AUDIT REPORT ASHLEY CROSSINGS APARTMENT HOMES HUD PROJECT NO. 067-35331 2002-AT-1004 SEPTEMBER 26, 2002 OFFICE OF AUDIT, REGION 4 Table of Contents Exit Issue Date September 26, 2002 Audit Case Number 2002-AT-1004 TO: Donzella B. Hamm, Director, Atlanta Enforcement Center, VS4 FROM: Nancy H. Cooper Regional Inspector General For Audit, Region 4, 4AGA SUBJECT: Ashley Crossings Apartment Homes HUD Project No. 067-35331 Largo, Florida We audited the operations of Ashley Crossings Apartment Homes. The HUD Jacksonville Multifamily HUB office requested the audit because (1) the owner defaulted before final endorsement by the Department of Housing and Urban Development (HUD), (2) numerous liens were placed against the property, (3) the owner was not utilizing a HUD-approved management agent, and (4) there were concerns about information reported on the Monthly Accounting Reports. Our report contains three findings related to mismanagement of project operating funds, misuse of tenant security deposit funds, and the lack of full disclosure/diversion of mortgagor entity assets on the part of the project owner. We have accepted your proposed management decisions for each report recommendation. Please advise us when all final actions have been completed. Also, please furnish us copies of any correspondence or directives issued because of the audit. If you have any questions, please contact James D. McKay, Assistant Regional Inspector General for Audit, at (404) 331-3369. Table of Contents Exit Management Memorandum THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page ii Table of Contents Exit Executive Summary We conducted the audit of Ashley Crossings Apartment Homes in response to a request by HUD, Jacksonville Multifamily HUB. HUD requested the audit because: (1) the owner defaulted before final endorsement, (2) numerous liens were placed against the property, (3) the owner was not utilizing a HUD-approved management agent, and (4) there were concerns about information reported on the Monthly Accounting Reports. We reviewed project operations, construction activities, and procedures relating to the application, Firm Commitment, and Initial Closing on the project. Specifically, the audit objectives were to determine (1) what transpired up to and during the initial closing, (2) if the owner used project operating and trust funds in compliance with the Regulatory Agreement and HUD requirements specifically related to the distributions of earnings, and (3) whether improper construction activities occurred during the project’s rehabilitation period. We found no irregularities related to the construction activities. The owner improperly disbursed $312,439 in project operating and trust funds, while defaulting under the Regulatory Agreement and while providing HUD with inaccurate and incomplete information on monthly accounting reports. The ineligible disbursements consisted of $200,330 for unauthorized distributions, including $25,000 disbursed after the mortgage default, and $112,109 for ineligible management agent expenditures. The misuse of funds contributed to the mortgage default and HUD’s recommendation to foreclose on the mortgage. The owner improperly used $12,039 of tenant security deposits. As a result, project liabilities to tenants were not funded in a trust account as prescribed by HUD regulations. The owner also deposited tenant security deposits into the operating account initially and paid security deposit refunds from the operating account recently. The owner failed to fully disclose all facts concerning the Ashley Crossings Project and mortgagor entity, and diverted mortgagor entity assets that could have been used for the project. HUD processed the loan application and approved the loan without full knowledge of all the relevant facts surrounding the acquisition of the property. Had HUD been aware of all the facts, the loan may not have been approved. As a result, the $12,989,900 HUD insured loan went into default, was assigned to HUD, and was recommended for foreclosure. Subsequent to the foreclosure recommendation, HUD decided to dispose of the mortgage in a note sale. The FHA Insurance Fund stands to suffer a substantial loss when the mortgage note is sold as a result of the assignment. We attributed the conditions to the owner’s failure to HUD Management follow HUD requirements. Decisions We discussed the violations with the owner during the audit and we scheduled an exit conference for August 28, 2002. However, the owner requested a postponement and declined to reschedule an exit conference during subsequent contacts with him. Furthermore, the owner did not provide written comments even after we gave him Page iii 2002-AT-1004 Table of Contents Exit Executive Summary additional time to respond prior to preparing the final report. We also discussed the draft findings with the Jacksonville Multifamily HUB office and the Atlanta Enforcement Center. In response to the draft findings, the Atlanta Enforcement Center agreed to be responsible for implementing the draft report recommendations. The Atlanta Enforcement Center agreed to require repayment of ineligible distributions and ineligible management agent expenditures. The Center also agreed to pursue debarment action against the mortgagor entity and its individual principals. 2002-AT-1004 Page iv Table of Contents Exit Table of Contents Management Memorandum i Executive Summary iii Introduction 1 Findings 1. Mismanagement of Project Funds 3 2. Misuse of Tenant Security Deposits 9 3. Owner Did Not Fully Disclose Facts to HUD and Diverted Mortgagor Entity Assets 11 Management Controls 19 Follow-Up On Prior Audits 21 Appendices A. Schedule of Ineligible Costs 23 B. Summary of Finding 1 Ineligible Expenditures 25 C. Detailed Schedule of Finding 1 Ineligible Expenditures 27 Page v 2002-AT-1004 Table of Contents Exit Table of Contents D. Listing of Discrepancies and Concerns Identified in Monthly Accounting Reports 33 E. Distribution Outside of HUD 35 2002-AT-1004 Page vi Table of Contents Exit Introduction Ashley Crossings Apartment Homes, located in Largo, Florida, is a 278-unit profit motivated project owned by Ashley Crossings Apartment Homes of Florida, LP (Mortgagor). HUD authorized and financed the project under Section 221(d)(4) Substantial Rehabilitation. The partners in the mortgagor entity are Mason-Phillips Properties of Florida IV, Inc. (Managing General Partner) and Tampa Club, Inc. (General Partner). Charles E. Hartman and Vanessa L. Hartman were listed as President and Vice President of Mason-Phillips Properties, respectively. The Hartmans are father and daughter, who subsequently switched roles in the company. Stuart Chalfin was President of Tampa Club. Charles Hartman (herein referred to as “owner” or “mortgagor”) had primary responsibility for the project and maintenance of its books and records. On June 17, 1999, HUD issued a Commitment for Insurance of Advances (Firm Commitment). The mortgagee, Continental Wingate Associates, Inc., requested that HUD reissue the Firm Commitment