Issue Date January 26, 2006 Audit Report Number 2006-SE-1001 TO: Renee' Greenman, Region X, Director, Multifamily Housing Hub, 0AH FROM: Joan S. Hobbs, Regional Inspector General for Audit, Region X, 0AGA SUBJECT: Idaho Housing and Finance Association, Boise, Idaho, Did Not Monitor Subsidized Multifamily Projects in Accordance with Regulations or its Annual Contributions Contract with HUD HIGHLIGHTS What We Audited and Why At the request of the Region X Multifamily Housing Hub, we audited Idaho Housing and Finance Association (Idaho Housing) due to concerns that (1) it allowed excess owner distributions; (2) it did not properly administer projects’ residual receipts and replacement reserve accounts; and (3) a conflict of interest exists because Idaho Housing acts as lender, owner, management agent, and Section 8 contract administrator. In addition, we were concerned that Idaho Housing did not properly review changes in management fees to determine whether they were reasonable. Our overall audit objective was to determine whether Idaho Housing monitored projects in accordance with its annual contributions contract with the U.S. Department of Housing and Urban Development (HUD) to ensure that project funds were expended appropriately. What We Found Idaho Housing did not monitor its subsidized multifamily housing projects in accordance with federal regulations or its annual contributions contract with HUD. Idaho Housing inappropriately authorized $3,721,738 in owner distributions in excess of allowable amounts from project funds. Idaho Housing allowed nonprofit owners, who are not entitled to any distributions, to receive distributions of project funds and limited distribution owners to receive distributions of funds in excess of the limitations imposed by federal regulations. Idaho Housing also approved a duplicate request for reimbursement of $24,562 from a project’s replacement reserve funds and approved $182,264 in disbursements from projects’ replacement reserves without obtaining adequate supporting documentation. In addition, contrary to the requirements of the Code of Federal Regulations, the housing assistance payments contracts, and its annual contributions contract, Idaho Housing allowed a conflict of interest situation to exist between itself and The Housing Company, a nonprofit owner of subsidized multifamily projects. A conflict of interest situation exists because Idaho Housing formed and holds substantial control over The Housing Company and is paid by HUD, under terms of its annual contributions contract, to monitor The Housing Company’s subsidized projects. Further, between January 1, 2001, and December 31, 2004, Idaho Housing approved revised management agreements for 10 projects. The revised agreements increased the management fees for these projects to $121,521 in excess of HUD’s residential management fee range for Idaho. What We Recommend We recommend that the director, Region X Multifamily Housing Hub, require Idaho Housing to reimburse the projects $3,867,821 and to provide supporting documentation for $182,264 in unsupported costs or also return this amount to the projects. In addition, we recommend that HUD require Idaho Housing to comply with federal regulations and HUD guidelines when processing owner distributions, distributions from residual receipts and replacement reserves, and changes in management fees. We also recommend that the director, Region X Multifamily Housing Hub, require Idaho Housing take corrective action to dissolve the conflict of interest relationship or make a determination of default in accordance with paragraph 2.16(b)(2) of its annual contributions contract with Idaho Housing. If Idaho Housing is declared in default of the annual 2 contributions contract, we recommend the director assume the role of contract administrator or assign another contract administrator (including any associated administrative fee) over any projects that (1) are owned by The Housing Company, (2) receive Section 8 subsidy from HUD, and (3) are currently monitored by Idaho Housing. For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or directives issued because of the audit. Auditee’s Response We provided Idaho Housing a draft report on December 13, 2005, and held an exit conference on January 6, 2006. Idaho Housing provided written comments on January 13, 2006. Idaho Housing agreed with much of the report in general, but disagreed with the inclusion of specific projects in the findings and recommendations. The complete text of Idaho Housing’s response, along with our evaluation of that response, can be found in appendix B of this report. The exhibits Idaho Housing supplied with its response are too voluminous to include in this report but are available upon request. We considered Idaho Housing’s response and exhibits and made changes to the report as appropriate. 3 TABLE OF CONTENTS Background and Objectives 5 Results of Audit Finding 1: Idaho Housing Inappropriately Authorized $3,721,744 in Owner 7 Distributions in Excess of Allowable Amounts from Project Funds Finding 2: Idaho Housing Approved One Duplicate and Other Unsupported 13 Requests for Reimbursement from Project Replacement Reserves Finding 3: A Conflict of Interest Exists between Idaho Housing and The 16 Housing Company Finding 4: Idaho Housing Approved Excessive Management Fees for 10 Idaho 19 Projects Scope and Methodology 22 Internal Controls 23 Appendixes A. Schedule of Questioned Costs and Funds to Be Put to Better Use 25 B. Auditee Comments and OIG’s Evaluation 26 C. Schedule of Excessive Owner Distributions (Finding 1) 47 D. Unsupported Disbursements from Replacement Reserve Accounts (Finding 2) 49 E. Excessive Management Fees (Finding 4) 50 4 BACKGROUND AND OBJECTIVES Idaho Housing and Finance Association (Idaho Housing) is Idaho’s housing finance agency. Idaho Housing does not receive state-appropriated funds for its operations. However, it funds its programs from various sources, including the sale of tax-exempt mortgage revenue bonds. Its mission is to provide funding for affordable housing opportunities in Idaho communities where they are most needed and when it is economically feasible. Idaho Housing participates in the development, finance, management, and tenant support for 59 projects under an annual contributions contract with the U.S. Department of Housing and Urban Development (HUD). Under this agreement, it functions as the agent for HUD in performing tasks in these areas as the Section 8 subsidy contract administrator. Idaho Housing’s subsidy contract administration responsibilities include program compliance functions, to ensure that HUD- subsidized projects are serving eligible families at the correct level of assistance, and asset management functions, to ensure the physical and financial health of the projects. It processes the monthly housing assistance payments and is responsible for asset management functions, housing assistance payments contract (contract) compliance, and monitoring functions. It performs compliance reviews on these developments, including physical inspections and occupancy reviews. It holds and administers the replacement reserve, residual receipts, and all other appropriate escrow accounts for these projects. It also processes the monthly housing assistance payments. The monthly housing assistance payments are based on contracts between the owner and Idaho Housing. These contracts are categorized as either old regulation or new regulation. New regulation projects are those with a signed agreement to enter into a contract on