Pennsylvania Audit Reports

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Issue Date: February 2, 2009
Audit Report No.: 2009-PH-1005
File Size: 284.75KB

Title: The City of Bethlehem, Pennsylvania, Generally Administered Its Community Development Block Grant Program in Accordance with HUD Requirements

We audited the City of Bethlehem's (City) Community Development Block Grant (CDBG) program as a result of a citizen complaint. Our audit objective was to determine whether the City administered its CDBG program in compliance with U.S. Department of Housing and Urban Development (HUD) requirements. We focused our review on whether the City (1) had adequate internal controls over its management process, accounting, and data processing; (2) used CDBG program funds for eligible activities; (3) used CDBG funds to meet the program's national objectives; and (4) properly accounted for CDBG program income. We concluded that the City generally administered its CDBG program in compliance with HUD requirements.

Issue Date: January 15, 2009
Audit Report No.: 2009-PH-1003
File Size: 1.42MB

Title: The Housing Authority of the City of Pittsburgh, Pennsylvania, Did Not Ensure That Its Leased Housing Units Met Housing Quality Standards under Its Moving to Work Program

We audited the Housing Authority of the City of Pittsburgh's (Authority) administration of its leased housing under its Moving to Work Demonstration (Moving to Work) program as part of our fiscal year 2008 audit plan. This is our second audit report issued on the Authority's program. The audit objective addressed in this report was to determine whether the Authority ensured that its leased housing units met the U.S. Department of Housing and Urban Development's (HUD) housing quality standards.

The Authority failed to ensure that its leased program units met housing quality standards. Of 66 program units statistically selected for inspection, 62 did not meet HUD's housing quality standards, of which 53 were in material noncompliance with housing quality standards. The Authority spent $100,362 in program and administrative funds for these 53 units. We estimated that over the next year if the Authority does not implement adequate procedures and controls to ensure that its program units meet housing quality standards, HUD will pay more than $9.3 million in housing assistance on units that materially fail to meet HUD's housing quality standards.

We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD's housing quality standards, reimburse its program for the improper use of $100,362 in program funds for units that materially failed to meet HUD's housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $9.3 million from being spent annually on units that materially fail to meet HUD's housing quality standards.

Issue Date: December 3, 2008
Audit Report No.: 2009-PH-1002
File Size: 1.23MB

Title: The Delaware County Housing Authority, Woodlyn, Pennsylvania, Did Not Ensure That Its Section 8 Housing Choice Voucher Program Units Met Housing Quality Standards

We audited the Delaware County Housing Authority’s (Authority) administration of its housing quality standards inspection program for its Section 8 Housing Choice Voucher program as part of our fiscal year 2008 audit plan. Our audit objective was to determine whether the Authority ensured its program units met housing quality standards in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority did not adequately administer its inspection program to ensure that its program units met housing quality standards as required. We inspected 61 housing units and found that 60 units did not meet HUD’s housing quality standards. Moreover, 32 of the 60 units had health and safety violations that the Authority’s inspectors did not observe or report during their last inspection. The Authority spent $43,324 in program and administrative funds for these 32 units.

The Authority also did not properly abate rents when units failed its housing quality standards inspections. We reviewed 25 program units that did not pass the Authority’s housing quality standards inspections and determined that the Authority failed to abate payments for 21 of the units and inappropriately abated payments for four units. The 21 units remained in a failing status for as long as 65 days. However, the Authority failed to abate the program rents or terminate the contracts for these units, resulting in improper payments of $6,522. In four cases, the Authority did not resume the housing assistance payments once the units became compliant with housing quality standards, resulting in $1,520 in underpayments to landlords.

We estimate that over the next year if the Authority does not implement adequate procedures and controls to ensure that its program units meet housing quality standards and that abatement requirements are enforced, HUD will pay more than $1.9 million in housing assistance on units with material housing quality standards violations and for units that should have had assistance payments abated.

We recommend that the Director of HUD’s Pennsylvania State Office of Public Housing require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards, reimburse its program from nonfederal funds for the improper use of $43,324 in program and administrative funds for units that materially failed to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $1.9 million from being spent annually on units that materially fail to meet HUD’s housing quality standards. We also recommend that HUD require the Authority to reimburse its program $6,522 for the 21 units for which it did not abate assistance payments, pay landlords $1,520 for payments that were not abated correctly, and enforce its established policies and procedures to ensure that its abatements comply with HUD requirements, thereby preventing an estimated $26,000 from being spent annually on units that should have had assistance payments abated.

Issue Date: September 30, 2008
Audit Report No.: 2008-PH-1014
File Size: 495.55KB

Title: The Housing Authority of the City of Pittsburgh, Pennsylvania, Did Not Adequately Administer Its Housing Assistance Payments for Leased Housing

We audited the Housing Authority of the City of Pittsburgh’s (Authority) administration of its housing assistance payments for leased housing under its Moving to Work Demonstration program agreement based on our analysis of various risk factors relating to housing authorities administering a leased housing program within our region. This is the first of two audit reports we plan to issue on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority properly maintained documentation to support housing assistance payments and accurately calculated them.

The Authority did not properly maintain documentation to support housing assistance payments and did not always accurately calculate housing assistance payments for its leased housing. We identified deficiencies in 28 of the 30 tenant files that we reviewed. The Authority did not maintain complete documents required by the U.S. Department of Housing and Urban Development (HUD) and its own administrative plan, resulting in unsupported housing assistance payments of $58,470. It also made ineligible housing assistance payments totaling $12,180 because it did not execute housing assistance payments contracts within 60 days of the beginning of the lease term, and it made housing assistance payments before the effective date of the related housing assistance payment contract. Lastly, the Authority inaccurately calculated housing assistance payments, resulting in $4,811 in overpayments and $1,708 in underpayments.

We recommend that HUD require the Authority to correct the errors in the tenant files identified by the audit, provide documentation to support housing assistance payments totaling $58,470 or reimburse its leased housing program for the payments that it cannot support, reimburse its leased housing program $16,991 for the ineligible payments and overpayments, and reimburse applicable tenants $1,708 for the housing assistance underpayments.

Issue Date: August 15, 2008
Audit Report No.: 2008-PH-1012
File Size: 236.22KB

Title: The Delaware County Housing Authority, Woodlyn, Pennsylvania, Did Not Adequately Administer Its Housing Assistance Payments

We audited the Delaware County Housing Authority’s (Authority) Section 8 Housing Choice Voucher program (program). We selected the Authority for an audit based on our analysis of various risk factors relating to the housing authorities under the jurisdiction of the U.S. Department of Housing and Urban Development’s (HUD) Philadelphia regional office. This is the first of two audit reports that we plan to issue on the Authority’s program. Our audit objective was to determine whether the Authority administered its housing assistance payments in compliance with HUD requirements and its own administrative plan.

The Authority did not adequately administer its housing assistance payments in compliance with HUD requirements and its own administrative plan. It incorrectly calculated housing assistance and utility allowance payments and failed to execute housing assistance contracts in a timely manner, resulting in about $58,900 in ineligible payments and more than $3,300 in tenant underpayments. It also could not support more than $26,500 in housing assistance and utility allowance payments. If the Authority does not implement sufficient controls or procedures to ensure that its program is administered in compliance with HUD requirements, we estimate that over the next year it will pay more than $926,300 in ineligible housing assistance.

We recommend that HUD require the Authority to reimburse the program from nonfederal funds for ineligible payments of about $58,900, reimburse the appropriate tenants or households more than $3,300 for the underpayment of housing assistance and utility allowances, provide documentation or reimburse the program more than $26,500 from nonfederal funds for unsupported payments, and implement sufficient controls or procedures to prevent ineligible payments of more than $926,300 in program funds over the next year.

Issue Date: July 14, 2008
Audit Report No.: 2008-PH-1009
File Size: 1.78MB

Title: The Housing Authority of the City of Allentown, Pennsylvania, Did Not Ensure That Its Section 8 Housing Choice Voucher Program Units Met Housing Quality Standards

We audited the Housing Authority of the City of Allentown’s (Authority) administration of its housing quality standards inspection program for its Section 8 Housing Choice Voucher program as part of our fiscal year 2008 audit plan. This is our second audit report issued on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority adequately administered its Section 8 housing quality standards inspection program to ensure that its program units met housing quality standards in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority did not adequately administer its inspection program to ensure that its program units met housing quality standards as required. We inspected 57 housing units and found that 51 units did not meet HUD’s housing quality standards. Moreover, 47 of the 51 units had exigent health and safety violations that the Authority’s inspectors neglected to report during their last inspection. The Authority spent $80,316 in program and administrative funds for these 47 units. The Authority also did not properly abate rents when units failed its housing quality standards inspections. We reviewed 30 program units that did not pass the Authority’s housing quality standards inspections and determined that the Authority should have abated housing assistance payments for 13 units. However, the Authority failed to abate the program rents or terminate the contracts for these units, resulting in improper payments of $8,504 in housing assistance. We estimated that over the next year if the Authority does not implement adequate procedures and controls to ensure that its program units meet housing quality standards and that abatement requirements are enforced, HUD will pay $1.3 million in housing assistance and administrative fees on units that materially fail to meet HUD’s housing quality standards and for units that should have had assistance payments abated.

We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards, reimburse its program for the improper use of $80,316 in program funds for units that materially failed to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $1.2 million from being spent annually on units that materially fail to meet HUD’s housing quality standards. Further, we recommend that HUD require the Authority to reimburse its program $8,504 for the 13 units for which it did not abate assistance payments and develop and implement management controls to ensure that employees comply with HUD policies and procedures concerning abatements, thereby preventing an estimated $34,016 from being spent annually on units that should have had assistance payments abated.

Issue Date: April 15, 2008
Audit Report No.: 2008-PH-1007
File Size: 1.74MB

Title: The Harrisburg Housing Authority, Harrisburg, Pennsylvania, Did Not Ensure That Its Section 8 Housing Choice Voucher Program Units Met Housing Quality Standards

We audited the Harrisburg Housing Authority’s (Authority) administration of its housing quality standards inspection program for its Section 8 Housing Choice Voucher program based on the survey results of our recently completed audit of the Authority’s low-rent public housing and Section 8 Housing Choice Voucher programs. This is our second audit report issued on the Authority’s programs. The audit objective addressed in this report was to determine whether the Authority adequately administered its Section 8 housing quality standards inspection program to ensure that its program units met housing quality standards in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority did not adequately administer its inspection program to ensure that its program units met housing quality standards as required. We inspected 52 housing units and found that 37 units did not meet HUD’s housing quality standards. Moreover, 35 of the 52 units had exigent health and safety violations that the Authority’s inspectors neglected to report during their last inspection. The Authority spent $34,113 in program and administrative funds for these 35 units. We estimated that over the next year if the Authority does not implement adequate procedures and controls to ensure that its program units meet housing quality standards, HUD will pay more than $884,000 in housing assistance and administrative fees for units with material housing quality standards violations. In addition, the Authority did not abate rents for units that failed the Authority’s housing quality standards inspections. For 11 units that we reviewed, the Authority failed to abate the program rents or terminate the contracts, resulting in an improper payment of $10,796 in housing assistance and administrative fees.

We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards, reimburse its program from nonfederal funds for the improper use of $34,113 in program funds for units that materially failed to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $884,917 from being spent annually for units with material housing quality standards violations. Further, we recommend that HUD require the Authority to reimburse its program $10,796 from nonfederal funds for the 11 units for which it did not abate payment or terminate the assistance contract in a timely manner and develop and implement management controls to ensure that employees comply with its policies and procedures concerning abatements.

Issue Date: March 28, 2008
Audit Report No.: 2008-PH-1005
File Size: 162.55KB

Title: Elders Place, Incorporated, Philadelphia, Pennsylvania, Did Not Administer Project Operating Funds in Accordance with HUD Requirements

Our audit objective was to determine whether Elders Place, Incorporated, (Elders Place, Inc.), administered project operating funds in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

Elders Place, Inc., did not administer project operating funds in accordance with HUD requirements. It made more than $309,900 in unsupported disbursements and more than $73,400 in ineligible disbursements and, thereby, did not sufficiently protect HUD’s and the residents’ interests in the project.