due to a change in the interest rate. HUD reissued the Firm Commitment on July 21, 1999. The maximum FHA Insured Loan amount was $12,989,900. The Initial Endorsement and Initial Closing occurred on August 25, 1999. However, the Regulatory Agreement and the Mortgage were signed and dated on August 24, 1999. Construction began in September 1999. During the construction period the owner failed to pay the contractor, real estate taxes, and water and sewer charges. The Douglas Company, general contractor, stopped work on May 23, 2000, because the owner had not paid for work completed to that point. Three months later, the owner and contractor reached an agreement and work recommenced on August 24, 2000. On December 14, 2000, HUD certified that the contractor’s work was 100 percent complete. However, the project was only 96 percent complete as a result of the City of Largo citing local building code deficiencies. The work necessary to correct those deficiencies was the owner’s responsibility and was outside the contractor’s scope of work. The project could not be finally inspected until the owner completed his portion of the work, so that the Certificate of Compliance could be issued. The owner did not make the mortgage payments due on January 1, and February 1, 2001, and allowed the mortgage to go into default. HUD provided the owner an opportunity to correct all violations of the mortgage and Regulatory Agreement. The owner objected to all violations cited by HUD. The project never reached Final Endorsement, as the owner never submitted a Cost Certification. The mortgagee assigned the loan to HUD on May 10, 2001. The Jacksonville Multifamily HUB recommended debarment of Ashley Crossings ownership entities, and on May 17, 2001, recommended foreclosure. While our audit was in progress, HUD decided to dispose of the property via a Note Sale. The process was still underway when we completed our audit work. Page 1 2002-AT-1004 Table of Contents Exit Introduction The audit objectives were to determine (1) what transpired Audit Objectives up to and during the initial closing, (2) if the owner used project operating and trust funds in compliance with the Regulatory Agreement and HUD requirements specifically related to the distributions of earnings, and (3) whether improper construction activities occurred during the project’s rehabilitation period. To accomplish the objective, we reviewed project records at HUD’s office in Jacksonville, Florida; the office of the owner/manager of Ashley Crossings Apartment Homes in Ponte Vedra Beach, Florida; and the project’s leasing office in Largo, Florida. We also interviewed officials at HUD’s Jacksonville and Atlanta offices, the owner/manager, the on-site property manager, the owner’s accountant, and mortgagee officials. We tested project accounting records and interviewed the owner and his accountant to gain an understanding of the management controls relevant to the audit. The main focus of the audit covered the period May 1997 Audit Scope and through March 2002, although the initial application was Methodology submitted to HUD in late 1996. Between 1999 and February 2002 the project generated revenue of $588,209 and disbursed $586,845 from its operating account. We reviewed 100 percent of the income and disbursement transactions for the operating account during that period. We also reviewed all disbursements from the Tenant Security Deposit Account totaling $12,837. We conducted the audit from February through June 2002 in accordance with generally accepted government auditing standards. 2002-AT-1004 Page 2 Table of Contents Exit Finding 1 Mismanagement of Project Funds Ashley Crossing’s managing owner improperly disbursed $312,439 in project operating and trust funds, while defaulting under the Regulatory Agreement and while providing HUD with inaccurate and incomplete information on monthly accounting reports. The ineligible disbursements consisted of $200,330 for unauthorized distributions, including $25,000 disbursed after the mortgage default, and $112,109 for ineligible management agent expenditures. The misuse of funds contributed to the mortgage default and HUD’s recommendation to foreclose on the mortgage. We attribute these conditions to the owner’s failure to abide by HUD requirements. According to the Regulatory Agreement, Section 9(f), at HUD requires monthly HUD’s request, the owner shall furnish monthly occupancy accounting reports. reports and shall give specific answers to questions upon which information is desired from time to time relative to income, assets, liabilities, contracts, operations, conditions of the property, and the status of the insured mortgage. HUD Handbook 4370.1, Reviewing Annual and Monthly Financial Reports, provides that monthly accounting reports are useful tools for evaluating a project's performance and monitoring compliance. The reports are generally required when there are indications that the project is experiencing financial or management difficulties or the owner/agent is suspected of noncompliance. Possible actions that may be needed after reviewing monthly accounting reports that depict errors, incomplete forms, noncompliance, and questionable disbursements include written communication with the owner or enforcement action, if appropriate. HUD required the owner to use the form “Monthly Report for Establishing Net Income” to prepare monthly accounting reports. The form provided for detailed reporting of project cash balances, disbursements, and accounts payable. The owner repeatedly submitted incomplete, inaccurate, Owner provided inaccurate and improperly prepared monthly accounting reports. The and incomplete monthly owner began submitting monthly accounting reports in accounting reports to HUD September 2000. According to the mortgagee and HUD, the reports (1) lacked supporting documentation, (2) omitted disbursements and payables, and (3) included computation errors and questionable disbursements. The mortgagee and HUD posed questions and expressed concerns in writing to the owner regarding monthly reports Page 3 2002-AT-1004 Table of Contents Exit Finding 1 from October 2000 through December 2001. The owner’s monthly reports for January and February 2002 were delinquent. In responses to the mortgagee and HUD, the owner’s executive assistant admitted ignorance of how to prepare parts of the monthly reports, but did not respond to all issues. For example, there were no responses to requests for return of funds paid to an unacceptable management agent or explanations of $4,500 and $1,800 disbursements for miscellaneous administrative expenses. We also questioned the owner concerning information on the monthly accounting reports. The owner claimed that the inconsistencies in the monthly accounting reports were due to incompetent employees, poor record keeping, and poor reporting. The owner is ultimately responsible for information submitted to HUD, therefore we attribute the condition to the owner’s failure to abide by HUD requirements. Appendix D provides more detailed descriptions of the discrepancies and concerns identified in Ashley Crossing’s monthly reports by the mortgagee and HUD. By continuously providing incomplete, inaccurate, and improperly prepared monthly accounting reports, the owner deprived HUD of accurate financial information needed to effectively monitor project revenues, disbursements, and obligations. Between August 1999 and February 2002, the owner made 520 disbursements totaling $586,845 from the project operating account. The owner also made two withdrawals totaling $12,039 from the tenant security deposit account. We reviewed all disbursements and both withdrawals. The disbursements consisted of 134 payments totaling $200,330 for ineligible distributions to the owner, his partners, investors, or his related company, and 51 payments totaling $112,109 for ineligible management agent expenditures. The total ineligible expenditures of $312,439 amounted to over 52 percent of project expenditures. 