February 29, 1980, or later. Owners of old regulation projects are not limited as to the amount of distributions they may receive from the project, except that the distribution may only be made after funds have been set aside or payment has been made for all project expenses. Pipeline projects are treated like old regulation projects with respect to distributions. Although these projects are technically new regulation projects because the date of submission of the initial application was during a time of transition for HUD regulations, HUD allowed the projects to opt out of the limitation on distributions. Therefore, these projects, like old regulation projects, are not limited with regard to distributions. New regulation projects are of two types: nonprofit and profit-motivated. Owners of new regulation nonprofit ownership projects are not entitled to distributions. Owners of profit- motivated new regulation limited distribution projects may only receive 6 percent (projects with elderly tenants) or 10 percent (family projects) of owner equity determined when the project was constructed. Owners of profit-motivated projects that are family projects with 50 or fewer units are exempt from the limitations on distributions. In this way, these projects are treated like old 5 regulation projects. Additionally, the contract for new regulation projects states that the contract will remain in effect for at least 20 years, regardless of whether the mortgage is prepaid. Our overall audit objective was to determine whether Idaho Housing monitored projects in accordance with its annual contributions contract with HUD to ensure that project funds were expended appropriately. We also wanted to quantify any inappropriate owner distributions, disbursements from the residual receipts and replacement reserve accounts, and any excessive management fees. 6 RESULTS OF AUDIT Finding 1: Idaho Housing Inappropriately Authorized $3,721,738 in Owner Distributions in Excess of Allowable Amounts from Project Funds Idaho Housing inappropriately authorized owner distributions in excess of allowable amounts from project funds. It allowed nonprofit owners, who are not entitled to any distributions, to receive distributions of project funds and limited distribution owners to receive distributions of funds in excess of HUD’s limitations. In addition, Idaho Housing improperly allowed distributions to be paid from the projects’ residual receipts accounts and replacement reserves. This occurred because Idaho Housing did not properly implement federal regulations at 24 CFR [Code of Federal Regulations] Part 883 and HUD guidelines regarding owner distributions and use of residual receipts and replacement reserves. As a result, $3,721,738 in excessive distributions is unavailable to use for the projects’ purposes. Of that amount, $747,776 disbursed from the residual receipts accounts is not available to reduce housing assistance payments or for HUD’s use to provide housing assistance to other low-income individuals upon termination of the contracts. Projects Adopted Subpart G of 24 CFR Part 883 We reviewed owner distributions for 19 projects under Idaho Housing’s annual contributions contract with HUD. In 1988, owners of 11 of these projects amended their old regulation contracts and adopted 24 CFR [Code of Federal Regulations] subpart G, incorporating the limitation on distributions. Idaho Housing told us these amendments were entered into with the understanding that there would be no limitation on distributions, as provided in 24 CFR [Code of Federal Regulations] 883.105(b)(2). Under this provision, the agency, the owner, and HUD may agree to make the revised subpart G applicable to the project with or without limitations on distributions and execute the appropriate amendments to the contract. However, there was nothing in the amendments or other documentation to indicate any of the parties originally agreed to opt out of the limitation on distributions. Further, the regulatory agreement for each project already limited distributions from the time of the projects’ inceptions. 7 The owners of 9 of the 11 projects subject to the 1988 amendment later sold the projects to The Housing Company, a nonprofit owner/ management agent. This nonprofit assumed the prior owners’ regulatory agreements as well as the contracts and amendments. Another project was already owned by a nonprofit. According to 24 CFR [Code of Federal Regulations] 883.306, as nonprofits, these owners are not entitled to any distribution of project funds. Nonetheless, we found Idaho Housing inappropriately authorized distributions to these owners from 1994 through 2004. Idaho Housing Did Not Require the Projects to Use HUD’s Surplus Cash Statement Idaho Housing implemented a distribution policy, effective January 1, 1994, that conflicts with the federal regulations and HUD guidelines in HUD-OIG Handbook 2000.04 and HUD Handbook 4381.5. This policy requires the use of its own form rather than the HUD-required surplus cash statement. Idaho Housing did not direct owners to complete the HUD-required surplus cash statement to determine surplus cash, the amount of allowable owner distribution, and the amount to be deposited to residual receipts. Instead, Idaho Housing used its own form, the partnership distribution worksheet. This worksheet often gives a different result than the required surplus cash statement. We calculated surplus cash for 16 projects from 2001 through 2004 using the required surplus cash statement. During this period for 11 of these projects, 31 distributions allowed by Idaho Housing were greater than available surplus cash calculated using HUD’s surplus cash statement. For example, • At the end of 2002, Aspenwood Apartments had a cash deficit according to HUD’s surplus cash statement, but Idaho Housing authorized a distribution of $70,826 in early 2003; • At the end of 2003, Eagle Manor had a cash surplus of $169,371, but Idaho Housing authorized a distribution of $187,010 in early 2004; and • At the end of 2002, Westside Court had a cash surplus of only $2,579, but Idaho Housing authorized a distribution of $143,565 in early 2003. 8 Idaho Housing Policy Allows Special Purpose Distributions Idaho Housing’s 1994 distribution policy allows project owners distributions equal to the limited distribution allowed, plus a distribution for projects that meet Idaho Housing’s special purpose criteria. Idaho Housing’s senior compliance manager confirmed that this policy is effective for new regulation limited distribution and nonprofit projects. This is contrary to 24 CFR [Code of Federal Regulations] 883.306, which allows only limited distributions to profit-motivated project owners of elderly or large family projects and does not allow any distributions to nonprofit owners. As a result, the owner of Riverside Senior Housing, an old regulation nonprofit project subject to the 1988 amendment, inappropriately received a $242,666 special purpose distribution. Owners Signed Perpetual Affordability Agreements In 1994, Idaho Housing required some owners to sign a perpetual affordability agreement in exchange for an equity takeout as part of a bond refunding.1 In 1997, Idaho Housing informed The Housing Company that distribution of “excess reserves” was an option. However, projects that had not yet committed to perpetual affordability would have to do so to receive distributions from the “excess reserves.” The initial 1997 “excess reserves” distribution included the sum of the replacement reserve balance, interest earned, and residual receipts balance, less two months worth of operating budget and $3,000 per unit for replacement reserves. Later distributions for projects with perpetual affordability agreements also included operating cash on hand. Idaho Housing’s distribution of “excess reserves” in exchange for commitments to perpetual affordability is contrary to 24 CFR [Code of Federal Regulations] 883.306 for distributions to the owners of four new regulation limited distribution projects and six old regulation nonprofit projects subject to the 1988 amendment. 