We recommend that HUD direct Elders Place, Inc., to provide documentation to support $309,929 in unsupported costs or reimburse the project for any unsupported costs from nonfederal funds. Additionally, we recommend that HUD direct Elders Place, Inc., to repay the project $73,447 from nonfederal funds for the ineligible costs identified by the audit.We also recommend that HUD direct Elders Place, Inc., to develop and implement controls to ensure that project operating funds are administered in compliance with applicable HUD and federal regulations, thereby preventing $13,155 from being disbursed improperly over the next year. We further recommend that HUD take administrative sanctions against Greater Germantown Housing Development Corporation, the project’s sponsor for violations of the regulatory agreement.

Issue Date: November 21, 2007
Audit Report No.: 2008-PH-1003
File Size: 180.30KB

Title: The Housing Authority of the City of Allentown, Pennsylvania, Needs to Settle Interfund Accounts Monthly and Revise Its Method of Allocating Administrative Salary and Benefit Costs

Attached is the final report on our audit of the Housing Authority of the City of Allentown (Authority), Allentown, Pennsylvania, Audit Report Number 2008-PH-1003, dated November 21, 2007. Our objectives were to determine whether the Authority calculated housing assistance payments accurately and properly maintained documentation in its tenant files for its Section 8 Housing Choice Voucher program according to U.S. Department of Housing and Urban Development (HUD) regulations; settled interfund payables accruing to its Section 8 program in a timely manner; and properly allocated administrative salary and benefit costs to its programs on a reasonable and fair basis.

The Authority generally calculated housing assistance payments accurately and properly maintained documentation in its tenant files for its Section 8 program according to HUD regulations. The Authority did not settle interfund payables accruing to its Section 8 program in a timely manner and it did not allocate administrative salary and benefit costs to its programs on a reasonable and fair basis. As a result, the Authority allowed the Section 8 program’s interfund payables to accumulate to $760,109 over a 10-month period and it charged excess administrative salary and associated employee benefit costs totaling $150,837 to its low-rent public housing program.

We recommend that HUD verify the Authority’s reimbursement of $760,109 to settle the Section 8 program’s interfund payables and direct the Authority to reimburse its low-rent public housing program $150,837 from the programs that benefited from the improper allocation of administrative salary and benefit costs.

Issue Date: November 20, 2007
Audit Report No.: 2008-PH-1002
File Size: 257.03KB

Title: National City Mortgage, Plymouth Meeting, Pennsylvania, Generally Complied with HUD Requirements in Originating FHA-Insured Single-Family Loans

Attached is the final report on our audit of the Plymouth Meeting, Pennsylvania, branch of National City Mortgage (branch office), Audit Report Number 2008-PH-1002, dated November 20, 2007. We selected the branch office because its default rate was above the state’s default rate. Our objective was to determine whether the branch office complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination and quality control review of FHA loans. The branch office generally complied with HUD regulations, procedures, and instructions in the origination and quality control review of FHA-insured single-family loans. However, two of eight loans selected for review were not originated in accordance with HUD requirements. The branch office did not properly document borrowers’ qualifying ratios and did not properly verify assets for the two loans, originally valued at more than $181,000. The deficiencies occurred because the branch office did not exercise due diligence in the underwriting of the loans, causing an unnecessary increased risk to the FHA insurance fund. In addition, the branch office charged ineligible commitment fees and/or overcharged for credit reports, contrary to HUD regulations, in six of the eight cases reviewed. As a result, borrowers incurred $857 in unnecessary costs. We recommend HUD’s assistant secretary for housing – Federal Housing Commissioner require National City Mortgage to indemnify $198,389 for two loans, which it issued contrary to HUD’s loan origination requirements; reimburse borrowers $857 in overcharges; and emphasize its policies, procedures, and controls to branch office staff to ensure that the underwriters consistently follow HUD’s underwriting requirements.

Issue Date: September 27, 2007
Audit Report No.: 2007-PH-1013
File Size: 1.49MB

Title: Harrisburg Housing Authority, Harrisburg, Pennsylvania, Did Not Properly Administer Its Low-Rent Public Housing Program

We audited the Harrisburg Housing Authority (Authority) Harrisburg, Pennsylvania. Our objective was to determine whether the Authority administered its low-rent public housing program in accordance with U.S. Department of Housing and Urban Development (HUD) regulations.

The Authority did not administer its low-rent public housing program in accordance with HUD regulations. It improperly disbursed $834,969 in operating funds from its low-rent public housing program to open and support the Greater Harrisburg Community Credit Union (credit union) and allowed a related conflict-of-interest situation to exist. The Authority’s noncompliance occurred because it believed its use of its operating funds and its consulting contract arrangements for the credit union was proper. We recommend that HUD review the issues in this report and if appropriate, initiate action to declare the Authority in substantial default of its consolidated annual contributions contract and take appropriate administrative action as detailed in section 17 (Notices, Defaults, and Remedies) of the contract.

We recommend that HUD direct the Authority to repay its low-rent public housing program $834,969 from nonfederal funds for the ineligible disbursements related to the credit union; develop and implement controls to ensure that disbursements of operating funds are eligible and supported; and develop and implement controls to detect, prevent, and resolve future conflict-of-interest situations.

Issue Date: July 26, 2007
Audit Report No.: 2007-PH-1010
File Size: 293.70KB

Title: Countrywide Home Loans, Plymouth Meeting, Pennsylvania, Generally Complied with HUD Requirements in Originating FHA-Insured Single-Family Loans

We audited of the Plymouth Meeting, Pennsylvania, branch of Countrywide Home Loans. We selected the Plymouth Meeting, Pennsylvania, branch of Countrywide Home Loans because its default rate was above the state’s default rate. Our objective was to determine whether the branch office complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination and quality control review of FHA loans.

The branch office generally complied with HUD regulations, procedures, and instructions in the origination and quality control review of FHA-insured single-family loans. However, two of 10 loans we selected for review were not originated in accordance with HUD requirements. The branch office did not properly verify the borrowers’ assets for the two loans originally valued at more than $254,000. The deficiencies occurred because the branch office did not exercise due diligence in the underwriting of the loans, causing an unnecessary increased risk to the FHA insurance fund.

We recommend HUD’s assistant secretary for housing – federal housing commissioner require Countrywide Home Loans to indemnify $256,534 for two loans, which it issued contrary to HUD’s loan origination requirements; and develop internal procedures to more closely monitor its underwriting process.

Issue Date: April 19, 2007
Audit Report No.: 2007-PH-1006
File Size: 230.27KB

Title: Elders Place II, Incorporated, Philadelphia, Pennsylvania, Did Not Properly Administer HUD Funds in Accordance with HUD Requirements

We audited Elders Place II, Incorporated (Elders Place II, Inc.), Philadelphia, Pennsylvania. Our audit objective was to determine whether Elders Place II, Inc., administered HUD funds in accordance with HUD requirements.

Elders Place II, Inc., did not administer HUD funds in accordance with HUD requirements. It did not maintain complete and accurate books and records to support the receipt and disbursement of HUD funds, deposit all HUD funds intended for the construction of the project into the project’s construction account, maintain adequate control over the disbursement of project funds, establish an escrow account to cover additional construction costs, and submit an acceptable cost certification to bring the project to final closing. This noncompliance occurred because Elders Place II, Inc., lacked standard operating procedures and sufficient oversight from a functioning board of directors. As a result, it made ineligible disbursements of $87,866, unsupported disbursements totaling $605,166, and drastically delayed the process of bringing the project to final closing.

We recommend that HUD direct Elders Place II, Inc., to repay the project $87,866 from nonfederal funds for the ineligible costs identified by the audit. Additionally, we recommend that HUD direct Elders Place II, Inc., to provide documentation to support the $605,166 in questioned costs or reimburse the project for any unsupported costs from nonfederal funds. We further recommend that HUD direct Elders Place II, Inc., to deposit $95,382 into an escrow account to cover the additional construction costs and to develop and implement written procedures to ensure that disbursements of HUD funds are eligible and consistent with applicable HUD and federal regulations, thereby preventing $45,843 from being disbursed improperly over the next year.

Issue Date: December 13, 2006
Audit Report No.: 2007-PH-1002
File Size: 1.06MB

Title: The Montgomery County Housing Authority, Norristown, Pennsylvania, Improperly Used HUD Funds to Purchase, Renovate, and Maintain Its Main Office

We audited the Montgomery County Housing Authority (Authority). Our audit objective was to evaluate whether the Authority properly used U.S. Department of Housing and Urban Development (HUD) funds to purchase, renovate, and maintain its main administrative office. We also reviewed the adequacy of the Authority’s administration of its Section 8 Housing Choice Voucher program.

The Authority complied with HUD regulations and adequately administered its Section 8 Housing Choice Voucher program. However, it violated its consolidated annual contributions contract by improperly acquiring a $1.2 million loan using HUD assets as collateral. Also, the Authority improperly used HUD funds to pay the interest and principal on the $1.2 million loan which it used to renovate its main office building. The Authority also violated its annual contributions contract by improperly using HUD funds to purchase, renovate, and maintain its main office. It improperly used $975,900 in Public Housing Homeownership (Homeownership) program proceeds and $609,363 in capital funds to purchase, renovate, and maintain its main office building, much of which is vacant, or which the Authority has been attempting to lease commercially for several years, or has leased to the Redevelopment Authority of Montgomery County (Redevelopment Authority). The Authority improperly used another $9,257 in Homeownership program proceeds to pay the utilities of the Redevelopment Authority, which is a tenant in its building. The Authority’s improper use of HUD funds contributed to a significant increase in its operating expenses and caused it to delay and cancel needed repairs at public housing units in Montgomery County. This occurred because the Authority erroneously believed that its main administrative office was not a project asset covered by its consolidated annual contributions contract; misinterpreted applicable requirements; and failed to develop and implement adequate internal controls to ensure that HUD funds were used in accordance with its consolidated annual contributions contract and with the applicable requirements.

We recommended that the director of the Philadelphia Office of Public Housing notify the Authority that it has improperly encumbered annual contributions contract assets and direct it to provide evidence that the financial instruments encumbering the assets have been changed to exclude the assets and, thereby, put $1.1 million to better use. We further recommended that if the Authority does not withdraw its encumbrances of annual contributions contract assets, the director should advise HUD Headquarters Office of Field Operations that the Authority is potentially in substantial default of its annual contributions contract because it has improperly encumbered contract assets and provide all the relevant information. Further, the Philadelphia Office of Public Housing should request to be advised on Headquarters’ disposition of the “Notice of Default” to the Authority. We also recommended that the Department's Enforcement Center initiate appropriate sanctions against Authority officials responsible for encumbering annual contributions contract assets to secure a loan. In addition, we recommended that HUD require the Authority to properly support its use of $975,900 in Homeownership program proceeds or repay the program unsupported amounts from nonfederal funds. The Authority should also repay from nonfederal funds $609,363 in ineligible capital funds spent to be returned to the United States Treasury. We further recommended that the Authority reimburse the Homeownership program $9,257 for improperly paying its tenant’s utility bills. Lastly, we recommended that the Authority begin paying future debt service on the $1.2 million loan attributable to activities unrelated to its consolidated annual contributions contract from nonfederal funds and provide adequate support for $119,139 in interest payments it made on the loan or repay HUD any unsupported amounts.

Issue Date: October 31, 2006
Audit Report No.: 2007-PH-1001
File Size: 265.58KB

Title: The Housing Authority of the County of Beaver, Beaver, Pennsylvania, Needed to Improve Controls over HUD Assets

We audited the Housing Authority of the County of Beaver's (Authority's) controls over HUD assets. Our audit objective was to determine whether the Authority properly used and maintained control of U.S. Department of Housing and Urban Development (HUD) assets.

