Congressionally Requested Audit of the Section 514 Outreach and Technical Assistance Training Contract, C-OPC-21280, awarded to Cox & Associates, Washington, DC

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-08-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Division. We performed the on-site review work during July 2002. This audit was performed in
accordance with the Generally Accepted Government Auditing Standards.


Congress mandated HUD’s Office of Inspector General (OIG) to perform an audit of each
Section 514 activity. Specifically, Section 1303 of the fiscal year 2002 Defense Appropriation
Act (PL 107-117) required HUD’s OIG to audit each provision of technical assistance obligated
under the requirements of Section 514 of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (MAHRA, PL 105-65) over the last 4 years (fiscal years 1998 through

Housing subsidy contracts are expiring on thousands of privately owned multifamily properties
with federally insured mortgages. Many of these contracts set rents at amounts higher than those
of the local market. As these subsidy contracts expire, the Mark-to-Market (M2M) program will
reduce rents to market levels and will restructure existing debt to levels supportable by these

The Office of Multifamily Housing Assistance Restructuring (OMHAR) was established by the
MAHRA to administer the M2M program and was mandated to sunset September 30, 2001.
OMHAR was extended for three years to September 30, 2004 and the M2M program will
continue for two additional years to September 30, 2006.

OMHAR works with property owners, Participating Administrative Entities (PAEs), tenants,
lenders, and others with a stake in the future of affordable housing.

The MAHRA authorizes the Secretary to establish procedures to provide an opportunity for
tenants of the project and other affected parties to participate effectively and on a timely basis in
the restructuring process established by MAHRA. These procedures take into account the need
to provide tenants of the project and other affected parties timely notice of proposed restructuring
actions and appropriate access to relevant information about restructuring activities. This will
give such parties an opportunity to provide comments to the PAEs. The procedures developed
require consultation with tenants of the project and other affected parties in connection with at
least the following:
        (a) The mortgage restructuring and rental assistance sufficiency plan;
        (b) Any proposed transfer of the project; and
        (c) The rental assistance assessment plan.

Under the terms of the Cox Contract, awarded on September 30, 1998, Cox & Associates was to
provide financial management technical assistance training to Outreach Technical Assistance
Grant (OTAG) and Intermediary Technical Assistance Grant (ITAG) organizations selected
under the Notice of Funds Availability (Super-NOFA) and provide Mark-to-Market information
to interested parties. The Contract was for the base year with two one-year options. The ceiling
amount of the contract was for $1,248,140, however the amount of funds that were available
under the original task order was for $100,000. There were three modifications to the original
        (a) Modification 1, signed 11/21/98, changed the payment address;
        (b) Modification 2, signed 12/23/98, obligated an additional $250,000 in funds; and
        (c) Modification 3, signed 5/28/99, obligated an additional $300,000 in funds.
The total amount of monies disbursed to Cox & Associates under this contract was $541,472.21.

                                    RESULTS OF REVIEW

Based upon the review and analysis of the Drawdown Invoices and the Bi-Weekly Activity
Reports, we determined that all of the funds obligated, drawn down, and paid to Cox &
Associates, for services provided under the Cox Contract, were for authorized costs. These costs
consisted of salaries, consulting fees, travel expenses, and materials associated with the financial
management technical assistance training of OTAG/ITAG grantees. There was no evidence of
spending of Section 514 monies on unauthorized activities. In addition, we did not discover any
evidence of lobbying activities.

We discussed this memorandum with officials from the Office of Multifamily Housing
Assistance and Restructuring (OMHAR) on August 19, 2002. The officials stated that they had
read and discussed the draft memorandum on Cox & Associates and they have no comments
concerning the memorandum.

We appreciate the courtesies and assistance extended by the personnel of the Office of
Multifamily Housing Assistance and Restructuring (OMHAR) and Procurement Management
Division. Should you have any questions, please contact Ernest Kite, Assistant Regional
Inspector General for Audit, at (303) 672-5452.

                                                                            Appendix A

                       DISTRIBUTION OUTSIDE OF HUD

Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human
    Resources, B373 Rayburn House Office Bldg., Washington, DC 20515
Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. General
    Accounting Office, 441 G Street, NW, Room 2T23, Washington, DC 20548
Steve Redburn, Chief Housing Branch, Office of Management and Budget, 725 17th Street,
    NW, Room 9226, New Executive Office Bldg., Washington, DC 20503
Linda Halliday (52P), Department of Veterans Affairs, Office of Inspector General, 810
    Vermont Ave., NW, Washington, DC 20420
William Withrow (52KC), Department of Veterans Affairs, OIG Audit Operations Division,
    1100 Main, Rm 1330, Kansas City, Missouri 64105-2112
The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs, 706 Hart
    Senate Office Bldg., United States Senate, Washington, DC 20510
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs, 340
    Dirksen Senate Office Bldg., United States Senate, Washington, DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
    Bldg., House of Representatives, Washington, DC 20515
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform,
    2204 Rayburn Bldg., House of Representatives, Washington, DC 20515
Andy Cochran, House Committee on Financial Services, 2129 Rayburn H.O.B., Washington,
    DC 20515
Clinton C. Jones, Senior Counsel, Committee on Financial Services, U.S. House of
    Representatives, B303 Rayburn H.O.B., Washington, DC 20515