2002-AT-1004 Page 4 Table of Contents Exit Finding 1 The Regulatory Agreement, Section 13(g), defines a HUD limits distributions distribution as any withdrawal or taking of project cash or only from surplus cash. any assets of the project including the segregation of cash for subsequent withdrawal, excluding payments for reasonable expenses incidental to the operations and maintenance of the project. Section 6(b), states that, without HUD’s prior written permission, owners shall not make or receive and retain any distribution of assets or any income of any kind of the project except surplus cash. Owners shall not without the prior written approval of the Secretary: assign, transfer, dispose of, or encumber any personal property of the project, including rents, or pay out any funds except from surplus cash, except for reasonable operating expenses and necessary repairs. The Regulatory Agreement further states that, (1) owners shall not make distributions from borrowed funds, prior to completion of the project, or when there is any default under the Regulatory Agreement or under the note or mortgage (Section 6(e)) and (2) any owner receiving such funds in violation of the Regulatory Agreement shall hold such funds in trust (Section 9(g)). HUD Handbook 4370.2, Financial Operations and Accounting Procedures, paragraph 2-10F, states that distributions may be made only if owners have been in compliance with all provisions of the Regulatory Agreement, including the requirement for the project to be in good repair and condition. The owner disbursed $200,330 from project operating and Ineligible distributions to trust funds for unauthorized distributions, including owners. $148,300 that directly benefited the owner in payments to himself and his management company. The $148,300 included $2,000 improperly disbursed from the tenant security deposit trust account. The owner also disbursed the remaining $52,030 of unauthorized distributions to the general and limited partners and investors. We consider the disbursements to be unauthorized distributions because the disbursements were made when the project was in violation of the Regulatory Agreement and when the physical condition needed to be brought up to code. The City of Largo had cited the project for local building code deficiencies. Page 5 2002-AT-1004 Table of Contents Exit Finding 1 The owner failed to abide by HUD requirements and improperly used project operating and trust funds to make the unauthorized distributions. The project generated sufficient cash to make some mortgage payments. The unauthorized distributions from the operating account could have funded two $86,685 mortgage payments. The owner’s misuse of project funds and failure to make mortgage payments contributed to the mortgage default, subsequent mortgage assignment to HUD, and HUD's foreclosure recommendation. Appendix C, Part I provides a detailed listing of the ineligible distributions summarized below: Payee Amount Charles Hartman $ 500 Mason-Phillips Management Company 147,800 Tampa Club Partners, Inc. 8,250 Universal Corporation of Pinellas 8,000 County Investors 35,780 Total Ineligible Distributions $ 200,330 The above distributions violated the project Regulatory Agreement and are subject to the double damages remedy for unauthorized use of multifamily housing project assets and income (12 USC 1715z-4a). Furthermore, the owner paid $25,000 to himself or his management company after mortgage default, which is subject to remedy under the equity skimming statute (12 USC 1715z-19). The Regulatory Agreement, Section 6(c) states that owners Ineligible management shall not without the prior written approval of the Secretary, agent expenditures convey, assign, or transfer any right to manage or receive the rents and profits from the mortgaged property. Section 6(e)(3), also states that any distribution of any funds of the project, which the party receiving such funds is not entitled to retain, shall be held in trust separate and apart from any other funds. Ashley Crossings owner disbursed $112,109 in project operating funds to property management agents not approved by HUD. Those property management agents were Mountain Heritage and its affiliates - Ward’s Painting and Lisa Kessler, which the owner allowed to collect rents. 2002-AT-1004 Page 6 Table of Contents Exit Finding 1 HUD did not approve Mountain Heritage as property management agent and had advised the project owner on several occasions that Mountain Heritage was not an acceptable property management agent. The owner disregarded HUD’s instructions and continued to use Mountain Heritage and its affiliated companies as on site property managers. Therefore, all disbursements to Mountain Heritage, Ward's Painting, and Lisa Kessler are ineligible. Appendix C, Part II provides a detailed listing of the ineligible management agent expenditures summarized below: Description Amount Payroll, Maintenance, and Repairs $ 71,673 Supplies and Services 25,473 Employee Benefits and Profit 14,942 Overpayment of Payroll Expense 21 Total Ineligible Management Agent Expenditures $ 112,109 The owner’s lack of effort to make any mortgage payments and mismanagement of project funds were significant causes of the mortgage default. Accordingly, HUD’s Jacksonville office recommended debarment action against the project owners based on several violations of the Regulatory Agreement and the mortgage, including failure to make mortgage payments, unauthorized payments to the owner, and unauthorized payments to a non-approved management company. Auditee Comments The owner did not respond to the finding. HUD Management The Atlanta Enforcement Center agreed to take the following Decision actions: 1A. Require the owner to reimburse the project operating and trust accounts in the amount of $200,330 for ineligible distributions and $112,109 for ineligible management agent expenditures. Page 7 2002-AT-1004 Table of Contents Exit Finding 1 1B. Pursue appropriate sanctions available under the Regulatory Agreement, Equity Skimming Statute, and the Double Damage Statutes against the mortgagor entity and its individual principals. 