For the most part, the Authority used and maintained control of HUD assets properly. It properly supported its drawdowns of HUD funds through the Line of Credit Control System, made purchases of goods and services in accordance with HUD and federal requirements, and appropriately used excess funds from an Authority-owned Section 8 new construction project for its nonfederal projects and other accounts. However, it did not properly support allocations of salary and benefit costs to its HUD-funded programs and did not properly monitor disbursements. As a result, the Authority made unsupported expenditures for salary and employee benefit costs of $292,576 and made ineligible disbursements totaling $46,917. This occurred because the Authority did not have adequate internal controls in place to ensure that it properly supported allocations of salary and benefit costs to its HUD programs, require all employees to complete personnel activity reports or equivalent documentation to account for their time, and properly monitor disbursements to ensure that the costs were consistent with contractual requirements and federal regulations.

We recommended that HUD direct the Authority to provide documentation to support the $292,576 in questioned costs or reimburse that amount from nonfederal funds. Additionally, we recommended that HUD direct the Authority to repay $46,917 for the ineligible costs identified during the audit. We further recommended that HUD direct the Authority to develop and implement procedures to ensure that salary and benefit allocations are properly supported, thereby putting $146,288 to better use over a one-year period, and disbursements of HUD funds are consistent with the terms of its annual contributions contracts and other federal regulations, thereby putting $15,639 to better use over a one-year period.

Issue Date: September 25, 2006
Audit Report No.: 2006-PH-1014
File Size: 3.39MB

Title: The Housing Authority of the City of McKeesport, McKeesport, Pennsylvania, Needed to Improve Its Low-Rent Housing Maintenance Program

We audited the Housing Authority of the City of McKeesport's (Authority's) management of its low-rent maintenance program. Our audit objective was to determine whether the Authority properly managed the maintenance of its low-rent housing program in accordance with U.S. Department of Housing and Urban Development (HUD) rules and regulations.

The Authority did not properly manage the maintenance of its low-rent housing program in accordance with HUD rules and regulations and its annual contributions contract with HUD. The Authority’s maintenance operations needed improvement; it received operating subsidies for ineligible units; and it did not prevent conflict-of-interest situations with its vendors. Additionally, the Authority did not provide adequate management oversight and control and did not implement adequate policies and procedures to ensure its maintenance employees completed vacant unit work orders as required.

We recommended that the Authority: repay the program $90,119 from nonfederal funds for the ineligible expenditures resulting from the prohibited conflict-of-interest situations with its vendors; implement controls and procedures to prevent and resolve conflict-of-interest situations with its vendors, thereby putting $51,497 in vendor payments to better use; provide adequate management oversight and control to ensure that maintenance employees document and complete vacant unit work orders in a timely manner as required, thereby putting $439,327 to better use; bring its maintenance staffing levels in line with HUD guidelines or properly justify why the additional maintenance personnel are needed, thereby putting $437,346 to better use; implement policies and procedures to justify hiring maintenance contractors to provide services that should be performed by the Authority’s maintenance personnel, thereby putting $215,067 to better use; repay HUD ineligible amounts from nonfederal funds after HUD recalculates the Authority’s operating subsidy to exclude ineligible units from April 1, 2003, to December 31, 2004; and discontinue requesting subsidies for housing units that are not eligible, thereby putting $743,135 to better use.

Issue Date: July 19, 2006
Audit Report No.: 2006-PH-1012
File Size: 594.10KB

Title: Trident Mortgage Company, Devon, Pennsylvania, Issued and Submitted for Endorsement Loans wth an Increased Risk of Defaults and Claims

We audited the Devon, Pennsylvania, branch of Trident Mortgage Company (Trident), a nonsupervised direct endorsement lender approved to originate Federal Housing Administration single-family mortgage loans, because its default rate was above the state’s default rate. Our objective was to determine whether Trident complied with the U.S. Department of Housing and Urban Development’s (HUD) regulations, procedures, and instructions in the origination of Federal Housing Administration loans.

Trident’s Devon office did not originate all Federal Housing Administration loans in accordance with HUD’s loan origination requirements. Of the 26 loans selected for review, the Devon office did not fully comply with Federal Housing Administration requirements for 15 of the loans valued at just under $2 million. Trident did not exercise due diligence in the review of assets and liabilities, did not properly verify income, did not ensure that all borrowers met the minimum required 3 percent investment in the property, did not properly document the qualifying ratios, and did not verify rental history. These deficiencies were caused by a lack of due professional care and contributed to an increased risk to the Federal Housing Administration insurance fund.

In addition, Trident overcharged for credit reports contrary to HUD regulations. For five of the cases reviewed, fees totaling $146 were charged to the borrowers. As a result, the borrowers incurred unnecessary costs.

Further, Trident’s quality control plan did not follow HUD requirements. Trident did not perform the required number of quality control reviews of its Federal Housing Administration loans and did not ensure that all Federal Housing Administration loans that went into early default were flagged for review. As a result, HUD-required elements were not addressed when the quality control reviews were performed.

We recommend that the assistant secretary for housing – federal housing commissioner

• Request from Trident an indemnification of $487,075 on 13 loans, which it issued contrary to HUD’s loan origination procedures.

Issue Date: April 20, 2006
Audit Report No.: 2006-PH-1010
File Size: 286.38KB

Title: The Housing Authority of the County of Butler, Butler, PA, Needed to Improve Administration of Its Section 8 Housing Choice Voucher Program

We completed an audit on the Housing Authority of the County of Butler's (Authority's) administration of its Section 8 Housing Choice Voucher Program, Audit Report Number 2006-PH-1010, dated April 20, 2006. Our audit objective was to determine whether the Authority was properly administering its Section 8 program.

The Authority generally administered its Section 8 Housing Choice Voucher program properly, but some improvements were needed. The Authority did not allocate administrative salary and employee benefit costs to the Section 8 program on a reasonable and fair basis. As a result, it could not support $229,460 in expenditures for administrative salaries and associated employee benefits over a three-year period. This occurred because the Authority did not have a formal cost allocation plan, nor did it use personnel activity reports or equivalent documentation to allocate salary and benefit costs for its senior management and accounting staff for years 2002 to 2004. In addition, the Authority did not always calculate housing assistance payments correctly or maintain adequate documentation in its client files to demonstrate compliance with U.S. Department of Housing and Urban Development (HUD) requirements. Generally, this occurred because of administrative errors by the Authority’s staff. However, the Authority did not have written procedures for Section 8 employees to calculate housing assistance payments correctly and maintain client files adequately. The Authority also did not have written procedures for conducting quality control reviews of the client files that would have alerted the Authority to the deficiencies. As a result, it made housing assistance overpayments of $501 and underpayments of $1,100 in the 21 client files reviewed and did not have adequate assurance that the housing assistance payments it made to landlords were reasonable.

We recommended that the Authority provide documentation to support the $229,460 in questioned employee salary and benefit costs or reimburse the Section 8 program from the programs that benefited from the erroneous cost allocations. Additionally, we recommended that the Authority develop and implement a reasonable method for allocating costs to the Section 8 program, thereby putting $76,487 to better use over a one-year period. We further recommended that the Authority repay its Section 8 program $501 and reimburse clients $1,100 from its earned Section 8 administrative fees, for housing assistance overpayments and underpayments. Lastly, we recommended that the Authority develop and implement procedures for calculating rents correctly, maintaining client files adequately, performing quality control reviews of its client files, and performing adequate rent reasonableness determinations.

Issue Date: February 8, 2006
Audit Report No. 2006-PH-1006
File Size: 634KB

Issue Date: January 10, 2006
Audit Report No. 2006-PH-1005
File Size: 354KB

Issue Date: December 2, 2005
Audit Report No. 2006-PH-1004
File Size: 224KB

Issue Date: July 29, 2005
Audit Report No. 2005-PH-1014
File Size: 429.89KB

Title: Review of the McKeesport Housing Authority ’s Section 8 and Public Housing Programs, McKeesport, Pennsylvania

We reviewed the McKeesport Housing Authority’s (Authority) Section 8 and public housing programs. Our objective was to determine whether the Authority operates its Section 8 and public housing programs according to U.S. Department of Housing and Urban Development (HUD) requirements.

We found no significant deficiencies with the Authority’s administration of its Section 8 program. However, the Authority’s current physical inspection process is not effective in ensuring its low rent units are always properly maintained in good operable condition. Specifically, the Authority’s 1) method of scheduling its low rent inspections is causing a backlog in the maintenance division, 2) low rent inspectors are not completing thorough inspections or adequately documenting the inspection results, and 3) procedures to ensure deficiencies identified during its inspections are completed in a timely manner are not effective. As a result, the Authority’s low rent housing units are not always maintained in an efficient and effective manner. This was demonstrated when five of the Authority’s eight low rent properties received individual failing scores ranging from 45 to 59 points on its fiscal year 2004 Real Estate Assessment Center inspection for its Public Housing Assessment System review.

We recommend that the Authority implement a number of policies and procedures that will improve its low rent inspection process. These policies should ensure that low rent inspections are scheduled throughout the year, the inspections are thoroughly completed and properly documented, and a follow-up inspection procedure is implemented to ensure previous deficiencies are corrected in a timely manner.

Issue Date: July 29, 2005
Audit Report No.: 2005-PH-1013
File Size: 1.25MB

Title: Review of the Commonwealth of Pennsylvania ’s HOME Investment Partnership Program, Harrisburg , Pennsylvania

In response to a request from the former assistant United States attorney of the Commonwealth of Pennsylvania, we audited Pennsylvania’s Department of Community and Economic Development’s (Commonwealth) administration of the HOME Investment Partnership Program (HOME). Our audit objectives were to determine whether the Commonwealth is 1) adequately monitoring localities to ensure HOME funds are expended on allowable HOME activities, and 2) properly allocating its staff’s time for the administration of the HOME program in accordance with applicable U.S. Department of Housing and Urban Development (HUD) and other federal regulations.

We found the Commonwealth is not adequately monitoring its localities to ensure HOME funds are expended on eligible HOME activities. Three of the four localities we reviewed had spent a portion of their HOME funds on ineligible expenses/activities, which totaled $79,070. This occurred because the Commonwealth did not develop or implement an adequate monitoring program to oversee its localities. We also noted the Commonwealth had accumulated more than $6.9 million in administrative fees from the program by obligating more funds than it spent to administer its HOME program. These excess funds should have been used to strengthen the Commonwealth’s monitoring program and to fund additional eligible HOME projects. Doing so would have enabled the Commonwealth’s HOME program to better meet its main goal of providing affordable housing for low-income households.

In addition, we found the Commonwealth is improperly allocating its staff’s time for the administration of the HOME program. Instead of maintaining accurate timesheets, the Commonwealth follows an unwritten policy that requires staff time to be split equally between the HOME and Community Development Block Grant (Block Grant) programs. As a result, the Commonwealth is unable to ensure HOME funds are only being used to pay for the administration of the HOME program.

We recommend that the director of Community Planning and Development, Philadelphia Regional Office, require the Commonwealth to recover $79,070 in ineligible fees from the localities we reviewed. In addition, the Commonwealth should use the accumulated $6,930,916 in administrative fees to improve its monitoring program and recommit the funds to eligible HOME projects. We also recommend that the director of Community Planning and Development, Philadelphia Regional Office, require the Commonwealth to establish proper time allocations that meet the requirements of Office of Management and Budget Circular A-87.

Issue Date: June 6, 2005
Audit Report No.: 2005-PH-1012
File Size: 360.43KB

Title: The Lycoming County Housing Authority, Williamsport, Pennsylvania, Risked HUD Assets for the Benefit of Its Affiliated Nonfederal Entity

We completed this audit in response to a referral from the U.S. Department of Housing and Urban Development’s (HUD) Pennsylvania State Office, Office of Public Housing. Our audit objective was to determine whether the Authority properly used HUD funds to develop and support its affiliated nonfederal entity.

The Authority properly allocated direct and indirect costs to its nonfederal entity. However, the Authority violated its annual contributions contract with HUD by guaranteeing a $3.5 million line of credit with HUD assets to help support the nonfederal entity. As of March 2005, the Authority owed $2.9 million on this line of credit, placing significant HUD assets at risk. This occurred because the Authority erroneously believed that a disposition agreement approved by HUD granted it permission to use HUD funds to support its affiliated nonfederal entity.