1 See audit report no. 2005-SE-1008 for information on the bond refunding. 9 Idaho Housing Authorized Distributions to Be Paid from Residual Receipts and Replacement Reserves Of the excess distributions Idaho Housing authorized, $747,776 and $11,275 were disbursed from the projects’ residual receipts and replacement reserves, respectively. However, according to 24 CFR [Code of Federal Regulations] 883.306(e) and 883.702(e), residual receipts are to be used only to reduce housing assistance payments or for other project purposes, and upon termination of the contract, the residual receipts balance must be remitted to HUD. In addition, according to 24 CFR [Code of Federal Regulations] 883.703 and the contracts, replacement reserves are to be established to aid in funding extraordinary maintenance and repair of the project or for replacement of capital items. The excess owner distributions did not meet these requirements since the funds were distributed to the owners and were not used for project purposes, extraordinary maintenance, repairs, or replacement of capital items. The Rest of the Distributions Were Paid From the Projects’ Operating Accounts The balance of the distributions were paid from the projects’ operating accounts. Federal requirements dictate that any funds in the operating account in excess of those required to fund project operations and allowable owner distributions must be deposited to the residual receipts account. Since the distributed funds were in excess of what was required to operate the projects, the funds should have been deposited to the residual receipts account. More Than $3.7 Million in Excess Distributions Is Not Available for Project Purposes Since Idaho Housing did not follow federal regulations and HUD guidelines regarding owner distributions, excessive distributions to 13 projects totaling $3,721,738 will not be available to use when or if funds are needed for project purposes. In addition, these funds are no longer available to reduce housing 10 assistance payments or for HUD’s use to provide housing assistance to other low- income individuals upon termination of the contracts. Appendix C details the excessive distributions by project. The average excess distributions from 1994 through 2004 total $316,279 per year. These funds could be put to better use over the next year if Idaho Housing stops allowing these excess distributions. Recommendations We recommend that the director, Region X Multifamily Housing Hub, 1A. Require Idaho Housing to reimburse the projects’ residual receipts accounts from nonfederal funds $3,710,463 for excessive partnership distributions that it inappropriately allowed (see appendix C). 1B. Require Idaho Housing to reimburse the applicable projects’ replacement reserve accounts from nonfederal funds $11,275 for excessive partnership distributions that it inappropriately allowed from those accounts (see appendix C). However, if these replacement reserve accounts are fully funded, we recommend HUD require Idaho housing to reimburse the excessive distributions into the applicable projects’ residual receipts accounts. 1C. Require Idaho Housing to implement procedures to ensure that nonprofit owners under new regulations (including 1988 amended projects) do not receive distributions of project funds and that limited distribution project owners do not receive distributions in excess of their allowed limited distributions. This will allow $316,279 in project funds to be put to better use over the next year. 1D. Require Idaho Housing to implement procedures to ensure the residual receipts account is used only to reduce housing assistance payments or for project purposes and not for owner distribution. 1E. Require Idaho Housing to implement procedures to ensure that replacement reserves are used only for extraordinary maintenance and repairs or replacement of capital items and not for owner distribution. 1F. Require that Idaho Housing use HUD’s surplus cash statement to determine the surplus cash available for partnership distribution. 11 1G. Require Idaho Housing to amend its distribution policy to conform to the new regulations at 24 CFR [Code of Federal Regulations] 883.306 with respect to owners’ distributions for all new regulation projects as well as for all projects subject to the 1988 housing assistance payments amendment incorporating limitations on distributions. 1H. Require Idaho Housing to discontinue use of the perpetual affordability agreement as a basis for determining owner distributions. 1I. Obtain a formal legal opinion as to whether the 1988 housing assistance payments amendments subject the owners of the projects to limitations on distributions in accordance with 24 CFR 883.702(e) and take the appropriate above actions based on that opinion. 12 Finding 2: Idaho Housing Approved One Duplicate and Other Unsupported Requests for Reimbursement from Project Replacement Reserves Idaho Housing approved requests for reimbursement from project replacement reserve funds without obtaining adequate supporting documentation. This occurred because Idaho Housing did not always follow HUD guidelines and its own policies and procedures regarding expenditures from the reserve for replacement accounts. As a result, one project’s replacement reserves were used to make a $24,562 duplicate payment to a vendor, and $182,264 in expenditures from 13 project replacement reserve accounts was not adequately supported. Idaho Housing’s practices provide little assurance that reserve for replacement expenditures meet HUD’s restrictions on the use of reserve for replacement funds. We Reviewed Replacement Reserve Transactions for 21 Projects Federal regulations at 24 CFR [Code of Federal Regulations] 883.703 and the contracts provide that a replacement reserve must be established and maintained in an interest-bearing account to aid in funding extraordinary maintenance and repair and replacement of capital items. We identified 21 limited distribution, nonprofit, or pipeline projects that are required to maintain this account under Idaho Housing’s annual contributions contract with HUD. We reviewed replacement reserve transactions for these 21 projects over the years 2001 through 2004 and found that Idaho Housing staff did not always follow HUD guidelines or its own written policies and procedures. Twenty-Six Reimbursements Were Not Properly Supported HUD Handbook 4381.5 requires an invoice for payment, a written request, and a payment voucher in support of capital expenditures. Idaho Housing’s replacement reserve agreement requires an invoice for payment for expenditures from the reserve for replacement accounts. Idaho Housing’s new construction budget procedures also require that bids be submitted to Idaho Housing for all expenditures of more than $1,000. Nonetheless, from 2001 through 2004, Idaho Housing approved 24 reimbursements totaling $182,264 from projects’ replacement reserve accounts without obtaining bids or invoices (see appendix D). 