1C. Debar the mortgagor entity and its individual principals from future participation in HUD Programs based upon a history of unsatisfactory performance of regulatory requirements. 2002-AT-1004 Page 8 Table of Contents Exit Finding 2 Misuse of Tenant Security Deposits The owner improperly used $12,039 of tenant security deposits. As a result, project liabilities to tenants were not funded in a trust account as prescribed by HUD regulations. The owner also deposited tenant security deposits into the operating account initially and paid security deposit refunds from the operating account recently. We attribute these violations to the owner’s failure to abide by HUD requirements. The Regulatory Agreement, Section 6(g), states that any funds collected as security deposits shall be kept separate and apart from all other funds in a trust account. The amount of the trust account shall at all times equal or exceed the aggregate of all outstanding obligations under said account. The owner deposited the first $600 of security deposit collections into the project operating account. The collection appeared to have been subsequently deposited to the tenant security deposit account when it was opened. Recently, the owner paid $247 from the operating account to tenants for security deposit refunds because he had not ordered checks for the security deposit account. Initially, we determined that, as of February 28, 2002, the cash balance in the tenant security deposit trust account was $10,546 which was $1,202 less than the $11,748 liability for security deposits that we calculated. We used information from the Rent Roll system, monthly accounting reports, and bank statements to calculate the liability. We attributed most of the shortage to an improper $2,000 withdrawal from the account in March 2001, which was used to pay marketing expenses for the owner’s management company. The owner stated that the amount was withdrawn in error and the account was later reimbursed. We found no evidence that the $2,000 was ever fully reimbursed. We obtained a bank statement for the month following the cutoff date of the above analysis and found that the account was cleared out and had a zero balance as of March 29, 2002. The statement showed a $300 deposit on March 5, 2002, a service charge deduction of $8.72, and a withdrawal of $10,837 described as a writ received from Dart Electronics, Inc. on March 12, 2002. The owner stated that the funds were attached in response to a lawsuit against him. He further stated that the money was not taken, but placed in suspense pending settlement of the lawsuit. The owner claimed that he had already settled the suit with the plaintiff and the funds would soon be released. However, at the time of our conversation, the funds had not yet been returned to the account. Therefore, considering Rent Roll and monthly accounting data, the account was under funded by $12,039 ($11,748 plus $300 minus $8.72) as of March 29, 2002. The balance in the trust account should equal or exceed the aggregate of all outstanding obligations reflected by the security deposit liability account. As of March 29, 2002, the trust account for security deposits contained a zero ($0) balance. Page 9 2002-AT-1004 Table of Contents Exit Finding 2 In summary, the owner stated that he spent the security deposit account funds in March 2001 in error and in March 2002 the funds were garnished due to a lawsuit. We had no evidence that the account was replenished at either time. Therefore, we conclude that the owner mismanaged the tenant security deposit funds. Auditee Comments The owner did not respond to the finding. The Atlanta Enforcement Center agreed to: HUD management decision 2A. Require the owner to reimburse the tenant security deposit trust account in the amount of $12,039 for improper disbursements, unless he can provide evidence the tenant security deposit account was replenished. 2002-AT-1004 Page 10 Table of Contents Exit Finding 3 Owner Did Not Fully Disclose Facts to HUD and Diverted Mortgagor Entity Assets The owner failed to fully disclose all facts concerning the Ashley Crossings Project and mortgagor entity, and diverted mortgagor entity assets that could have been used for the project. HUD processed the loan application and approved the loan without full knowledge of all the relevant facts surrounding the acquisition of the property. Had HUD been aware of all the facts, the loan may not have been approved. As a result, the $12,989,900 HUD insured loan went into default, was assigned to HUD, and was recommended for foreclosure. Subsequent to the foreclosure recommendation, HUD decided to dispose of the mortgage in a note sale. The FHA Insurance Fund stands to suffer a substantial loss when the mortgage note is sold as a result of the assignment. HUD Handbook 4065.1, paragraph 1-2, states that it is HUD's policy that participants in its housing programs be responsible individuals and organizations who will honor their legal, financial, fair housing, and contractual obligations. It further states that "responsibility" is a term used by HUD to mean business integrity, honesty and capacity to perform. HUD has a process for review of past/present performance of those principals applying for participation in the Department's Multifamily Housing programs, which is known as a Previous Participation Review and Clearance Procedures or Form HUD 2530 Previous Participation Certification approval. The handbook also defines who is considered to be principals of a project. HUD Handbook 4370.2, paragraph 2.3, states that both the Regulatory Agreement and the certificate executed by the mortgagor, at the time the mortgage is insured, contain provisions that accounts of mortgaged property operations be kept in accordance with the requirements of the Secretary and in such form as to permit a speedy and effective audit. HUD Handbook 4470.1, paragraph 3.1, states that the sponsor, mortgagor (if formed), principals of the mortgagor, and general contractor must furnish current financial statements with supporting schedules as part of the application for commitment processing. HUD’s debarment regulations at Title 24 CFR 24.305 (d) provides that debarment may be imposed for any cause of so serious or compelling a nature that it affects the present responsibility of a person. Throughout the loan application, underwriting, and Firm Owner failed to fully Commitment processes, the owner failed to make full disclose facts to HUD disclosure of all facts. Changes occurred between the time of Firm Commitment and Initial Closing that should have been brought to the attention of HUD. Because the owner failed to disclose all relevant information, HUD was deprived of information that could have affected its decision to issue the Firm Commitment and proceed with Page 11 2002-AT-1004 Table of Contents Exit Finding 3 the Initial Closing on the loan. The owner’s pattern of less than full disclosure continues up to the present time with his failure