Number 96-CH-241-1002
File Size: 142KB

Title: City of East Cleveland, East Cleveland, OH

The City of East Cleveland did not: (1) achieve its primary objective of correcting code violations; (2) spend $42,657 Block Grant money on eligible or supported activities; and (3) establish an effective system of internal controls.