13 Idaho Housing’s compliance manager stated that Idaho Housing is not strict with regard to compliance with its own requirements for owners to obtain bids, especially with respect to smaller projects. He also said that, at times, a verbal approval for the projects not to obtain bids is acceptable. One Reimbursement Was a Duplicate Our review also disclosed one disbursement was a duplicate submission for reimbursement of $24,562 for parking lot paving at Lake Country Apartments. The first request for reimbursement for the paving was paid in May 2002. This package included an invoice from the vendor. The second request for reimbursement was paid in August 2002. This request was part of a larger request that included the authorization and purchase order for paving the parking lot but not the invoice. Idaho Housing Could Not Ensure Expense Payments Were Proper Since Idaho Housing did not always require sufficient supporting documentation before reimbursement of expenses from replacement reserves, it did not detect the duplicate payment and cannot ensure that reserve for replacement expenditures totaling $182,264 complied with HUD’s and its own restrictions on the use of reserve for replacement funds. Recommendations We recommend that the director, Region X Multifamily Housing Hub, require Idaho Housing to 2A. Return $24,562 from nonfederal funds for the duplicate payment to the project’s replacement reserve account. However, if the replacement reserve account is fully funded, we recommend the reimbursement be made to the project’s residual receipts account. 2B. Provide supporting documentation for the $182,264 in unsupported costs or return this amount to the projects’ replacement reserve accounts (see appendix D). If the replacement reserve accounts are fully funded, we recommend the director require the reimbursement to be made to the projects’ residual receipts accounts. 14 2C. Comply with HUD guidelines and its own policies and procedures in processing replacement reserve disbursements. 15 Finding 3: A Conflict of Interest Exists between Idaho Housing and The Housing Company Contrary to HUD requirements, Idaho Housing allowed a conflict of interest to exist between itself and The Housing Company, a nonprofit owner of subsidized multifamily projects. Idaho Housing created and holds substantial control over The Housing Company; however, under terms of its annual contributions contract, HUD pays Idaho Housing to monitor The Housing Company’s subsidized projects. This occurred because management controls are insufficient to ensure that Idaho Housing complies with federal requirements. Also, the close relationship between Idaho Housing and The Housing Company exists in order for Idaho Housing to assist The Housing Company to meet its operational needs for personnel and office space. However, because of the close relationship, HUD has no independent assurance that projects controlled by The Housing Company are operated according to program requirements. In addition, there is the potential for The Housing Company or its projects to receive special consideration. The Housing Company Is an Affiliate of Idaho Housing The Housing Company was formed in 1990 by Idaho Housing to facilitate Idaho Housing’s mission to preserve affordable housing and develop new housing in underserved areas of Idaho. It is an affiliate of Idaho Housing. Two of Idaho Housing’s board members also serve on the board of The Housing Company. Idaho Housing’s president and executive director serves as the president of The Housing Company. The Housing Company’s employees are Idaho Housing employees who are subcontracted to The Housing Company. Idaho Housing and The Housing Company share telephone and Internet systems, and managers for both entities meet together weekly. In addition, if The Housing Company ceases operations, all of its assets become the assets of Idaho Housing. The vice president of The Housing Company is responsible for oversight of The Housing Company’s activities and supervises all project management and development. Her immediate supervisor, who performs her annual evaluation, is the president and executive director of Idaho Housing. Consequently, the president of Idaho Housing has a measure of control over The Housing Company’s activities. 16 Idaho Housing Is the Contract Administrator for The Housing Company’s Projects The Housing Company owns 13 projects that receive Section 8 subsidies under Idaho Housing’s annual contributions contract with HUD. Idaho Housing is the contract administrator for these projects. In this capacity, Idaho Housing makes the monthly housing assistance payments to project owners and is required to perform various monitoring activities, including reviewing • Οwner calculations of tenant payments, • Owner financial statements, • Expenditures to ensure costs are reasonable and necessary, • Payments to owners to eliminate overpayments or underpayments of Section 8 subsidies, • Owner compliance with Section 8 requirements, • Tenant files, • Owner compliance with physical inspections, and • Actions taken with regard to owner and tenant complaints. Idaho Housing is also responsible for reviewing and paying special claims for vacancy loss and unreimbursed tenant damages as well as for calculating owner distributions. This Relationship Violates Housing Assistance Payments Contracts and the Annual Contributions Contract In effect, Idaho Housing is both owner and manager of The Housing Company and its projects and monitors its own actions with respect to the Section 8 assistance provided to these projects. This relationship violates requirements of Idaho Housing’s old and new regulation contracts with The Housing Company’s projects at paragraphs 2.18 and 2.11 respectively as well as its annual contributions contract with HUD at paragraph 2.18. These contracts prohibit members or officers of Idaho Housing from having a direct or an indirect interest in contracts during tenure or for one year after. 17 Idaho Housing Does not Have Controls in Place to Prevent Conflicts of Interest We determined this conflict of interest relationship was allowed because Idaho Housing lacks the management controls to ensure that it complies with the requirements of the CFR [Code of Federal Regulations], its annual contributions contract with HUD, and its housing assistance payments contracts with project owners. Each of these include prohibitions against this type of relationship. HUD Has No Assurance These Projects Are Operated in Accordance with Program Requirements Since Idaho Housing is so closely tied to the ownership of The Housing Company, HUD has no independent assurance that The Housing Company’s subsidized projects are operated in accordance with the requirements of the Section 8 program. Additionally the potential exists for The Housing Company or its projects to be granted special consideration or concessions not available to other projects monitored by Idaho Housing. Recommendations We recommend that the director, Region X Multifamily Housing Hub, 3A. Require Idaho Housing take corrective action to dissolve the conflict of interest relationship. If Idaho Housing does not take the corrective action, we recommend the director make a determination of default in accordance with paragraph 2.16(b)(2) of its annual contributions contract with Idaho Housing. If Idaho Housing is declared in default of the annual contributions contract, we recommend the director assume the role of contract administrator or assign another contract administrator (including any associated administrative fee) over any projects that (1) are owned by The Housing Company, (2) receive Section 8 subsidy from HUD, and (3) are currently monitored by Idaho Housing. 