to provide all requested documentation to the Jacksonville Multi-Family staff and to the OIG auditors conducting this audit. Charles E. Hartman considered as "owner" and controlling participant The key individual controlling the Ashley Crossings project was Charles E. Hartman. Per the initial loan applications, Mr. Hartman was to have been a principal of Ashley Crossings and was to have been the President of the Managing General Partner entity (Mason-Phillips Properties of Florida, IV, Inc.). However, due to an existing Internal Revenue Service tax lien and lack of financial capacity, Mr. Hartman was not used as a principal. Several other individuals, who had financial capacity and creditworthiness, were subsequently used as sponsors to satisfy HUD loan underwriting requirements. Mr. Hartman's daughter, Vanessa L. Hartman, was subsequently named President of the Managing General Partner entity. Charles Hartman was named as Vice-President. Our audit disclosed that Charles Hartman signed Vanessa Hartman's name to several key documents (including the Application for Multifamily Housing Project, HUD Form 92013) provided to HUD without proper Power of Attorney to do so. Technically, that constitutes forgery on the part of Charles Hartman. Charles Hartman has stated that Vanessa Hartman was not involved at all in the day-to-day operations of Ashley Crossings. Thus, it was Charles Hartman who was responsible for the representations made to HUD and he is responsible for what happened concerning Ashley Crossings. Therefore, we consider Charles Hartman to be the "owner" of Ashley Crossings, although he was technically not a "principal" as defined by HUD guidance. As the owner and controlling participant in Ashley Crossings concerning the housing program, HUD would expect him to demonstrate the same level of "responsibility" as any principal. It is clear he did not exercise this responsibility and did not honor his legal, financial, and contractual obligations. This resulted in the default and assignment of the HUD Insured loan. 2002-AT-1004 Page 12 Table of Contents Exit Finding 3 Misrepresentations concerning the Mortgagor Entity and its Financial Structure The mortgagor entity was presented to HUD, per the application, as a newly formed entity without any financial or credit history. This turns out to be only partially true. It is true that the mortgagor (Ashley Crossings Apartment Homes of Florida, Limited Partnership) had only been formed four months prior to the filing of an amended loan application on July 30, 1998. However, the owner had obtained loans during 1997 and early 1998 from individuals and solicited funds from investors in Ashley Crossings. These loans and investments were obtained for the specific purpose of the Ashley Crossings project. Part of these investments was considered by the owner to be "Notes Payable" rather than owner equity. The owner had already begun to pay the investors monthly "interest" on their investments or notes payable. Thus the owner had effectively established liabilities for the mortgagor entity that were not disclosed to HUD. Although we found no proof that any of these loans or "notes payable" were directly attached to the project property, they did represent financial obligations of the mortgagor entity that should have been disclosed to HUD. Identity of Interest Relationship between Mortgagor Entity and the Seller Per the loan application, the relationship between the Buyer (mortgagor entity) and the Seller (Universal Corporation) was stated to be a "business" relationship. That might have been the case at the time the application was initially filed with HUD. However, sometime prior to the Initial Closing the Seller became a "limited partner" in the mortgagor entity and had agreed to put up $1.87 million of its equity in the property in order for the transaction to close. While the Seller’s 10 percent limited partner interest in the mortgagor entity did not technically trigger the requirement for Form 2530 filing (due to not meeting the definition of a principal with at least 25 percent interest), the contribution of $1.87 million in equity was a substantial change in the financial underwriting of the project. It was materially different than that presented during the application and Firm Commitment process. This resulted in a situation where, instead of the Sponsors (who had shown "financial Page 13 2002-AT-1004 Table of Contents Exit Finding 3 capacity" to support the cash requirements of the project) having to put up the cash, the Seller used a substantial part of its equity in the property to satisfy the cash requirement. This may not technically meet the "substantial deviation" test, but it certainly was a material change that should have been clearly brought to the attention of HUD prior to Initial Closing. We consider this to be a failure to disclose an identify of interest relationship between the Buyer and the Seller since this placed the Seller in a position of having more financial interest (equity) in Ashley Crossings than any other limited or general partner. Amendments to the Partnership Agreement Not Timely Provided to HUD Part of the documentation presented to HUD during the Initial Closing process was an Amended Partnership Agreement reflecting that the Seller of the property had become a limited partner in the partnership as discussed above. This documentation should have been presented to HUD at least 15 days prior to the Initial Closing as part of the pre-closing documentation package. The Amended Partnership Agreement was dated the same day as the Initial Closing. Merely providing a copy of an Amended Partnership Agreement as part of a large package of documents during the Initial Closing process was not adequate and clear disclosure of this material change. This is just another example of how the owner failed to provide HUD with information, or failed to provide it in a timely manner that would have allowed adequate time for HUD staff to review it and assess its impact on their decision to approve and process the loan. Owner’s Failure to Maintain Adequate Accounting System and Provide Annual Financial Statements The owner has not maintained an adequate accounting system and has not filed the Final Cost Certifications and subsequent Annual Financial Statements as required by the Regulatory Agreement and other HUD handbooks. During the audit, we found the accounting system used by Ashley Crossings to be little more than a data entry system. The owner did not maintain adequate records of project transactions or investor contributions. For example, expenses were not posted to the proper accounts and many 2002-AT-1004 Page 14 Table of Contents Exit Finding 3 items such as bank service charges, deposits, and returned checks were not recorded in the cash register or posted to the general ledger. Additionally, we found that the owner had solicited investments of $2.54 million for use in the project. Only $870,000 went into an escrow account. The owner claimed that all funds from investors were used to