We recommend that the Director, Office of Public Housing, Pennsylvania State Office, notify the Authority that it has improperly encumbered annual contributions contract assets and direct it to provide evidence within the next 30 days that the financial instruments encumbering the assets have been changed to exclude the assets and, thereby, put $2.9 million to better use.

In its response the Authority agreed to review the financial instruments the audit determined encumbered HUD assets and stated it would make changes required to ensure that HUD assets are not at risk.

Issue Date: April 13, 2005
Audit Report No.: 2005-PH-1010
File Size: 248.38KB

Title: Rudolphy/Mercy-Douglass Home for the Blind, Philadelphia, PA, Did Not Charge a Cosponsor $19,582 in Commercial Rent

We audited the Rudolphy/Mercy-Douglass Home for the Blind (Owner/Project), an independent living facility for low-income persons with blindness and other disabilities, in response to a citizen complaint. The complainant alleged Project development funds and Project facilities were improperly used, payments to two payees were improper, and Project management deficiencies existed. Our objectives were to determine whether the Owner used Project development funds and Project facilities properly and whether the payments to the two payees were proper.

We found the owner properly used project development funds to pay for expenditures and payments related to the project. However, contrary to U.S. Department of Housing and Urban Development (HUD) regulations, one cosponsor of the Project, Mercy-Douglass Human Services Affiliate, the Management Agent, is using Project facilities to perform work not exclusively related to the administration of the Project. The Project lost commercial rent of $19,582 and future rental income will equal $18,076 per year. The additional revenue would enable the Project to make the required deposits to the Reserve for Replacement account, which are not being made, and have funds available for other Project needs.

We recommend that the Pennsylvania Multifamily HUB require the Owner to ensure the cosponsor, Mercy-Douglass Human Services Affiliate, pay past rent of $19,582 and future rent of $18,076 per year for the extra space it occupies in the Project.

Issue Date: March 24, 2005
Audit Report No.: 2005-PH-1008
File Size: 2.81MB

Title: The Housing Authority of the City of Pittsburgh, PA, Did Not Effectively Implement Its Moving to Work Demonstration Program

We audited the Housing Authority of the City of Pittsburgh's implementation of its Moving to Work demonstration program. Our audit objective was to evaluate the effectiveness of the Authority's implementation of the Moving to Work program.

We found the Authority was not able to develop and implement an effective strategy to fully use the freedom and flexibility of the Moving to Work program. Since entering the program in November 2000, the Authority accumulated more than $81.4 million of HUD funds during the first 4 years of its 5-year Moving to Work agreement. In addition, we estimated the Authority will accumulate an additional $21.2 million in the fifth and final year of its agreement. In large part this occurred because the Authority changed its program strategy several times during its first 4 years under the program. Also, the Authority lacked the capacity to simultaneously implement all components of its Moving to Work plan.

In October 2004, the Authority requested HUD extend its Moving to Work agreement to allow it to complete implementation of its revised Moving to Work plans. However, based on the Authority’s lack of progress in implementing a workable strategy under its first 5-year agreement, we recommended HUD not extend the Authority's current agreement after it expires on December 31, 2005. As an alternative, we recommended the Authority work collaboratively with HUD to develop and implement a workable strategy to transition out of the program. This process will ensure that accumulated and future reserve funds will be used prudently and expediently to improve the condition of the Authority’s more than 6,700 low-rent housing units and provide suitable housing to nearly 3,000 households on its Section 8 and low-rent waiting lists.

Issue Date: March 9, 2005
Audit Report No.: 2005-PH-1007
File Size: 1.06MB

Title: Lehigh County Housing Authority, Emmaus, PA, Could Not Support All Costs and Used HUD Funds to Support Its Nonfederal Entities

This is the second of two audit reports on this audit, which we performed in response to a complaint. Our audit objectives were to determine whether the Authority could adequately support its use of HUD funds and if it used HUD funds to develop and support its affiliated nonfederal entities.

Contrary to its Annual Contributions Contract, the Authority could not always support expenditures made with HUD funds and used HUD funds to develop and support its affiliated nonfederal entities. Specifically, the Authority could not provide adequate documentation to support $4 million in expenditures it made from January 2001 to December 2003 using HUD Public Housing and Section 8 Program funds. During the same period, the Authority also used an estimated $726,625 in HUD funds to pay salary and administrative costs of its affiliated nonfederal entities.

We recommend that HUD require the Authority to provide adequate documentation to fully support its disbursement of $4 million of HUD funds that it could not properly support, or reimburse HUD from nonfederal sources. We also recommend HUD require the Authority to implement an equitable method of allocating administrative expenses to its nonfederal entities and to reimburse the Public Housing Program $726,625 for ineligible salaries and administrative costs it provided to its nonfederal entities. The Authority acknowledged that it could not adequately support costs during the audit and did not have a certified cost allocation plan. It also agreed to pass Board resolutions approving new procedures needed to ensure it properly supports and allocates costs.

Issue Date: January 20, 2005
Audit Report No.: 2005-PH-1005
File Size: 1.19MB

Title: Fleet National Bank, Philadelphia, PA - Mortgagee Review. Fleet National Bank Issued and Submitted for Endorsement Loans With an Increased Risk of Defaults and Claims

We audited the Philadelphia branch of Fleet National Bank (Fleet), a supervised direct endorsement lender approved to originate Federal Housing Administration (FHA) single family mortgage loans. Our objectives were to determine whether Fleet complied with the U.S. Department of Housing and Urban Development’s (HUD) regulations, procedures, and instructions in the origination of Federal Housing Administration loans and whether Fleet’s quality control plan, as implemented, met HUD requirements.

Fleet’s Philadelphia branch office did not originate all Federal Housing Administration loans in accordance with HUD’s loan origination requirements. Of the 20 loans we selected for review, the branch office violated HUD requirements for 5 of the loans valued at $224,245. Fleet did not exercise due diligence in the review of assets and income, did not verify rental history, and approved loans with excessive debt to income ratios.

Fleet also submitted loans for late endorsement when the payment histories of the buyer were not current. We found seven loans totaling $434,804 were from borrowers who had delinquent mortgage payments. In addition, Fleet’s Philadelphia branch office, contrary to HUD requirements, did not provide an accessible business environment for its clients during normal business hours and did not employ a branch manager to supervise operations. Finally, the quality control plan provided by Fleet does not meet all the requirements of HUD.

We recommend that the Assistant Secretary for Housing – Federal Housing Commissioner require Fleet to take immediate action to determine whether deficiencies in Fleet’s loan origination process warrant administrative action and if appropriate, request that the Mortgagee Review Board impose civil monetary penalties for Fleet’s failure to provide an adequate quality control plan. We also recommend that HUD request indemnification from Fleet on Federal Housing Administration loans valued at $619,614, which it issued contrary to HUD’s loan origination procedures, and repayment of $39,435 on one loan that went into default, causing HUD to pay a claim. Further, since we have been informed by Fleet that the Philadelphia branch office has been closed, we recommend HUD ensure the branch is removed from its systems as an approved direct endorsement lender.

Issue Date: October 15, 2004
Audit Report No.: 2004-PH-1001
File Size: 1.94MB

Title: The Lehigh County Housing Authority, Emmaus, PA, Risked HUD Assets for the Benefit of Nonfederal Entities

We performed this audit in response to a complaint. This is the first of two audit reports we will issue from the audit. Our audit objective was to determine if the Authority improperly used U.S. Department of Housing and Urban Development (HUD) funds to develop and support these entities.

The Authority improperly used HUD funds to develop and support its affiliated nonfederal entities. It violated its Consolidated Annual Contributions Contract with HUD by guaranteeing tax credits and debt, estimated at $4.4 million for its affiliated nonfederal entities, and by improperly providing its affiliated entities $95,634. We found that $3.0 million of the $4.4 million in HUD assets the Authority pledged since 1988 remained at risk, and the entities still owed the Authority $93,834. Further, an apparent conflict of interest existed regarding the Executive Director’s relationship with the Authority’s affiliated nonfederal entities. These problems occurred because the Authority’s Board of Commissioners did not provide adequate oversight over the Authority’s management, nor did it ensure adequate internal controls were in place to detect and prevent these problems from occurring. The control deficiencies created an environment that allowed the Authority to put HUD funds at risk for the benefit of its affiliated nonfederal entities.

During and immediately after the audit, we recommended and the Authority took action to remove all but $130,000 of its improper pledges of HUD assets. The Authority also recovered all but $13,100 of the funds it improperly provided its affiliated entities. The Authority also agreed to remove the remaining improper pledges of HUD assets, and recover the remaining funds it improperly provided its affiliated entities. Additionally, the Authority’s Board of Commissioners passed a Board resolution creating internal controls to prevent, detect, and resolve improper pledging of HUD assets, and apparent conflict of interest situations.

Issue Date: August 4, 2004
Audit Report No.: 2004-PH-1010
File Size: 3.37MB

Title: Lambeth Apartments - Section 236/Section 8 Multifamily Housing Review, Pittsburgh, Pennsylvania

In response to a request from the U.S. Department of Housing and Urban Development (HUD), Multifamily Pittsburgh Field Office, we performed an audit of the multifamily operations at Lambeth Apartments. The property is owned by Episcopal Residences, Incorporated (ERI). The primary objective of our audit was to assess HUD’s concerns over management and operational problems identified during a management review at the property. Specifically, we wanted to determine if the general management practices were in compliance with their Regulatory Agreement, Housing Assistance Payments Contract and applicable HUD rules and regulations.

We found Episcopal Residences, Incorporated did not manage the property in accordance with the terms of the Regulatory Agreement, Housing Assistance Payments (HAP) Contract and other applicable HUD rules and regulations. Specifically, ERI distributed property funds without HUD’s approval; used project funds to pay for unauthorized structural changes to the property and made payments for ineligible and unsupported miscellaneous expenses. Further, Episcopal Residences, Incorporated did not properly manage the property to maximize rental income or maintain proper documentation to support the Housing Assistance Payments it received from HUD. These violations occurred because the owners and its Board of Directors did not have policies and procedures in place to ensure the property was managed in accordance with its Regulatory Agreement or HAP contract with HUD. As a result, Episcopal Residences, Incorporated used project funds to pay for $209,081 of ineligible and $258,819 of unsupported expenditures. In addition, it received $284,470 of unsupported Housing Assistance Payments from HUD. We also estimate the property lost $280,115 in potential income due to the unauthorized changes in how the property was used and managed. As such, Lambeth Apartments may have lost $748,015 in project funds that could have been used to pay for reasonable and necessary operating expenses and needed repairs. Further, these actions have placed Lambeth Apartments in a non-surplus cash position, and limited the availability to provide affordable units to eligible low-income households.

We recommended the Director of the Pittsburgh Area Office of Multifamily Housing take appropriate administrative action against Episcopal Residences, Incorporated as allowed under Section 11 of the Regulatory Agreement, for violating their Regulatory Agreement. We also recommend that HUD recover $209,081 of ineligible and $543,689 of unsupported payments from Lambeth Apartments.

Issue Date: May 28, 2004
Audit Memorandum No.: 2004-PH-1007
File Size: 431.1KB

Title: Review of the Community Development Block Grant (CDBG) Program for the City of McKeesport
McKeesport, Pennsylvania

In response to a request from the U.S. Department of Housing and Urban Development's (HUD's) Pittsburgh Office of Community Planning and Development, we completed a review of the Community Development Block Grant (CDBG) Program for the City of McKeesport. Specifically, our review concentrated on the City’s oversight of the Home Improvement Loan Program by its sub-recipient, the McKeesport Housing Corporation, for January 2000 through December 2002. The objective of our audit was to determine if the City of McKeesport established adequate management controls to ensure its sub-recipient administered its Home Improvement Loan Program in compliance with HUD regulations and requirements.