3B. Require that Idaho Housing implement controls to ensure that any conflict of interest relationships will not be allowed in the future. 18 Finding 4: Idaho Housing Approved Excessive Management Fees for 10 Idaho Projects Between January 1, 2001, and December 31, 2004, Idaho Housing approved excessive management fees for 10 subsidized projects. This occurred because Idaho Housing did not establish an appropriate management fee range and did not have a process for assessing the reasonableness of requests for management fee increases. As a result, from 2001 to 2004, 10 projects paid $121,521 in management fees in excess of HUD’s residential management fee range for Idaho. The excessive management fee payments could have been used for other project purposes, deposited in the residual receipts account and used to reduce housing assistance payments, or upon termination of the contract, revert to HUD to be used for other low-income housing purposes. The Contract Administrator Is Responsible for Reviewing Management Fees Under HUD Handbook 4381.5, Idaho Housing is required to perform a management fee review when a project owner or agent requests an increase in the management fee percentage. This is to ensure that approved fees do not significantly exceed the amount that independent agents and owners would ordinarily negotiate for comparable services at projects in the same geographic/cost area, except as justified by conditions that require more time and effort on the part of the management agent. The maximum residential management fee range for projects in Idaho, as computed by HUD for 2001-2005, was $35 per–unit–per–month. Although Idaho Housing is not required to use HUD’s computed management fee range, it must use some range. It must follow the same procedures HUD uses to determine the maximum fee range (i.e., the procedures in chapter 3 of HUD Handbook 4381.5). Since Idaho Housing did not compute its own residential management fee range, it should have used HUD’s maximum residential management fee of $35 per– unit–per–month. Ten Projects Are Paying Excessive Management Fees New regulation limited distribution and nonprofit projects are required to maintain a residual receipts account. Deposits to this account come from project 19 funds in excess of the amount needed for project operations, reserve requirements, and permitted distributions. We identified 10 new regulation projects that have restrictions on their residual receipts accounts that also had a change in the management agreement between January 1, 2001, and December 31, 2004. Nine of these projects are owned by The Housing Company, an affiliate of Idaho Housing (see finding 3). We selected these projects for review since any excess funds beyond those needed for project operations and the allowable distributions would ultimately be remitted back to HUD. We compared the actual management fees paid for these projects to HUD’s computed maximum residential management fee of $35 per–unit–per– month. Only eight projects are identified in the chart below because The Housing Company has historically reported Meadowview and Pondside Gardens together as one project and Village Community Gardens and Village Gardens together as one project. Briarw ood Bristlecone Lake Country HUD's calculation of Meadow view and Pondside reasonable fee per unit Gardens per month Ow yhee Place Average per unit per month paid in excess of South Meadow the reasonable fee Village Community Gardens and Village Gardens Westside Court $0 $10 $20 $30 $40 $50 Fee per unit per month Excessive Management Fees Could Have Been Used for Other Low-Income Housing Purposes We found that these projects paid $121,521 from 2002 through 2004 for management fees in excess of the amount they would have paid by using the maximum HUD-determined fee of $35 per unit per month. These excessive management fee payments are costing the applicable projects an average total of $41,707 per year. The excessive payments could have been used for other project purposes or deposited in the residual receipts account. The additional residual receipts could then be used to reduce housing assistance payments or, upon 20 termination of the contract, revert to HUD to be used for other low-income housing purposes (see appendix E). Lack of Management Controls Contributed to the Excessive Management Fees Idaho Housing’s lack of adequate management controls contributed to the excessive management fees. Idaho Housing does not have specific written policies and procedures to ensure management fees are reasonable. Idaho Housing did not calculate its own reasonable management fee range for multifamily units in Idaho or adopt HUD’s residential management fee range. Further, Idaho Housing did not assess requests for increases in the management fee percentage to determine whether the requested percentage was reasonable. Recommendations We recommend that the director, Region X Multifamily Housing Hub, 4A. Require Idaho Housing to reimburse the applicable projects’ residual receipts accounts from nonfederal funds for excess management fees of $121,521 paid (see appendix E). 4B. Require Idaho Housing to adopt HUD’s residential fee range for management’s fees or calculate its own residential fee range for management fees using the process prescribed in Management Agent Handbook 4381.5, chapter 3. 4C. Require Idaho Housing to instruct the owner/management agents for the applicable projects to immediately reduce the management fees to a reasonable amount to allow $41,707 in project funds to be put to better use over the next year. 4D. Require Idaho Housing to prepare and implement a policy to review management fee percentage changes for reasonable assurance that management agents do not receive excessive fees. 4E. Obtain a formal legal opinion as to whether HUD Handbook 4381.5 applies to these projects and take the appropriate above actions based on that opinion. 21 SCOPE AND METHODOLOGY To achieve our audit objectives, we reviewed applicable federal regulations, HUD handbooks, Idaho Housing written policies and procedures, and project files for the 59 subsidized projects administered under the annual contributions contract between Idaho Housing and HUD. In addition, we interviewed local HUD staff and Idaho Housing staff. We performed audit work at Idaho Housing’s offices in Boise, Idaho, and at HUD’s Office of Housing - Multifamily Hub in Seattle, Washington, from November 2004 through October 2005. Our audit generally covered the period January 1, 2001, through December 31, 2004, and was expanded as needed. We performed our review in accordance with generally accepted government auditing standards. 22 INTERNAL CONTROLS Internal control is an integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: • Effectiveness and efficiency of operations, • Reliability of financial reporting, and • Compliance with applicable laws and regulations. Internal controls relate to management’s plans, methods, and procedures used to meet its mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined the following internal controls were relevant to our audit objectives: • Program operations – Policies and procedures that officials of the audited entity have implemented to reasonably ensure that a program meets its objectives and that unintended actions do not result. • Compliance with laws and regulations – Policies and procedures that officials of the audited entity have implemented to reasonably ensure that resources used are consistent with laws and regulations. • Safeguarding resources – Policies and procedures that officials of the audited entity have implemented to reasonably prevent or promptly detect unauthorized acquisition, use, or disposition of resources. We assessed the relevant controls identified above. A significant weakness exists if management controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. 