cover expenses of the project. However, he did not document those expenditures in Ashley Crossings accounting system. Even the owner and his accountant advised us that the project accounting system was not adequately maintained, and therefore, recorded data may not be accurate. This lack of an adequate accounting system and the lack of financial statements created additional work for us. Missing supporting documentation was also a problem during the audit. The lack of documentation and adequate records was given by one of the other General Partners (who was responsible for preparing financial statements and tax returns) as the reason for his inability to accomplish his designated responsibilities. During 1997 through 2000, the owner solicited numerous Owner diverted loans and investments from investors (Note Holders, mortgagor entity assets Limited Partners, and General Partners) for the specific purpose of providing funds for Ashley Crossings. There were two private offerings made on behalf of Ashley Crossings whereby the owner attempted to raise a total of $6.37 million. In total, the owner raised $2.54 million from lenders and investors that was to be used for Ashley Crossings. Only about $870,000 was deposited in an escrow account. Prior to the Initial Closing on August 25, 1999, almost all of these funds had been transferred from the escrow account to one of Mr. Hartman’s other business accounts (Mason-Phillips Management Company, Inc.). We were not provided with documentation to show where the remaining $1.67 million was deposited. While the owner claims to have used these funds for purposes connected to Ashley Crossings, he failed to provide adequate documentation to support his claim. He only provided copies of a Mason-Phillips Management Company, Inc. general ledger account (Accounts Receivable from Ashley Crossings) for the payments he claims were made on behalf of Ashley Crossings, and Page 15 2002-AT-1004 Table of Contents Exit Finding 3 copies of cancelled checks. The general ledger account and cancelled checks are not adequate supporting documentation. They only show that payments were made, not that they were payments for legitimate expenses of Ashley Crossings. Even this unsupported information does not account for the full $2.54 million collected on behalf of Ashley Crossings. The $2.54 million in funds collected by the owner on behalf of Ashley Crossings would have been sufficient to cover all known expenses connected with the development of the project that were not covered by the HUD insured loan of $12,989,900 from Continental Wingate Associates. The owner could have used these funds to make mortgage interest and loan payments and prevented the loan from going into default status and subsequent assignment. It is apparent that a substantial amount of these funds were diverted by the owner and not used or made available for the Ashley Crossings Project. Given the amount of funds that were raised on behalf of Ashley Crossings and should have been available for the project, it is difficult to understand why this project failed and how the loan went into default and was assigned back to HUD. For example, at the end of the construction period (when rehabilitation had been completed by the General Contractor), there was only an estimated $75,000 worth of additional work that needed to be completed to satisfy local building codes and obtain Certificates of Occupancy for all buildings in the project complex. With Certificates of Occupancy the project could have moved forward to full lease-up status and generated sufficient rental revenues to sustain the mortgage payments and operating expenses. We believe the violations of the Regulatory Agreement discussed in Findings 1 and 2, along with the default and assignment of the Ashley Crossings HUD insured loan are sufficient grounds to take debarment actions against Charles E. Hartman. The facts presented in this finding add additional support for immediate action to prevent Mr. Hartman, or any entity under his control, from participating in any future HUD housing programs. Auditee Comments The owner did not respond to the finding. 2002-AT-1004 Page 16 Table of Contents Exit Finding 3 HUD management The Atlanta Enforcement Center agreed to decision 3A. Take immediate action to debar the mortgagor entity and its individual principals from future participation in HUD Programs based upon a lack of present responsibility. Page 17 2002-AT-1004 Table of Contents Exit Finding 3 THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page 18 Table of Contents Exit Management Controls In planning and performing our audit, we considered management control systems of Ashley Crossings Apartment Homes to determine our auditing procedure and not to provide assurance on management controls. Management control includes the plan of organization, methods and procedures adopted by management to ensure that its goals are met. Management controls include the processes for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. We determined the following management controls were Relevant Management relevant to our audit objectives: Controls • Controls over the validity and reliability of data • Controls over compliance with laws and regulations • Controls over the safeguarding of resources We assessed the relevant controls identified above. A significant weakness exists if management control does not give reasonable assurance that the entity’s goals and objectives are met; that resource use is consistent with laws, regulations, and policies; that resources are safeguarded against waste, loss, and misuse; and that reliable data are obtained, maintained, and fairly disclosed in reports. We tested project accounting records and interviewed the owner and his accountant to gain an understanding of the management controls relevant to the audit. Significant weaknesses in the assessed controls existed with respect to the owner controlling, managing, and reporting on the project without regard for HUD program requirements and prudent financial management. We placed no reliance on the controls and instead reviewed all project income and disbursements and tenant security account withdrawals. The control weaknesses were the primary causal factors for Findings 1, 2, and 3. Page 19 2002-AT-1004 Table of Contents Exit Management Controls THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page 20 Table of Contents Exit Follow-Up On Prior Audits This was the first Office of Inspector General audit of Ashley Crossings Apartment Homes mortgagor operations. An independent audit of Ashley Crossings Apartment Homes has not been conducted since its inception. Page 21 2002-AT-1004 Table of Contents Exit Follow-Up On Prior Audits THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page 22 Table of Contents Exit Appendix A Schedule of Ineligible Costs HUD Management Decision Number Ineligible1/ 1A $ 312,439 2A 12,039 Total $ 324,478 1/ Ineligible – Costs that are questioned because of an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other