We found the City of McKeesport did not adequately monitor the performance of its sub-recipient, the McKeesport Housing Corporation, to ensure it administered its Home Improvement Loan Program in compliance with HUD requirements. Specifically, the City of McKeesport did not review quarterly status reports submitted by the McKeesport Housing Corporation to ensure Program income it generated through its Home Improvement Loan Program was used to fund eligible activities in accordance with HUD and OMB requirements. As a result, the City of McKeesport did not identify that the McKeesport Housing Corporation violated federal procurement regulations and requirements when it procured consultants for accounting, legal, computers, financial audit and loan underwriting services; and rehabilitation contractors.We also found the sub-recipient did not establish a cost allocation plan to ensure indirect costs were equitably distributed to the Home Improvement Loan Program and other CDBG Programs. Thus, the McKeesport Housing Corporation could not support $694,573 in consultant contract costs, rehabilitation contract costs and indirect costs. We recommended that the City of McKeesport provide adequate support or reimburse HUD for the any unsupported expenditures.

We also recommended the City establish and implement a comprehensive system to monitor its sub-recipients to ensure they administer their programs in accordance with HUD requirements.

Issue Date: March 25, 2004
Audit Memorandum No.: 2004-PH-1004
File Size 245.1KB

Title: Carbondale Nursing Home
Carbondale, Pennsylvania

In response to an audit request by the Philadelphia Multifamily HUB Office, we completed an audit of Carbondale Nursing Home (Project), a Section 232 Multifamily Insured Project owned by CNH, Incorporated (Owner). The purpose of our audit was to assess the Owner’s compliance with the terms and conditions of the Regulatory Agreement, and all other applicable HUD requirements.

We found the Owner did not comply with the Regulatory Agreement and other HUD requirements in operating the Project. In total, the Owner made $1,261,301 of ineligible and unsupported payments from Project funds. Specifically, the Owner: received ineligible salary payments of $374,790; collected ineligible distributions/repayment of advances of $170,155; paid ineligible expenses for another company of $485,997; disbursed ineligible extension fees of $132,728; and paid unsupported loan payments of $97,631. Several staff persons at the Project, including the Controller and Administrator, stated the Owner was not aware of the HUD requirements prohibiting these expenditures. If the Owner had complied with HUD requirements and used Project funds for only necessary operating expenses of the Project, the Owner could have used these funds to pay the mortgage costs (principal and interest) for over two years and possibly avoided bankruptcy and default on the HUD-insured loan.

We recommended HUD require the Owner to repay the $1,163,670 in ineligible expenditures and either support or repay the $97,631 of unsupported expenditures. Also, we recommended HUD take appropriate administrative action against the Owner.

Issue Date: January 16, 2004
Audit Report No.: 2004-PH-1002
File Size: 1.2MB

(Due to the file size a separate link is provided for the detailed auditee reponse.)

Auditee Reponse

Title: Allegheny County Housing Authority Public Housing Drug Elimination Grant Program, Pittsburgh, Pennsylvania

In response to an anonymous complaint, we performed a review of the Allegheny County Housing Authority (Authority)’s Public Housing Drug Elimination Program (Grant Program). Specifically, the complaint alleged the Authority was misspending Grant Program funds on various ineligible expenditures. The objective of the audit was to determine if the Authority spent its Grant Program funds in accordance with the applicable HUD rules and regulations. To accomplish our objective we reviewed how the Authority used the Grant Program funds it received for Fiscal Years 1996 through 2000.

We found the Authority did not administer its Drug Elimination Program according to its grant agreements with HUD and the applicable HUD rules and regulations. Specifically, the Authority did not always ensure program expenditures were eligible and properly supported and it did not properly follow Federal procurement requirements when it awarded a number of service contracts. These problems occurred because the Authority did not have the proper controls in place to enable management to detect and prevent these weaknesses from occurring within the administration of its Grant Program. As a result, the Authority spent $615,636 on ineligible expenditures and drew down another $761,950 of grant funds for expenditures that were not properly supported.

We recommended the Authority reimburse HUD for the ineligible expenditures and for all expenditures it cannot provide adequate support for. We also made a number of recommendations to assist the Authority in improving the management of its Grant Program.

Issue Date: January 7, 2004
Audit Memorandum No.: 2004-PH-1801
File Size: 125.8KB

Title: Review of Philadelphia Housing Authority’s Executive Director’s Sick Leave and Annual Leave Conversion, Philadelphia, Pennsylvania

We conducted a review of the Philadelphia Housing Authority’s (Authority) sick leave and annual leave conversion policy in response to a credible anonymous complaint. Our objective was to determine whether the Authority made cash payments to its Executive Director, for converted sick leave to annual leave and annual leave to cash, in accordance with HUD regulations and Authority policies and procedures.

We reviewed the Authority’s conversion of sick leave to annual leave and annual leave to cash during calendar years 2002 and 2003 and found that policies in effect at the time permitted these conversions. We noted that HUD regulations do not address Housing Authority employee leave conversions or require leave conversion policies to be in the Administrative Plan. However, the Authority’s Human Resources Manual of Policies and Procedures, dated December 2, 1999, and approved by the Authority’s Board of Commissioners on October 18, 2001, allows Executive level personnel to convert sick leave to annual leave on a one for one basis. Further, the Manual also allows Executives to receive lump sum payments for unused annual leave. As a result, the regulations, in effect at the time, allowed the leave conversions and the complaint was unsubstantiated.

Issue Date: November 13, 2004
Audit Memorandum No.: 2004-PH-1001
File Size: 559.3KB

Title: Bucks County Housing Authority, Utilization of Section 8 Funds
Doylestown, Pennsylvania

We audited the Bucks County Housing Authority’s Tenant-Based Section 8 Program to determine if the Authority adequately administered its Section 8 Program to ensure available funds were fully utilized to assist the maximum number of eligible families under the Program.

We found that the Authority is generally administering its Section 8 Program in an efficient manner. The drop in the Authority’s Section 8 utilization rate from 95 percent in 1988 to 83 percent by the end of 2002, for the most part, occurred because it was unable to use all the additional 1,284 vouchers HUD provided it for two apartment complexes that choose to drop the Section 236 Program. In large part, we attributed the Authority’s difficulty in leasing-up the vouchers to Bucks County’s very tight housing market, high rents, and a lack of available housing.

However, during our review we did identify a number of areas where the Authority could improve its operations. These areas include: re-evaluating staffing levels to determine if they are adequate; developing a landlord outreach program to keep current landlords informed of changes to the Program and to encourage new landlords to enter the Program; creating and providing desk manuals to its Section 8 employees to aid in performing their specific tasks; and developing a formal training plan. We made a number of recommendations to improve operations in these areas, which the Authority agreed to take action on.

Issue Date: September 25, 2003
Audit Report No.: 2003-PH-1006
File Size: 1.52MB

Title: Scranton Housing Authority Audit of Low-Income Housing and Section 8 Programs, Scranton, PA

We audited selected aspects of the Scranton Housing Authority’s (SHA) Low-Income Housing and Section 8 Programs. The purpose of our review was to determine if the SHA was managing the areas selected for audit of its Low-Income Housing and Section 8 Programs in an efficient, effective and economical manner and complying with the terms and conditions of its ACC, applicable laws, HUD regulations, and other applicable directives.

We found the SHA’s public housing developments were well maintained and in excellent repair. However, we identified a number of weaknesses in the SHA’s operations where the SHA needed to improve its operations or take appropriate administrative action to resolve the issue. Specifically, we found the SHA: (1) improperly charged the conventional program $206,563 in salaries and operating costs; (2) improperly received $9,187 in rental subsidy payments; (3) failed to properly record $81,741 in laundry machine income; (4) kept units off the rental market for an unreasonable period; (5) did not properly establish waiting lists and process tenant applications; (6) did not perform adequate outreach to locate qualified applicants for its vacant units; (7) violated the conflict of interest provisions of its Annual Contributions Contract with HUD; (8) did not ensure Section 8 units met housing quality standards; (9) did not ensure deposits at financial institutions in excess of FDIC coverage limits were collateralized; (10) discontinued using purchase orders to make small purchases; and (11) paid travelers an excessive allowance for meals, gratuities and incidentals.

During the course of the audit, we presented the SHA’s Executive Director with our findings and recommendations. In all cases the Executive Director took immediate action to correct the weaknesses by modifying the SHA’s operating procedures and practices. Further, the SHA repaid the Conventional Program $297,491 for the ineligible costs

Issue Date: September 24, 2003
Audit Memorandum Report: 2003-PH-1803
File Size: 806.8KB

Title: Philadelphia Housing Authority
Utilization of Tenant-Based Section 8 Funds, Philadelphia, PA

We completed an audit of the Philadelphia Housing Authority’s (Authority) Tenant-Based Section 8 Program. The objective of the audit was to determine why the Authority was not fully utilizing its tenant-based Section 8 funding to assist the maximum number of families under the Program.

Although the Authority steadily increased the number of vouchers it issued since March 2000, it consistently and significantly underutilized its available Section 8 funding from HUD. For example, for its fiscal year ending March 2000, the Authority did not use $24.7 million of its available budget authority of $96.6 million, and $23.9 million of its available budget authority of $107.6 million for its fiscal year ending March 2001. Since the Authority was not able to fully utilize its available funding, HUD recaptured $47.9 million of Section 8 funds from the Authority in August 2001. Yet, about 18,000 families remained on the Authority’s Section 8 waiting list as of January 2002, of which, we estimate the Authority could have assisted an additional 3,200 families.

In our audit, we identified a number of weaknesses in the Authority’s Section 8 administration that adversely impacted its ability to fully utilize its Section 8 funding. Specifically, we found the Authority needed to more effectively: implement required procedures to improve utilization; supervise employees; collect, maintain, and analyze key Program data; follow-up on its landlord and voucher holder outreach efforts; and address external factors it believed contributed to low utilization. Further, we noted the Authority requested and received more than 3,700 additional vouchers, from April 1999 through April 2001, that it could not reasonably accommodate, and this only exacerbated its utilization problem.

In February 2002, HUD signed an agreement with the Authority accepting it into a new flexible housing demonstration program known as Moving to Work. Although the Authority’s Moving to Work agreement included a Section 8 component, it marked the end of the Authority’s traditional Section 8 Program until April 2008. Under Moving to Work, HUD exempted the Authority from many public housing and Section 8 Program rules, and the Authority now has the flexibility to allocate Section 8 funds not used on vouchers for other housing activities, including capital programs. Even though the Authority is now under the demonstration program, the operational issues identified in this report are still pertinent and need to be addressed to improve operations. The Authority recognized this and took corrective action to address a number of the issues during the audit; however further actions need to be taken to address the remaining issues.

Issue Date: January 27, 2003
Audit Report No.: 2003-PH-1002
File Size: 339KB

Title: Philadelphia Housing Authority Contracting and Purchasing Activity Philadelphia, Pennsylvania

Issue Date: September 30, 2002
Audit Memorandum No.: 2002-PH-1005
File Size: 339KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant and Intermediary Technical Assistance Grant awarded to the Philadelphia Regional Alliance of HUD Tenants, Grants Numbers FFOT00033PA and FF1T98005NT Philadelphia, Pennsylvania

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

The audit identified that the Grantee assisted ineligible projects; could not provide adequate support for $97,928 in disbursements it made for salaries and fringe benefits; and did not properly support $35,341 in direct and indirect costs. In addition, the grantee charged an additional $13,719 in ineligible expenditures to the grant. We also noted the grantee did not comply with other requirements of the Office of Management and Budget’s (OMB) Circular A-122, Cost Principles for Non-Profit Organizations, which included using grant funds to participate in lobbying activities. Accordingly, we made recommendations that will correct the above deficiencies and will improve the Grantee’s controls over administering OTAG funds.

Issue Date: September 30, 2002
Audit Memorandum No.: 2002-PH-1004
File Size: 509KB

Title: Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Tenants' Action Group of Philadelphia, Grant Number FFOT98025PA Philadelphia, Pennsylvania

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

The audit identified that the Grantee assisted ineligible projects; could not provide adequate support for $97,928 in disbursements it made for salaries and fringe benefits; and did not properly support $35,341 in direct and indirect costs. In addition, the grantee charged an additional $13,719 in ineligible expenditures to the grant. We also noted the grantee did not comply with other requirements of the Office of Management and Budget’s (OMB) Circular A-122, Cost Principles for Non-Profit Organizations, which included using grant funds to participate in lobbying activities. Accordingly, we made recommendations that will correct the above deficiencies and will improve the Grantee’s controls over administering OTAG funds.