23 Significant Weaknesses Based on our review, we believe the following items are significant weaknesses: • Idaho Housing does not have controls in place to ensure that project funds are used in accordance with federal regulations at 24 CFR [Code of Federal Regulations] 883.0306 (See findings 1 and 4). • Management controls do not reasonably prevent or promptly detect the improper use of project resources (See findings 2 and 4). • Management controls are insufficient to ensure that Idaho Housing complies with the requirements of the CFR [Code of Federal Regulations], the housing assistance payments contracts, and the annual contributions contract (see finding 3). 24 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Ineligible 1/ Unsupported 2/ Funds to be put to number better use 3/ 1A $3,710,463 1B $11,275 1C $316,279 2A $24,562 2B $182,264 4A $121,521 4C $41,707 Totals $3,867,821 $182,264 $357,986 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or federal, state, or local policies or regulations. 2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when we cannot determine eligibility at the time of audit. Unsupported costs require a decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of departmental policies and procedures. 3/ “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an Office of Inspector General (OIG) recommendation is implemented, resulting in reduced expenditures at a later time for the activities in question. This includes costs not incurred, deobligation of funds, withdrawal of interest, reductions in outlays, avoidance of unnecessary expenditures, loans and guarantees not made, and other savings. 25 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 26 Comment 1 Comment 2 Comment 3 Comment 4 Comment 5 27 Comment 6 Comment 7 Comment 8 Comment 2 Comment 9 28 Comment 10 Comment 11 Comment 12 Comment 13 Comment 11 Comment 14 29 Comment 15 Comments 11, 14 Comment 10 30 Comment 16 Comment 17 Comments 11, 15 Comment 18 31 Comment 19 Comment 19 Comment 15 Comment 15 32 Comment 20 Comment 21 Comment 20 Comment 22 33 Comment 23 Comment 28 Comment 20 Comment 24 34 Comment 3 Comment 25 Comments 20, 22 Comment 26 Comment 27 35 Comment 6 Comment 28 36 Comment 29 Comment 30 Comment 31 Comment 32 Comments 28, 29 37 Comments 28, 29 Comment 30 Comment 33 Comment 34 38 Comments 15, 20 Comment 30 Comment 30 39 Comment 35 Comments 28, 29 40 OIG Evaluation of Auditee Comments Comment 1 The letter to which Idaho Housing refers also states that HUD made this acknowledgement subject to a review of the issue by the OIG. Comment 2 Because of a disagreement with the Region X Multifamily Hub, we included additional recommendations that they obtain a formal legal opinion and take action based on that opinion (Findings 1 and 4). Comment 3 OIG reviewed the documents provided by Idaho Housing in support of the duplicate payment and the unsupported payments and adjusted the unsupported amount identified in our report by $6,083 as a result. Comment 4 Although Idaho Housing disagrees that replacement reserves for all projects we identified are subject to HUD restrictions, each project we identified is subject to these restrictions either because they are new regulation projects or because they adopted 24 CFR 883 Subpart G in 1988. Subpart G of 24 CFR 883 contains requirements for the replacement reserve accounts for these projects. These requirements do not exempt any projects except partially assisted projects. Comment 5 The guidance to which Idaho Housing refers does not consider two very important facts. The executive director of Idaho Housing is also the president of The Housing Company. In addition, all assets of The Housing Company revert to Idaho Housing upon dissolution of The Housing Company. We believe this would have changed the opinion of HUD’s Portland Regional Office. Also, as stated in our report, Idaho Housing was told that it should not monitor its own performance as an owner/manager. Further, this guidance provided an alternative suggesting that HUD or a public housing authority could provide oversight over these projects. Comment 6 In our exit conference with Idaho Housing, the Region X multifamily representative agreed that it wasn’t until about 2000 that HUD first noticed that there was such a close relationship between Idaho Housing and The Housing Company. In December 2004, HUD issued a legal opinion stating that Idaho Housing was in a conflict of interest situation. However, Idaho Housing has agreed to implement recommendations 3A and 3B in this report, which should resolve the conflict of interest issue. Comment 7 Although Idaho Housing does not believe that HUD Handbook 4381.5 applies to these projects, the Handbook itself states that it applies to HUD-assisted projects that receive Section 8 assistance. In addition, the management agreement for all of The Housing Company projects specifically states that the owner will receive its management fee in accordance with HUD Handbook 4381.5. 41 Comment 8 Since Idaho Housing does not have its own process to determine whether a fee is reasonable, it should have followed HUD’s process as found in the Handbook. Comment 9 Whether the amendments were intended to limit the distributions is immaterial. The amendments themselves do not state that this provision will not apply. Comment 10 The Region X HUD office agreed with Idaho Housing’s assessment of which projects were limited distribution projects under the new regulations subject to review of the issue by the OIG. Comment 11 As stated in our report, there was nothing in the amendments to indicate any of the parties originally agreed to opt out of the limitation on distributions. Further, the regulatory agreement for each project already limited distributions from the time of the projects’ inceptions. It was not until after The Housing Company purchased the projects and entered into a perpetual affordability agreement that distributions were allowed to The Housing Company in excess of the limitations. Comment 12 Each of the project owners that Idaho Housing contacted owned projects that now belong to The Housing Company. In addition, most of the projects for which Idaho Housing received these statements of intent were small, family projects that would have been exempt from limitations on distributions in accordance with the regulations. Comment 13 These signed statements were received by Idaho Housing 16 years after the amendments were signed. As stated in our report, there was nothing in the amendments or other documentation to indicate that the owners originally intended to opt out of the limitations on distributions. Comment 14 The projects purchased by The Housing Company were already limited as to distributions by the regulatory agreements between the owners and Idaho Housing. In addition, Idaho Housing then allowed no distributions to The Housing Company on these projects even after purchase, as is proper under the regulations. However, once The Housing Company entered into a perpetual affordability agreement, Idaho Housing began allowing distributions. Comment 15 Since Subpart G of 24 CFR 883 incorporates the limitations on distributions, the owners of these projects should have made some reference in the amendment if they did not intend to limit the distributions. For example, the pipeline projects were allowed to opt out of the limitations on distributions because of the timing of the signing of the agreement to enter into housing assistance payments contracts. The owners of these projects, with Idaho Housing and HUD approval, crossed out the sections of the contract that dealt with limitations on distributions. This was appropriate. However, as noted before, the amendments are silent on the issue of whether the owners will opt out of the limitations. 