document governing the expenditure. Page 23 2002-AT-1004 Table of Contents Exit Appendix A THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page 24 Table of Contents Exit Appendix B Summary of Finding 1 Ineligible Expenditures Payee Amount Charles Hartman $ 500 Mason-Phillips Management Company 147,800 Tampa Club Partners, Inc. 8,250 Universal Corporation of Pinellas County 8,000 Investors 35,780 Management Agents 112,109 Total Ineligible Expenditures $ 312,439 Page 25 2002-AT-1004 Table of Contents Exit Appendix B THIS PAGE LEFT BLANK INTENTIONALLY 2002-AT-1004 Page 26 Table of Contents Exit Appendix C Detailed Schedule of Finding 1 Ineligible Expenditures Part I Ineligible Distributions Paid Check Ineligible While in Date No. Payee Amount 1/ Default2/ 08/31/99 1003 Mason-Phillips Management Co. $ 42,000.00 09/16/99 1080 Mason-Phillips Management Co. 5,000.00 09/29/99 1099 Mason-Phillips Management Co. 10,000.00 10/08/99 1161 Mason-Phillips Management Co. 1,000.00 11/02/99 1173 Mason-Phillips Management Co. 1,000.00 01/24/00 2011 Mason-Phillips Management Co. 5,000.00 02/24/00 2021 Mason-Phillips Management Co. 7,000.00 05/17/00 2039 Mason-Phillips Management Co. 30,000.00 05/23/00 2041 Mason-Phillips Management Co. 16,000.00 12/01/00 2069 Mason-Phillips Management Co. 4,500.00 01/01/01 2070 Mason-Phillips Management Co. 1,800.00 02/01/01 2498 Mason-Phillips Management Co. 6,500.00 6,500.00 03/12/01 2492 Mason-Phillips Management Co. 4,000.00 4,000.00 03/30/01 2493 Mason-Phillips Management Co. 1,500.00 1,500.00 04/24/01 2391 Mason-Phillips Management Co. 7,500.00 7,500.00 08/16/01 2469 Mason-Phillips Management Co. 1,500.00 1,500.00 10/03/01 2098 Mason-Phillips Management Co. 1,500.00 1,500.00 02/23/01 2081 Charles Hartman 500.00 500.00 03/05/01 -3/ Mason-Phillips Management Co. 2,000.00 2,000.00 Subtotal - Mason-Phillips Management Co. and Charles Hartman $ 148,300.00 $ 25,000.00 08/31/99 1004 Universal Corp. $ 8,000.00 Subtotal - Universal Corp. $ 8,000.00 10/04/99 1107 Tampa Club Partners $ 4,125.00 10/06/99 1157 Tampa Club Partners $ 4,125.00 Subtotal – Tampa Club Partners $ 8,250.00 1/ Ineligible – Costs that are questioned because of an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other document governing the expenditure. 2/ These distributions were made while the mortgage was in default beginning February 1, 2002. 3/ Security Deposit Account Page 27 2002-AT-1004 Table of Contents Exit Appendix C Paid Check Ineligible While in Date No. Payee Amount 1/ Default 2/ 09/13/99 1009 William Or Sharron Bair $ 500.00 09/13/99 1010 Alan L Barton Retirement Acct., Inc. 220.00 09/13/99 1011 Christina F. Behrens Retirement Acct., Inc. 125.00 09/13/99 1012 Ted Berndt Retirement Acct., Inc. 250.00 09/13/99 1013 Frederick & Lois Biederman 250.00 09/13/99 1014 May Financial Corp for L. Jack Borsum 500.00 09/13/99 1015 Marjorie Borsum Trust 250.00 09/13/99 1016 S. Eileen Brezler 500.00 09/13/99 1017 Henry Brumbach 250.00 09/13/99 1018 Colin Burgess 750.00 09/13/99 1019 Harold E. Burt Retirement Accts. 150.00 09/13/99 1020 Thomas F Cullop Retirement Accts 500.00 09/13/99 1021 Dweyer Family Trust 1,025.84 09/13/99 1022 Anne L. Evans Retirement Accts 250.00 09/13/99 1023 Bessie C. Fennell (Nations Bank by Mail) 263.75 09/13/99 1024 Patricia Fleming 375.00 09/13/99 1025 Martha C. Haner 300.00 09/13/99 1026 Sharon E Harrell (Retirement Accts) 500.00 09/13/99 1027 Herman and Jane Hasselbring 1,000.00 09/13/99 1028 James F Hawkins 250.00 09/13/99 1029 Sharon A Herring, (Retirement Accts) 500.00 09/13/99 1030 Stanley or Rebekah Hime 250.00 09/13/99 1031 William A Iles Trust 388.75 09/13/99 1032 John Jacobsen 250.00 09/13/99 1033 Harry and Marjorie Judy 150.00 09/13/99 1034 H. Jack & Janet L. Judy Trust 300.00 09/13/99 1035 Kolseth Revocable Trust 200.00 09/13/99 1036 Catherine Kraus 250.00 09/13/99 1037 Mary Kraus 185.00 09/13/99 1038 Willadean Lamotte (Retirement Accts) 500.00 09/13/99 1039 Barbara Leohwing 500.00 09/13/99 1040 Leatrice Makrouer 255.50 09/13/99 1041 Peter J. Merkle (Retirement Accts) 500.00 09/13/99 1042 Charles V. Mullen, Sr 200.00 09/13/99 1043 Charles C. Mullen, Jr 150.00 09/13/99 1044 James Phoa 55.00 09/13/99 1045 Phyllis Phoa 150.00 09/13/99 1046 Katie Pike or Anita Kirkwood 150.00 09/13/99 1047 Lynn Queenan (Retirement Accts) 130.00 09/13/99 1048 Ralph and Marjorie Schockey 120.00 09/13/99 1049 Ruth B. Setser Rev. Trust 300.00 2002-AT-1004 Page 28 Table of Contents Exit Appendix C Paid Check Ineligible While in Date No. Payee Amount 1/ Default 2/ 09/13/99 1050 Frances R. Shepherd 277.50 09/13/99 1051 John D Shirley (Retirement Accts, 372.84 09/13/99 1052 Elliot S. Silverman 250.00 09/13/99 1053 Jan Silverman 250.00 09/13/99 1054 William or Jean Sponseller 300.00 09/13/99 1055 David Watson 250.00 09/13/99 1056 Maxine Weinberger 250.00 09/16/99 1079 Laura Travis 16.00 10/06/99 1109 William Or Sharron Bair 500.00 10/06/99 1110 Alan L Barton Retirement Acct., Inc. 220.00 10/06/99 1111 Christina F. Behrens Retirement Acct., Inc. 125.00 10/06/99 1112 Ted Berndt Retirement Acct., Inc. 250.00 10/06/99 1113 Frederick & Lois Biederman 250.00 10/06/99 1114 May Financial Corp for L. Jack Borsum 500.00 10/06/99 1115 Marjorie Borsum Trust 250.00 10/06/99 1116 Henry Brumbach 250.00 10/06/99 1117 Colin Burgess 750.00 10/06/99 1118 Harold E. Burt Retirement Accts. 150.00 10/06/99 1119 Paula Carver 250.00 10/06/99 1120 Thomas F Cullop Retirement Accts 500.00 10/06/99 1121 Dweyer Family Trust 1,025.84 10/06/99 1122 Anne L. Evans Retirement Accts 250.00 10/06/99 1123 Bessie C. Fennell (Nations Bank by Mail) 263.75 10/06/99 1124 Patricia Fleming 375.00 10/06/99 1125 Martha C. Haner 300.00 10/06/99 1126 Sharon E Harrell (Retirement Accts) 500.00 10/06/99 1127 Herman and Jane Hasselbring 1,000.00 10/06/99 1128 James F Hawkins 250.00 10/06/99 1129 Sharon A Herring, (Retirement Accts) 500.00 10/06/99 1130 Stanley or Rebekah Hime 250.00 10/06/99 1131 William A Iles Trust 388.75 10/06/99 1132 John Jacobsen 250.00 10/06/99 1133 Harry and Marjorie Judy 150.00 10/06/99 1134 H Jack & Janet L. Judy Trust 300.00 10/06/99 1135 Kolseth Revocable Trust 200.00 10/06/99 1136 Catherine Kraus 250.00 10/06/99 1137 Mary Kraus 185.00 10/06/99 1138 Willadean Lamotte (Retirement Accts) 500.00 10/06/99 1139 Barbara Leohwing 500.00 Page 29 2002-AT-1004 Table of Contents Exit Appendix C Paid Check Ineligible While in Date No. Payee Amount 1/ Default 2/ 10/06/99 1140 Leatrice Makrouer 255.50 10/06/99 1141 Susan Martin 250.00 10/06/99 1142 Peter J. Merkle (Retirement Accts) 500.00 10/06/99 1143 Charles V. Mullen, Sr 200.00 10/06/99 1144 Charles C. Mullen, Jr 150.00 10/06/99 1145 Phyllis Phoa 55.00 10/06/99 1146 Phyllis Phoa 150.00 10/06/99 1147 Katie Pike or Anita Kirkwood 150.00 10/06/99 1148 Kathlee Platte (Retirement Accts) 100.00 10/06/99 1149 Lynn Queenan (Retirement Accts) 130.00 10/06/99 1150 Ralph and Marjorie Schockey 120.00 10/06/99 1151 Ruth B. Setser Rev. Trust 550.00 10/06/99 1152 Frances R. Shepherd 277.50 10/06/99 1153 John D Shirley (Retirement Accts, 372.84 10/06/99 1154 Elliot S. Silverman 250.00 10/06/99 1155 Jan Silverman 250.00 10/06/99 1156 William or Jean Sponseller 300.00 10/06/99 1158 Laura Travis 250.00 10/06/99 1159 David Watson 250.00 10/06/99 1160 Maxine Weinberger 250.00 11/18/99 1236 Leatrice Makrouer 255.50 12/07/99 1270 Harold E. Burt Retirement Accts. 