Issue Date: March 26, 2002
Audit Report No.: 2002-PH-1803
File Size: 2.49MB

Title: Philadelphia Housing Authority Limited Personnel Review

In response to an anonymous complaint, we performed a review at the Philadelphia Housing Authority (Authority). The complaint alleged the Executive Director of the Authority was unfairly recruiting and promoting individuals he was affiliated with, rather than allow for open and fair competition. Also, the complaint alleged the Executive Director's management style was causing many executive level personnel to leave the Authority.

We found the allegation relating to the Executive Director's unfair hiring practices at the Authority had merit. However, as for the second allegation, although there was a general consensus the Executive Director was a demanding supervisor and a number of executive personnel left for this reason, we did not find his management style violated any Federal or State laws.

In addition, we noted the Authority violated the conflict of interest provision of its Consolidated Annual Contributions Contract (ACC) with HUD when it hired the daughter of a member of the Authority's Board of Commissioners for a senior management position for which she was not qualified. Further, we questioned the circumstances relating to the Authority obtaining the services of the human resource consultant, who drafted the Authority's personnel policy that exempted the Executive Director from following the Authority's prescribed personnel policies and procedures.

Issue Date: March 19, 2002
Audit Report No.: 2002-PH-1001
File Size: 2050KB

Title: City of Williamsport, Community Development Block Grant and HOME Investment Partnership Programs, Williamsport, Pennsylvania

We completed an audit of the City of Williamsport’s Community Development Block Grant (CDBG) and Home Investment Partnership (HOME) Program operations. HUD’s Pennsylvania State Office of Community Planning and Development (CPD) requested the Office of Inspector General (OIG) perform an audit of the City’s Programs after it identified numerous deficiencies in the City’s administration of the Programs during a routine monitoring review in June 2000. The primary objectives of our audit were to determine whether the City was administering its CDBG and HOME Programs in an economical and efficient manner and in accordance with the terms of its grant agreements with HUD and applicable Federal laws and HUD regulations.

We found the City was not efficiently or effectively administering its CDBG and HOME Programs in accordance with the terms of its grant agreements with HUD and applicable Federal laws and HUD regulations. For the six activities reviewed, we found the City violated 22 specific program regulations of which several had multiple violations. Also, the City violated many of the provisions of the Office of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments. This occurred because the City did not have a sound internal control environment (management controls) in which to execute the programs in accordance with the regulations. As a result, the City funded ineligible activities totaling $2,062,180, made unsupported payments and drawdowns totaling $576,190, and ultimately executed activities that may not have fully benefited the low and moderate-income persons whom Congress intended to benefit.

Issue Date: August 31, 2001
Audit Memorandum No.: 2001-PH-1803
File Size: 60KB

Title: Assessment of Problems at the Housing Authority of the County of Chester (HACC), West Chester, PA

We completed a limited review of the Office of Public Housing, Pennsylvania State Office, and TARC assessments of HACC operations. We also reviewed KPMG Consulting Draft Assessment of HACC’s private developments problems. In brief, we found the HACC is in substantial default of its Consolidated Annual Contribution Contracts (Low Rent and Section 8). Specifically, contrary to Section 7 of the Annual Contribution Contract (Low Rent), HACC pledged assets covered under its Annual Contribution Contract as collateral for loans for its private developments. HACC defaulted on a $500,000 loan and a local bank seized a $400,000 Certificate of Deposit. It appears other collateralized loans may be in jeopardy. Also, in violation of Section 11 of its Section 8 Annual Contribution Contract, HACC used Section 8 funds to pay interest and principal on a $4 million bond issue in June 2001. Furthermore, under its present structure, it appears the HACC no longer has the financial resources to meet its immediate and long-term debt obligations. Consequently, in accordance with Section 17 of the Annual Contribution Contract (low rent) and Section 15 of the Section 8 Annual Contribution Contract, we recommend HUD take immediate action in declaring the HACC in substantial default of its contracts, and take appropriate actions it deems necessary to cure the substantial default.

Issue Date: August 24, 2001
Audit Memorandum No.: 2001-PH-1802
File Size: 82KB

Title: City of Philadelphia, Shelter Plus Care Grant, PA26C960002, Philadelphia, Pennsylvania

We found that the City did not ensure TRAC implemented its Shelter Plus Care IV Grant according to its grant agreement and applicable Federal regulations. This occurred because the City did not provide adequate guidance and oversight in monitoring TRAC’s administration and implementation of the grant. Further, the City/TRAC has not been able to provide adequate documentation to support its claimed level of supportive services (match) that it provided to its participants as is required by Federal regulations.

Also, we noted that the management controls used by both the City and TRAC may not adequately protect grant funds from fraud, waste, or abuse. These management control weaknesses expose grant funds to a greater risk of fraud, waste, or abuse.

Issue Date: August 1, 2001
Audit Report No.: 2001-PH-1006
File Size: 534KB

Title: Audit of the Philadelphia Department of Commerce’s Loan Assistance to the Urban Education Development Research and Retreat Center (UEDRARC) Rehabilitation Project

We completed an audit of the City of Philadelphia’s Community Development Block Grant (CDBG) and Section 108 funding of the Urban Education Development Research and Retreat Center (UEDRARC) Rehabilitation Project, administered through its delegate agency, the Philadelphia Industrial Development Corporation (PIDC). The objectives of the audit were to determine whether PIDC:

Ensured HUD funds for the UEDRARC Project met a national objective;

Awarded the CDBG and Section 108 funds to UEDRARC in accordance with HUD’s requirements, as well as its own loan policies and procedures;

and Effectively administered the CDBG and Section 108 loans provided to UEDRARC.

Although we determined the UEDRARC Project did meet a national objective consistent with HUD’s CDBG criteria, the project was never financially viable. PIDC disregarded its own loan policies and procedures, as well as HUD’s requirements, in funding this high-risk project. In addition, the City of Philadelphia and PIDC neither provided the necessary oversight to ensure performance goals were achieved, nor monitored UEDRARC’s use of funds for compliance with loan requirements.

Since UEDRARC began operations in 1993, it has not been able to generate sufficient rental income to cover its long-term debt and operating expenses. In fact, all loans PIDC provided to UEDRARC quickly became delinquent and two of the loans were used to repay several delinquent loans. At the end of our review, UEDRARC’s three outstanding loans totaling $4,650,000 were either delinquent or defaulted. Under its present financial structure, it is doubtful UEDRARC will be able to repay these loans and sustain its operations for the long-term. Further, PIDC (1) did not apply approximately $1.5 million in credits to the CDBG Program for State reimbursements of contractor invoices, originally paid with HUD funds, and (2) used a Section 108 loan of $800,000 for ineligible purposes. Finally, we found UEDRARC used $604,235 of its funds to pay for questionable expenses rather than pay its contractors $526,514 of eligible construction expenses. The primary issue areas are detailed in the Findings section of this report.

Issue Date: May 3, 2001
Audit Report No.: 2001-PH-1005
File Size: 1,318KB

Title: Housing Authority of the City of Pittsburgh, Comprehensive Audit of Various Activities, Pittsburgh, Pennsylvania

We completed an audit of various aspects of the operations of the Housing Authority of the City of Pittsburgh (Authority). The purpose of the audit was to determine if the Authority properly procured goods and services with HUD funds and made disbursements using HUD funds according to the applicable program requirements. The audit generally covered the period January 1, 1998 through December 31, 1999, but was expanded when necessary to include other periods.

The Authority is not complying with key provisions of its Consolidated Annual Contributions Contract (ACC) with HUD. Specifically, we found the Authority is not properly procuring goods and services according to Federal procurement requirements, nor is the Authority adequately accounting for HUD funds it draws down and disburses according to the applicable program requirements. These conditions occurred because the Authority’s management does not ensure staff perform and comply with all applicable provisions of its ACC and applicable statutes and regulations issued by HUD. As a result of these deficiencies, we identified $8.1 million of questioned costs ($1,382,874 of ineligible and $6,758,294 unsupported) in our review. Immediate improvements are needed in the areas of procurement, drawing funds from Line of Credit Control System (LOCCS), and controls over cash disbursements.

Issue Date: April 20, 2001
Audit Report No.: 2001-PH-1004
File Size: 101KB

Title: Resources for Human Development, Supportive Housing Grants, PA26B8941402 (Renewal) and PA26B970105 (Renewal), Philadelphia, PA

As part of a nationwide review of HUD’s Continuum of Care Program, we audited two Resources for Human Development’s (RHD) 1997 Supportive Housing renewal grants.

Our audit concluded RHD implemented the grants in accordance with its applications, maintained evidence of measurable results, ensured a sustainable program, and expended funds timely. However, RHD needs to improve administration of the program to ensure compliance with federal regulations. Specifically, RHD did not: (1) include only eligible costs in its grant draw downs; (2) base draw downs on cash requirements of the program; (3) classify transactions by type of eligible activity; and (4) file accurate Annual Progress Reports (APR).

Issue Date: February 15, 2001
Audit Report No. 2001-PH-1002
File Size: 1116KB

Title: Chester Housing Authority, Chester, PA

On January 7, 2000 we began an audit to assess the Receiver’s and the CHA’s progress in:

analyzing existing policies and procedures; updating or revising procedures where warranted;

training staff on and monitoring the effectiveness of the new policies and procedures;

improving procurement and administration of its legal service contracts;

developing procedures to govern the use of the CHA credit cards and stipulate the documentation required to obtain payment for credit card and out-of-pocket expenses; and

reducing tenant rent receivables and improving rent collections.

The CHA needs to establish procedures, and train and monitor its staff in the areas of applicant screening, rent collections, and evictions. We discussed the results of our review during the audit and provided the Court, the Receiver, and the CHA with a draft report for comment. We discussed the draft report at an exit conference on December 19, 2000. The CHA provided a written response, which we included as Appendix B without exhibits, and where appropriate their comments are summarized in this report. CHA generally agreed with our recommendations, but disagreed with some of the reported facts.

Issue Date: November 2, 2000
Audit Report No. 01-PH-241-1001
File Size: 337KB

Title: Urban Education Development Research and Retreat Center (UEDRARC), Philadelphia, PA

We completed an audit of the Philadelphia Commercial Development Corporation’s (PCDC) funding of the Urban Education Development Research and Retreat Center (UEDRARC) rehabilitation project. The objectives of the audit were to determine whether: Community Development Block Grant (CDBG) funds were used to accomplish a national objective; the UEDRARC Project met its objectives; and PCDC effectively administered the CDBG funds provided to UEDRARC.

We noted positive effects from the UEDRARC Project. UEDRARC met a CDBG national objective by eliminating a slum and blighted condition, and accomplished its mission to provide an institutional environment encompassing programs designed to promote education, research, employment training, and human development to serve the needs of Philadelphia’s African American community. PCDC had designed good management systems and controls to provide project oversight and to account for all the loan funds disbursed to the project. Despite having these good controls, PCDC did not follow its own and HUD’s requirements, and did not use prudent financial judgment in evaluating, approving, and administering its $550,000 loan to UEDRARC - a high risk borrower. PCDC did not observe existing loan approval policies and procedures; enforce its loan monitoring policy and procedures when administering the loan; and take full advantage of available recourses when UEDRARC defaulted on its loan. As a result of PCDC’s loan decision, it is likely PCDC will need to write off the loan to UEDRARC, depriving other applicants of needed funds.