42 Comment 16 The regulatory agreement does not state or even indicate that it is, “…subject to revision by the Association without restriction for projects not subject to new regulation limitations on distributions.” In fact, section 13 of the regulatory agreement states that the agreement shall remain in effect as long as Idaho Housing is the holder of the mortgage loan or has any interest in the property. Comment 17 When the owners of projects entered into the housing assistance payments amendment in 1988, the projects became required to maintain a replacement reserve account in accordance with 24 CFR 883.703. This is included in Subpart G. Therefore, regardless of whether these projects are held to limited distribution, unlimited distribution, or nonprofit status, they are still required to follow the rules for replacement reserves. Comment 18 As stated in our report, Idaho Housing did not direct owners to complete the HUD-required surplus cash statement. In addition, during our review, we found of 16 projects, only one submitted a surplus cash statement for each year 2001 – 2004 and only one project submitted a surplus cash statement for one year. None of the other 14 projects submitted a surplus cash statement. In fact, the notes to the financial statements for four projects stated that computation of surplus cash based upon HUD guidelines was superseded by the Idaho Housing distribution policy. Comment 19 If the four projects to which Idaho Housing are referring are allowed to refinance at a lower rate, use the financing savings to repay the excessive distributions, and the change in rate is not used to lower the subsidy to the projects, then HUD, in effect, will be making the reimbursement instead of the owner or Idaho Housing. In addition, each of these four projects are subject to the McKinney Act and Idaho Housing would be required to reimburse HUD for one half of the savings attributed to a refinance.2 Comment 20 The finding does not deal with distributions, but with replacement reserves. As noted in comment 16, when the projects adopted Subpart G of 24 CFR 833 they became required to maintain a replacement reserve account for extraordinary maintenance and repair or replacement of capital items. Additionally, HUD Handbook 4381.5 states in paragraph 6.51 that HUD may not always be the contract administrator, but a state agency may be and that state agency Section 8 projects are specifically covered under this section. The Handbook does not differentiate between old regulation and new regulation projects, nor does it differentiate between limited distribution, unlimited distribution, and nonprofit projects. Paragraph 6.53(b)(3) states that the contract administrator will specifically review replacement reserve transactions for propriety and will ensure that the owner/manager is complying with regulatory requirements. This chapter 2 See audit report number 2005-SE-1008 for information on McKinney Act projects. 43 further states that monitoring regulatory agreements requires verification that replacement reserve account transactions are authorized and that vouchers, invoices, and other evidence of distribution and expense payments are proper. Comment 21 Replacement reserves are not to be used simply “…for the benefit of the projects…” but are only to be used, in accordance with 24 CFR 883.703(a), for extraordinary maintenance and repair and replacement of capital items. Comment 22 Although 24 CFR 883 does not mandate that bids or invoices for withdrawals of reserves for replacements be obtained, Idaho Housing policies require both bids and invoices and HUD Handbook 4381.5 paragraph 6.55 states that vouchers and invoices should be reviewed to ensure that distribution and expense payments are proper. Comment 23 Although HUD allows state housing finance agencies flexibility in monitoring the management and operation of these projects, the state housing finance agency is still required to follow the regulations and handbooks that apply to these projects. Comment 24 Our analysis of the documentation does not show that the duplicate disbursement from the replacement reserve account was reimbursed to the same account. The documentation actually shows the following: • There was a deposit to the replacement reserve account in June of 2004 in an amount more than three times the amount of the duplicate reimbursement. • According to the note written on the support, the deposit to the replacement reserve account was to replenish the $132,000 requirement for replacement reserves to be fully funded at $3,000 per unit and 44 units, not to reimburse the account for a duplicate payment as stated by Idaho Housing’s executive director and its attorney. • The check for the deposit to the replacement reserve account came from the project's operating account, not from the twice-paid vendor or the owner. Comment 25 Our analysis of the documentation Idaho Housing provided for the Briarwood transaction at our exit conference revealed that it did not support the transaction. Further, some of the documentation appeared to have been altered. Idaho Housing then provided us with other documents to support this transaction. The documents from the vendor did not match the transaction and the work order again appeared to have been altered. Comment 26 The purpose of the conflict of interest provision in the annual contributions contract and the housing assistance payments contracts is to avoid a conflict in activities performed to serve the public and those performed to promote one’s own interests and to prevent one from obtaining special benefits as a result of the close relationship. There is nothing in these provisions that state that the prohibition is only against a direct financial benefit. Although the executive director of Idaho Housing may not receive a direct financial benefit as a result of 44 his position as the president of The Housing Company, his actions in that position and the performance of The Housing Company would directly affect his reputation and could therefore indirectly affect his future financial position. Comment 27 Idaho Housing is correct in its quote of HUD’s legal counsel in guidance provided by HUD’s Portland’s Office of OGC during 1990. However, Idaho Housing did not complete the quote in which HUD’s legal counsel cautioned very strongly against monitoring its own performance as an owner/manager. In fact, HUD’s legal counsel even offered a solution suggesting that HUD or a public housing authority could perform the contract administrator role with regard to these projects. In addition, HUD’s legal counsel explained that its guidance should not be taken as definitive answers. Therefore, since there was an apparent inconsistency in what was being said, Idaho Housing should have acted further to resolve the issue. Further, it is not apparent from the letter to which Idaho Housing refers that it informed HUD that the executive director of Idaho