500.00 12/10/99 1303 Leatrice Makrouer 255.50 12/20/99 1001 Howard Weinberger 565.00 02/02/00 2014 Leatrice Makrouer 511.00 03/06/00 2023 Leatrice Makrouer 255.50 04/04/00 2028 Leatrice Makrouer 255.50 05/08/00 2034 Leatrice Makrouer 255.50 06/12/00 2042 Leatrice Makrouer 255.50 07/13/00 2049 Leatrice Makrouer 255.50 08/01/00 2054 Leatrice Makrouer 255.50 09/01/00 2060 Leatrice Makrouer 255.50 Subtotal - Investors $ 35,779.86 Total Ineligible Distributions (Part I) $ 200,329.86 $ 25,000.00 2002-AT-1004 Page 30 Table of Contents Exit Appendix C Part II Ineligible Management Agent Expenditures Paid Check Ineligible While in Date No. Payee Amount 1/ Default 2/ 07/07/00 2046 Mountain Heritage $ 485.58 07/11/00 2048 Mountain Heritage 10,275.55 01/24/01 2065 Mountain Heritage 1,644.20 01/24/01 2066 Mountain Heritage 371.20 02/06/01 2073 Mountain Heritage 950.00 02/12/01 2076 Mountain Heritage 950.00 02/26/01 2082 Mountain Heritage 1,739.31 03/02/01 2085 Mountain Heritage 1,257.39 03/09/01 2087 Mountain Heritage 1,580.16 03/16/01 2091 Mountain Heritage 1,268.67 03/23/01 2092 Mountain Heritage 1,282.75 03/30/01 2093 Mountain Heritage 2,153.00 04/25/01 2393 Mountain Heritage 1,298.94 04/25/01 2394 Mountain Heritage 1,384.75 04/25/01 2395 Mountain Heritage 1,113.89 11/01/01 2118 Mountain Heritage 4,120.58 Subtotal - Mountain Heritage $ 31,875.97 10/05/01 2099 Lisa Kessler $ 3,449.11 10/09/01 2101 Lisa Kessler 1,039.68 11/16/01 2128 Lisa Kessler 1,349.56 12/04/01 2133 Lisa Kessler 5,548.86 01/02/02 2151 Lisa Kessler 6,932.87 01/18/02 2160 Lisa Kessler 5,971.07 02/08/02 2171 Lisa Kessler 2,022.97 02/08/02 2172 Lisa Kessler 2,210.00 02/26/02 2182 Lisa Kessler 7,204.28 Subtotal - Lisa Kessler $ 35,728.40 05/15/01 2398 Ward's Painting $ 1,094.89 05/15/01 2399 Ward's Painting 1,311.30 05/15/01 2400 Ward's Painting 1,418.92 05/15/01 2402 Ward's Painting 1,985.00 05/24/01 2407 Ward's Painting 1,131.57 05/31/01 2411 Ward's Painting 930.00 06/06/01 2416 Ward's Painting 1,037.73 06/12/01 2419 Ward's Painting 1,586.98 06/12/01 2420 Ward's Painting 3,257.00 06/12/01 2421 Ward's Painting 3,185.00 06/20/01 2425 Ward's Painting 4,178.00 Page 31 2002-AT-1004 Table of Contents Exit Appendix C Paid Check Ineligible While in Date No. Payee Amount 1/ Default 2/ 06/20/01 2426 Ward's Painting 1,638.15 06/26/01 2429 Ward's Painting 2,266.60 07/16/01 2444 Ward's Painting 1,201.85 07/16/01 2445 Ward's Painting 1,608.10 07/19/01 2447 Ward's Painting 1,368.40 07/23/01 2451 Ward's Painting 1,601.60 07/30/01 2452 Ward's Painting 1,572.19 08/09/01 2460 Ward's Painting 1,754.50 08/20/01 2470 Ward's Painting 1,732.25 08/24/01 2473 Ward's Painting 1,368.22 08/28/01 2475 Ward's Painting 2,239.79 09/07/01 2479 Ward's Painting 1,329.00 09/07/01 2480 Ward's Painting 1,204.91 09/17/01 2488 Ward's Painting 1,237.08 09/28/01 2491 Ward's Painting 1,265.46 Subtotal - Ward's Painting $ 44,504.49 Total Ineligible Management Agent Expenditures (Part II) $ 112,108.86 TOTAL INELIGIBLE EXPENDITURES $ 312,438.72 $ 25,000.00 2002-AT-1004 Page 32 Table of Contents Exit Appendix D Listing of Discrepancies and Concerns Identified in Monthly Accounting Reports Identified by the Mortgagee: October 2000 • Beginning cash and ending cash of $88.52, even though the report indicated a disbursement of $40.00. • The required bank statement was not included. • Schedule C did not include payables that should be present. November 2000 • Schedule of Disbursements did not include payment of payables from October. • The required bank statement was not included. December 2000 • Questioned the nature and purpose of a $4,500.00 disbursement for misc. admin. January 2001 • Questioned the preparation of concrete slabs for a compactor as a routine operating expense. • Several invoices and disbursements indicated the presence of accounts payable prior to January 2001, but were not noted in previous monthly accounting reports. • Required an explanation as to why the model apartment unit received cable television service. • Required the explanation and itemizing of the miscellaneous administrative expense of $1,800.00 to Mason-Phillips. Identified by HUD: March 2001 • Required explanations for several disbursements on Schedule B. Payees included Tampa Bay Fire ($2,737.60), Mountain Heritage ($8,078.28), Bay Area Apt. Guide ($1,000.00), and Mason-Phillips ($4,000.00). April 2001 • Required explanations for several disbursements on Schedule B. Payees included Mountain Heritage ($5,950.58), Mason-Phillips ($9,000.00), and Bay Area Apt. Guide ($1,000.00). Page 33 2002-AT-1004 Table of Contents Exit Appendix D May 2001 • Schedule B, Schedule of Disbursements was not provided. June 2001 • The project occupancy information was incomplete. • The dollar amount on the Schedule of Disbursements was incorrect. September 2001 • Required explanations for several disbursements. Payees included Ward’s Painting ($5,036.45), Ultraedge Landscaping ($4,000.00), and Patty O’Callahan ($3,000.00). • Schedule A was not completed properly. October 2001 • Questioned the reasonableness of Ultraedge, Tree Trimming costs of $2,000.00 and $1,630.00. • Required explanations for several disbursements. Payees included Lisa Kessler ($3,449.11) and Patty O’Callahan (Unauthorized $8,385.21) • Questioned reasonableness of Apartment Finders, Advertising cost of $3,300.00. November 2001 • Questioned the reasonableness of Earl’s Pool Cleaning maintenance cost of $2,179.80 and Ultraedge landscaping cost of $3,000.00. • Required explanation and breakdown of $4,120.58 payroll cost December 2001 • Required explanation of Lisa Kessler payroll cost of $5,548.86 and Apartment Finders advertising cost of $3,300.00. • Questioned reasonableness of carpet cleaner cost of $2,073.50. 2002-AT-1004 Page 34 Table of Contents Exit Appendix E Distribution Outside of HUD Owner, Ashley Crossings Apartments Sharon Pinkerton, Senior Advisor Subcommittee on Criminal Justice Stanley Czerwinski, Associate Director Resources, Community, and Economic Development Division U.S. General Accounting Office Steve Redburn, Chief Housing Branch Office of Management and Budget The Honorable Joseph Lieberman Chairman Committee on Government Affairs The Honorable Fred Thompson Ranking Member Committee on Governmental Affairs, The Honorable Dan Burton Chairman Committee on Government Reform, The Honorable Henry A. Waxman Ranking Member Committee on Government Reform Andy Cochran House Committee on Financial Services Clinton C. Jones, Senior Counsel Committee on Financial Services Page 35 2002-AT-1004 Table of Contents Exit
Ashley Crossings Apartment Homes -HUD Project No. 067-35331 Largo, Florida
Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-09-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)