PCDC’s Board of Directors overruled their Vice President for Lending’s recommendation to reject the loan and bypassed their Loan Committee in providing the loan to UEDRARC. Based on the Office of Housing and Community Development’s (OHCD) assurances of UEDRARC’s financial viability and a Pennsylvania State Senator’s encouragement, PCDC’s Board authorized the loan. The State Senator, who was a member of both PCDC’s and UEDRARC’s Boards of Directors, used his influence in PCDC’s loan decision making process. Despite individual Board members’ concerns, the Board authorized the loan, featuring unusually favorable terms including: a loan amount exceeding the $100,000 maximum amount, an interest rate of only 3½ percent, and a 96 month moratorium on principal payments. Finally, PCDC used a for-profit loan vehicle to provide the loan to UEDRARC, a non-profit organization.

PCDC did not enforce its loan monitoring policy and procedures, and removed its loan officer from the loan monitoring process. PCDC relied on the Philadelphia Industrial Development Corporation (PIDC) to monitor the loan because PCDC lacked the resources to monitor the project and the PCDC loan was subordinate to the PIDC loan. We evaluated PIDC’s monitoring process and found it to be ineffective. Also, PCDC did not pursue UEDRARC for annual financial statements required by the loan agreement or a final audit of the project. UEDRARC defaulted on the loan within a month of receiving loan proceeds. As of March 13, 2000, UEDRARC had been delinquent 50 of the 53 months of the loan term and was $22,496.01 in arrears. PCDC never required UEDRARC to prove it lacked the capability to make its loan payments. PCDC did not take more forceful default action because of outside pressure and the desire to see the project succeed.

The UEDRARC Project met a CDBG national objective by eliminating a slum and blighted condition and met its goal by creating an educational facility at its project location. However, its ability to sustain this success is questionable. UEDRARC currently lacks the resources to complete facility renovations needed to increase revenue. Furthermore, current operations do not generate sufficient revenue to cover long term debt and operating expenses. During the 17 months ending May 31, 2000, UEDRARC experienced an average monthly shortfall of $24,672.86 or a total of $419,438.62 over the period. Due to its current financial condition, it is unlikely that UEDRARC will be able to obtain the funding for the remaining renovations. Without this funding and the resulting increased revenue, it is doubtful that UEDRARC will be able to repay its debt and continue operations.

We recommended to HUD that PCDC comply with loan approval and administration policies and procedures and loan agreements; document the reasons for circumventing existing policies and procedures when approving and administering loans; and require UEDRARC to obtain an audit of the construction project.

We also recommended that, if PCDC writes off the loan, HUD direct the City of Philadelphia to repay, to the City’s CDBG Program, with non-Federal funds, the loan portion written off as uncollectable.

We discussed the results of our review with PCDC during the audit and at an exit conference on September 22, 2000. By letter, dated October 4, 2000, the President/CEO of PCDC provided a detailed response to the conditions and recommendations discussed in the draft report. We have included PCDC’s pertinent comments in the Finding Section of this report. PCDC’s full response is included in Appendix A.

Issue Date: September 21, 2000
Audit Report No. 00-NY-229-1006
File Size: 941KB

Title: First Preston Foreclosure Specialists, Marketing and Management Contract, Blue Bell, Pennsylvania

We completed an audit of First Preston Foreclosure Specialists (First Preston) a Management and Marketing (M&M) contractor. This report presents the results of our audit of First Preston’s ability to manage and market the U.S. Department of Housing and Urban Development (HUD) single family properties. The report includes three findings with recommendations for corrective action.

Issue Date: August 21, 2000
Audit Report No. 00-PH-255-1802
File Size: 174KB

Title: Westmoreland County Consortium HOME Program Westmoreland, Pennsylvania

Our office completed a review of the Westmoreland County Consortium’s (County) HOME Program. We performed the review to determine whether the County is administering its HOME program in compliance with HUD requirements.

Generally, we found the County is administering it’s HOME Program in compliance with HUD requirements. However, the County needs to improve its administration by implementing a quality control process over rehabilitation property inspections to ensure the inspections are completed, accurate, and properties meet HOME rehabilitation standards. Details of our review can be found under the "Results of Review" section of this memorandum.

Issue Date: November 15, 1999
Audit Report No. 00-PH-201-1002
File Size: 2,285KB

Title: Review of the Philadelphia HA's Police Department, Philadelphia, Pennsylvania

We conducted a review of the Philadelphia Housing Authority’s police department. The review was undertaken to evaluate the propriety of the overtime payments that were made to its staff. As part of our review we also looked into the level of baseline police services being provided to the Housing Authority by the City of Philadelphia and attempted to relate those services to what should be provided under the terms of their Cooperation Agreement.

Police services need to be provided to the residents of the Philadelphia Housing Authority in a more organized, coordinated, and controlled fashion. While our review was conducted primarily to look into various complaints regarding the administration of overtime at the Authority’s police department, it is apparent that there are some very fundamental matters affecting the management and operation of the police department that need to be addressed by the Housing Authority and the City of Philadelphia. In addition to the use of Drug Elimination Program funds, this includes the baseline police services that should be provided by the City under the terms of its Cooperation Agreement with the Authority.

Issue Date: November 1, 1999
Audit Related Memorandum No. 00-PH-259-1801
File Size: 101KB

Title: County of Allegheny Supportive Housing Grants, Pittsburgh, Pennsylvania

Based on a request from your staff we reviewed the Supportive Housing Grants administered by the County of Allegheny (County) to determine whether the grants were properly administered and whether the costs that were incurred by the County and its subrecipients were necessary, eligible, and properly supported. Our audit period covered April 1, 1996 through July 31,1998.

The County needs to more closely adhere to the terms of its grant agreements with HUD and to provide better oversight and guidance to its subrecipients. We found that the County has not implemented a process by which it routinely monitors its subrecipients and, on occasion, has given its subrecipients improper advice concerning the requisitioning of funds under its letter of credit. As a result, the County drew down funds prior to actual needs, and the County and its subrecipients incurred $52,575 and $82,185 of ineligible and unsupported costs.

Issue Date: October 20, 1999
Audit Report No. 00-PH-201-1001
File Size: 655KB

Title: Public Housing Drug Elimination Program Housing Authority, Pittsburgh, Pennsylvania

We determined that the Authority spent PHDEP funds for a variety of purposes, some of which were included in the PHDEP applications, were properly supported, and were otherwise eligible expenditures. Other expenditures totaling $500,912 were ineligible project charges because they were used for other Authority activities which were not PHDEP related. Still other expenditures of $387,002 were inadequately supported and an assessment of their eligibility could not be made. These problems occurred because no one had the overall responsibility for administering the Authority’s PHDEP.

We recommend that you: (1) require the Authority to obtain your office’s approval before drawing down additional funds for its existing PHDEP; (2) have the Authority repay PHDEP the $500,912 that was spent on ineligible expenditures and, if proper support cannot be provided, the $387,002 in unsupported costs; and (3) consider the Authority for future PHDEP grants only after it has demonstrated the ability to properly administer a PHDEP.

Issue Date: September 30, 1998
Audit Report No. 98-CH-259-1006
File Size: 452KB

Title: City of Philadelphia Empowerment Zone Program Philadelphia, PA

Based on our review of 12 of the 109 activities reported to HUD in its June 30, 1997 Performance Review, we concluded that the City did not maintain adequate control over its Empowerment Zone Program to assure efficient and effective use of the funds or accurate reporting of the Program's accomplishments. The City: inappropriately used $83,998 of Empowerment Zone funds that did not benefit Zone residents; did not have documentation to show that another $32,934 of Zone funds paid and $4,367 billed to the City benefited Zone residents or were reasonable and necessary expenses; and spent $30,280 of Zone funds above the amount approved. The City also inaccurately reported the accomplishments of its Empowerment Zone activities and reported one project as an Empowerment Zone activity to HUD when it was not. As a result, Empowerment Zone funds were not used efficiently and effectively, and the impression exists that the benefits of the City's Empowerment Zone Program were greater than actually achieved.

Issue Date: August 14, 1998
Audit Related Memorandum No. 98-PH-201-1804
File Size: 30KB

Title: Northside Tenants Reorganization (NTR) - Security Funding Pittsburgh, PA

Based on a request from the Office of Inspector General for Investigations, we reviewed the security funding received by NTR to determine whether the expenditures were necessary, eligible, and properly supported.

We found NTR did not maintain records evidencing project security was provided and at least $360,00 of security funds were misspent. The owners of Northside Properties and the Housing Authority of the City of Pittsburgh (Authority) each suggested security funds were misspent, indicating it was each other's responsibility to monitor the funding. Your attention is required to ensure scarce Section-8 funding is not abused while responsible parties argue over monitoring responsibility.

Issue Date: April 13, 1998
Audit Related Memorandum 98-PH-241-1803
File Size: 26KB

Title: City of Sharon, Sharon, PA

Based on a citizen complaint we surveyed the operation of the City of Sharon's CDBG Program. The purpose of the survey was to review the City's administration of the CDBG Program, pursue the complainant's allegations, and determine whether further audit work was necessary.

Our review identified that the City's rehabilitation loan application required additional pertinent information, and should be amended to include the applicant's signature, social security number, and date. Our recommendation was brought to the attention of the Assistant Program Director for implementation.

Based on our review, we have concluded that the complainant's allegations were not justified, and no additional audit work is currently necessary.

Issue Date: October 29, 1997
Audit Related Memorandum No. 98-PH-241-1801
File Size: 18KB

Title: City of Altoona, Altoona, PA

Our survey disclosed the following:

- The City monitored only 2 of its 11 subrecipients since January, 1997. The City monitored its largest subrecipients, both of which received more than $200,000 each during 1995. Inadequate subrecipient monitoring was noted as a finding in the City's 1995 single IPA audit. The City's Community Development Director planned on establishing a threshold for on-site monitoring of subrecipients. The Director stated the City continually monitors the subrecipients because supporting documentation is required before any CDBG funds are released. Resolution of this situation is currently being handled by your staff.

- No significant deficiencies were disclosed in the other; areas surveyed.

Issue Date: August 21, 1997
Audit Related Memorandum No. 97-PH-212-1811
File Size: 235KB

Title: Elmira Jeffries Nursing Home, Philadelphia, PA

TUH/GPHSC could not provide sufficient documentation to support various payments to the previous owner, Mt Sinai Holy Church. TUH/GPHSC stated that the payments were made to the previous owner for:

(1) money due to the previous owner;

(2) consultant services rendered to the project; and,

(3) legal fees.

However, TUH/GPHSC was unable to produce documentation to evidence these expenditures were for reasonable operating expenses or necessary repairs.; As a result, TUH/GPHSC has agreed to credit the project $671,478.18 for all payments from project funds to repay funds advanced by TUH.

Issue Date: June 27, 1997
Audit Related Memorandum No. 97-PH-241-1809
File Size: 19KB

Title: O'Connor Square Townhouses, Pittsburgh, PA

Our review of GHCA's procurement activities disclosed:

- The contract for the construction of O'Connor Square was awarded without competition. - The contractor was not bonded.

- An identity of interest existed between a member of GHCA's Board and a sub-contractor.

Issue Date: May 8, 1997
Audit Related Memorandum 97-PH-211-1807
File Size: 16KB

Title: Fairview & Fairmount Apts., Meadville, PA

Our HQS inspections disclosed the need for Ground Fault Interrupt (GFI) electrical outlets in the bathroom medicine cabinets of both projects. No reportable deficiencies were found in the other areas reviewed.

Survey results were discussed with project management. They stated that the GFI outlet condition will be corrected. Based on survey results, we have concluded that no additional audit work is necessary. However, your staff should confirm the resolution of the GFI condition during their next physical inspection of both projects.

Issue Date: April 25, 1997
Audit Related Memorandum 97-PH-241-1806
File Size: 17KB

Title: City of Erie, Erie, PA

Our survey disclosed the following:

The City was not performing the required annual monitoring review of the Redevelopment Authority of the City of Erie (RACE). The last review was done in December 1994. The RACE's staff policies and procedures manual for housing rehabilitation programs was not current. City of Erie inspectors were not present during the RACE's progress and final housing rehabilitation inspections, as required by RACE's policy.

The RACE was not performing 60 day follow-up inspections of rehabilitated homes, as required by its policy. Various minor deficiencies were identified during OIG inspection of homes rehabilitated under the RACE's rehabilitation programs. No significant deficiencies were disclosed in the other areas surveyed.

Issue Date: February 21, 1997
Audit Related Memorandum 97-PH-241-1803
File Size: 15KB

Title: City of Pittsburgh, Pittsburgh, PA

Our survey disclosed no reportable deficiencies, and no additional audit work is currently necessary.

Issue Date: January 30, 1997
Audit Case Number 97-PH-202-1006
File Size: 100KB

Title: Luzerne County HA, Kingston, PA

Our audit found the LCHA needs to improve operational controls in the following areas:

- Public Housing Drug Elimination Program

- Administrative costs - Internal controls

- Public Housing Management Assessment Program

Issue Date: January 14, 1997
Audit Report Number 97-PH-201-1004
File Size: 137KB

Title: Philadelphia HA, Philadelphia, PA.

This report details the problems confronting the Authority today, steps they have taken to address the problems, and the progress made to date. We have also provided recommendations to assist HUD staff and Authority management in continuing to improve operations and the quality of living conditions for the residents.

Issue Date: December 27, 1996
Audit Related Memorandum 97-PH-203-1801
File Size: 29KB

Title: Pittsburgh HA, Pittsburgh, PA

Based on an anonymous citizen complaint we performed a limited review of the Pittsburgh Housing Authority's Section 8 Program.

1. HQS Inspections

Nine of fourteen properties inspected failed HQS.; Three property failures could be attributed to inspector oversight.; The property addresses and deficiencies were provided to your staff.; The Authority took immediate action to affect repairs.

2. Exception Rents

We were unable to confirm comparability data used to qualify units for exception rent.; For the five units sampled the Authority prepared a comparability analysis worksheet for all units receiving exception rent.; However, the Authority was unable to locate supporting documentation for comparable units listed on the analysis worksheets for four units.; Supporting documentation for two units was inconsistent with the data recorded on the analysis worksheet.; Independent confirmations with rental agents and owners of comparable units was inconsistent with Authority recorded data.

The Authority maintained data sheets on comparable units for each geographic area.; However these data sheets were used for processing both exception rents and annual adjustment factor rent increases.; The Authority indicated that when comparability data is used for annual adjustment rent increases the original data sheet is transferred to unit folders and therefore would be difficult to locate.; Source documentation for the comparability analysis worksheets is not retained in the exception rent unit folders. As a result the Authority would be unable to locate exception rent comparability data without 100% unit folder review. The Section 8 coordinator was not aware that original comparability data was not being retained in a control file. Changes are planned to make the process more efficient.

3. Total Tenant Payment Calculations

The Authority did not properly calculate Total Tenant Payment (TTP) for two of 14 tenant files reviewed. As a result, the Authority owes two tenants a total of $392. For one tenant, the Authority did not properly verify income for the recertifications effective February 1, 1994 and 1995. The Authority used income verifications from prior years. The Authority also included an income source twice when calculating the TTP for the recertification period effective February 1, 1994. As a result, the tenant is owed $72.

For another tenant the Authority did not consider an elderly allowance in the recertifications computation effective April 1, 1994 through November 13, 1996. As a result, the tenant is owed $320 for the period April 1, 1994 through November 13, 1996.

Issue Date: December 23, 1996
Audit Case Number 97-PH-202-1003
File Size: 62KB

Title: Washington City HA, Washington, PA

Our audit found the Authority needs to improve operational controls covering the Drug Elimination Program, Section 8 Program, and Public Housing Program occupancy.

Issue Date: August 8, 1996
Audit Related Memorandum 96-PH-250-1820
File Size: 36KB

Title: CDBG Program, City of Reading, PA

Based on our testing we determined that the Grantee adhered to HUD guidelines for performing financial feasibility analyses, documented eligibility and national objectives determinations and performed follow-up monitoring to assure that the loans achieved the intended public benefits in terms of jobs created or retained. The Grantee's controls were also adequate to achieve program objectives for economic development activities and safeguard related assets, except for two specific weaknesses involving loan underwriting and servicing.

The internal control weaknesses involve the underwriting of loans to borrowers who are or were delinquent on previous loans and the handling of loan payments mailed to the Grantee's office, for which we recommended that the Grantee revise its procedures in order to strengthen controls in these areas.

Issue Date: July 16, 1996
Audit Report Number 96-PH-202-1018
File Size: 97KB

Title: HA of the County of Chester, West Chester, PA

The Authority did not operate in an efficient, effective and economical manner. Improvements are needed in the overall management of the Authority's operations and in the maintenance of the Authority's projects.

Issue Date: May 20, 1996
Audit Report Number 96-PH-241-1016
File Size: 149KB

Title: Dept. of Housing Services, Norristown, PA

The audit disclosed that the Grantee needs to revise and strengthen procedures regarding inspections of completed rehabilitation work, conflicts of interest, rehabilitation costs, procurement of supplies and services, rents and occupancy, annual inspections, and contractors' liability insurance coverage.

Issue Date: April 29, 1996
Audit Related Memorandum No. 96-PH-249-1815
File Size: 40KB

Title: Delaware City Penza Tract Fund, Media, PA

The Grantee sold land in 1979 and 1981 that had previously been acquired with CDBG funds, but did not credit the net sales proceeds of $1,262,990 to program income, as required; and, earned a minimum of $516,309 in interest on the land sales proceeds since April 1988, but did not credit these earnings to CDBG program income, as required. Part of these interest earnings were transferred to the Grantee's general fund and subsequently spent on general governmental activities, contrary to regulations.

Issue Date: April 9, 1996
Audit Related Memorandum No. 96-PH-209-1814
File Size: 24KB

Title: Schuylkill County HA, Pottsville, PA

Our survey disclosed that:

- The Authority purchased the Female Grammar School Building for the purpose of consolidating and relocating their administrative offices, maintenance warehouse, and Section 8 offices to a central downtown location.

- Appraisal reports and property records support the Authority's purchase price of $100,000. No evidence was found to indicate that the purchase was other than an arm's length transaction. - The former Executive Director acted independently in the purchase and planned rehabilitation of the property.

- A professional estimate of rehabilitation costs, necessary to prepare the building for occupancy, was not performed prior to purchase. Rehabilitation costs were estimated by the former Executive Director. There was no documentation to support his rehabilitation estimate of the building.

- Oversight by the Board of Commissioners was minimal. The Commissioners accepted the former Executive Director's proposal and estimate of rehabilitation costs without challenge.

- Contractor bids for rehabilitation work disclosed that rehabilitation and occupancy of the building was prohibitive.

- Attempts to dispose of the property, to date, have failed to realize the Authority's original purchase price.

Action on the disposition of the property has been suspended pending direction from your office. Based on our review we have concluded that the former Executive Director did not act in the best interest of the Authority. Purchasing the building without first obtaining a professional estimate of rehabilitation costs to determine the feasibility to convert the building to office space, within the comprehensive grant budget, represents significant mismanagement. The absence of oversight by the Board of Commissioners in our opinion contributed to, rather than prevented, mismanagement. As a result, the Authority is now in a position to incur a substantial loss in the disposition of the property.

Issue Date: February 29, 1996
Audit Related Memorandum No. 96-PH-201-1014
File Size: 61KB

Title: Phila. HA, Philadelphia, PA

The ART program was a costly demonstration program. The program, which was designed to have union workers and Authority residents working together to renovate units and to provide training to residents, resulted in total costs of $28.3 million to renovate only 221 units. Over $2 million was spent on units which were determined to be not viable and not structurally sound, and on units that were never completed. Authority residents who participated in the job training program received $347,211, but union workers were paid over $19 million for renovation labor.

Issue Date: January 17, 1996
Audit Report Number 96-PH-214-1005
File Size: 101KB

Title: Allegheny Housing Rehab. Corp., Pittsburgh, PA

The report's five findings identifies that AHRCO: improperly paid employees from project funds; incurred ineligible and unsupported costs; mismanaged various aspects of the Flexable Subsidy Program; did not allocate computer costs to all entities managed and requires improvement in administering Section 8 occupany requirements.

Issue Date: December 5, 1995
Audit Related Memorandum No. 96-PH-212-1004
File Size: 15KB

Title: Wilkins House, Wilkinsburg, PA

Our survey disclosed that: 1. The Owner of Wilkins House had received $57,000 in salary from Wilkins House payroll from January through September, 1995. The Assistant Director of Wilkins House stated that HUD Area Office staff had verbally approved the Owner's salary since the Owner was considered an employee of Wilkins House. Your office contends that prior written HUD approval was necessary before the Owner could collect a salary. The Assistant Director concurred that written approval was not obtained from HUD before the Owner collected the salary. The status of this issue remains vested with your office for a decision.

2. Your office stated in a July 25, 1995 memo it appeared the Notes Payable to the Owner decreased $204,300 during 1994. The decrease in the Notes Payable actually occurred in 1993; $195,000 was paid to a former investor and the remaining $9,300 was paid to the Owner. On February 24, 1995 your office advised the former owner that $206,000 was an unauthorized distribution and reimbursement was required to the project's operating account. This issue was disclosed in the Audit Related Memorandum issued to your office on July 11, 1995. The $195,000 addressed above is not included in the unauthorized distribution.

Issue Date: November 28, 1995
Audit Related Memorandum No. 96-PH-214-1003
File Size: 17KB

Title: Supportive Housing Management Services, Clairton, PA

Our survey disclosed the following: Laurel Wood Apartments:

- The Security Deposit Account was underfunded by $280 due to clerical errors.

- The Reserve for Replacement Account was underfunded $10,577 due to cash deficits during initial operations. Wesley Commons:

- One tenant was selected for housing who had not been on the waiting list.

- Items cited on the latest physical inspection report dated June 26, 1995 have not been corrected to date.

- For two tenants, court ordered support payments were not included as income. - A tenant's rent was overstated by $75 monthly due to clerical oversight.

- The manager allowed tenants to hand carry statements from public assistance to expedite the recertification process. Versailles Archer:

- A tenant overpaid rent by $42 monthly because the manager overlooked the medical deduction for Medicare B payments.

Issue Date: November 27, 1995
Audit Report Number 96-PH-212-1002
File Size: 41KB

Title: Pine Hill Farms Apts., York, PA

We determined that the Owner did not comply with Regulatory Agreement provisions pertaining to cash distributions and tenant security deposits.

Issue Date: October 24, 1995
Audit Related Memorandum No. 96-PH-214-1802
File Size: 24KB

Title: NDC Asset Management, Inc., Pittsburgh, PA

Our survey disclosed the following:

- There were 21 overhoused and four underhoused tenants at Shenango Park Apartments. The overhoused tenants reside in two bedroom units but require transfers to one bedroom units. The underhoused tenants reside in two bedroom units but require three bedroom units. The Resident Manager stated that some of the overhoused tenants had lived in the same units for the past 15 to 20 years and refused to move. The Resident Manager stated transfers for the overhoused tenants will be done as soon as one bedroom units become available. The Resident Manager plans to transfer the underhoused tenants between September and October 1995.

- The laundry and boiler rooms of one of the buildings at Belvedere Acres was still suffering the effects of building subsidence. Your office has been aware of the situation since it originally occurred in 1986. According to your staff, the subsidence has been adequately monitored by HUD and does not pose a threat to the safety of the building's occupants. Since HUD was aware of the subsidence and has been monitoring the situation, it was not pursued as an issue.

- One of seven Section 8 units at Shenango Park Apartments failed HQS. The unit failed due to violations including peeling and chipping paint, a deteriorating window sill, and an unattached baseboard. Several other items noted during inspection of the same unit also failed but were repaired the same day and thus were not listed as failed items. The Maintenance Supervisor stated the remaining HQS deficiencies would be repaired immediately.

- No reportable deficiencies were noted regarding tenant eligibility and management activities.

Issue Date: October 12, 1995
Memorandum Report No. 96-AO-209-1804
File Size: 16KB

Title: Allegheny County HA, Pittsburgh, PA

We concluded that the abatement of lead-based paint, for which the contractor was paid more than $822,000, was not performed in accordance with the terms of the contract.