Housing would also be the president of The Housing Company or that the assets of The Housing Company would revert to Idaho Housing if The Housing Company was dissolved. We believe this information could have altered HUD’s legal counsel opinion in this case. Comment 28 HUD Handbook 4381.5 states in chapter 1, paragraph 1.1 that the handbook applies to HUD-assisted as well as HUD-insured projects. Figure 1-2 shows that the types of properties and programs affected include rental assistance projects in the Section 8 multifamily program area. Although paragraph 1.2 states that a state or local agency may be responsible for oversight of management agent activities, nowhere in the handbook does it say that state housing agencies are exempt from using this handbook. Also, since Idaho Housing is the agent of HUD, it must follow these procedures. Comment 29 Figure 3-5 of HUD Handbook 4381.5 shows that limited distribution and nonprofit projects, regardless of how project rents are set, are required to receive an after-the-fact review of management fees. Again, as stated above, nowhere in this chapter does it say that state housing agencies are exempt from the provisions of this chapter. Comment 30 Idaho Housing states that it is responsible for approval of management fees and other management agent issues under its own procedures. However, by its own admission, it does not have any procedures in place by which to ensure that approved fees do not significantly exceed reasonable amounts as described in HUD Handbook 4381.5. In addition, the management agreement between the owner and the lender (Idaho Housing) for the projects owned by The Housing Company states that the owner will receive a management fee, “…in accordance with HUD Handbook 4381.5 Rev 2…” Therefore, Idaho Housing should have used HUD’s procedures to determine if the increase in management fees was reasonable. 45 Comment 31 As stated in our report, the objective of HUD’s requirement that management fees be reviewed when a project owner or manager requests an increase in the management fee percentage is to ensure that those fees do not exceed that ordinarily paid in like circumstances between independent agents and owners. The authority for state housing agents to assume responsibility for these projects does not absolve them of the responsibility to review the management fees for reasonableness. Comment 32 Idaho Housing did not properly monitor the increase in management fees for these projects. It simply approved the increases without any analysis of reasonableness. Comment 33 Idaho Housing documentation did not show that it made its determination of reasonableness of management fee increases on a case-by-case basis. As stated in comment 30, Idaho Housing does not have a process in place to determine if a management fee is reasonable. In fact, the senior housing compliance manager told us that they just looked at the seven percent fee that was being requested by The Housing Company and decided it was reasonable. Comment 34 HUD Handbook 4381.5 does not require any review of management fees if there has not been a request for a change in management fee percentage or a change in the management agent. This is to give the agent an incentive to maximize collections as well as to increase the agent’s fee yield to offset the effects of inflation. Therefore, we did not review management fees established at project inception. However, a management fee percentage must be reviewed if a change in the percentage or in the management agent is requested. According to this Handbook, the fee percentage should be reviewed when one of the above changes are made in order to determine if the per-unit-per-month dollar amount is reasonable. The Handbook also states, in 3.19 b. that the "[r]esidential fee yield used for establishing the range(s) must be computed by applying the residential fee percentage to the monthly rent potential for all revenue-producing units (adjusted to reflect a 95 percent collection rate)." In 3.19 b. (2), it states that "[y]ields must be computed on a per-unit per-month basis." In 3.20 c. it states that if the yield is not reasonable (in comparison to what was calculated above) the fee percentage may not be approved. As stated in our finding, HUD calculated a reasonable management fee in accordance with this Handbook. Idaho Housing allowed management fees for these projects to exceed that amount from $5 to $13 per-unit-per-month by approving a flat seven percent fee. Comment 35 We believe the corrective action referred to may include repayment to projects or to HUD to correct the improper use of funds authorized by Idaho Housing. 46 Appendix C SCHEDULE OF EXCESSIVE OWNER DISTRIBUTIONS (FINDING 1) Deficiencies Ineligible Project amount A B C D E F G Aspenwood $ 43,186 X X X X Briarwood 384,116 X X X X Bristlecone 366,838 X X X X C Street Manor 92,117 X X X X X Eagle Manor 168,808 X X X X Lake Country 471,765 X X Landmark Tower 125,708 X X X Meadowview/Pondside 330,004 X X X X X Owyhee Place 116,602 X Riverside Senior 979,693 X X X X X X South Meadow 273,769 X X X X Village Community Gardens/Village Gardens 236,933 X X Westside Court 132,199 X X X X Total $3,721,738 A. 1988 housing assistance payments amendment - Owners of these projects signed the 1988 housing assistance payments amendment adopting subpart G of 24 CFR [Code of Federal Regulations] 883. Nonprofit owners should not have been allowed any distributions. Otherwise, distributions should have been limited. B. New regulation limited distribution projects - Under the new regulations, distributions to the owners of these projects are limited to 6 percent on equity. The ineligible amount is the amount in excess of that 6 percent. C. Surplus cash statement not used - Owners of these projects received excess distributions in part due to the difference between use of Idaho Housing's partnership distribution worksheet and HUD's surplus cash statement. D. Special purpose distributions - Idaho Housing allowed this owner to receive a special purpose distribution under its policies even though the owner of this project is a nonprofit organization and is not entitled to any distributions under the 1988 housing assistance payments amendment (see A. above). E. Perpetual affordability agreement - Idaho Housing allowed owners of these projects excess distributions after they signed a perpetual affordability agreement even though these owners are entitled to only a limited distribution or to no distribution as nonprofit owners under the new regulations or the 1988 amendment. F. Residual Receipts - Idaho Housing allowed owner distributions to be paid from residual receipts even though these funds are required to be used to reduce housing assistance payments or for project purposes only. 47 G. Replacement Reserves - Idaho Housing allowed owner distributions to be paid from replacement reserves even though these funds are required to be used only for extraordinary maintenance and repair or replacement of capital items. Specifically, Idaho Housing allowed a total of $11,275 ($8,325, $1,308, and $1,642) to be paid from the replacement reserves of C Street Manor, Pondside/Meadowview, and Riverside Senior. 48 Appendix D UNSUPPORTED DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNTS (FINDING 2) 2001 2002 2003 2004 Project No bids No No bids No No bids No No bids No invoice invoice invoice invoice Aspenwood 9,490 1,558* 8,385 Briarwood 1,693 Bristlecone 19,726 C Street Manor 20,000 15,000 Imperial 267 Lake Country 10,091 McConnell Building 3,429 5,800 Mill Creek 2,115 11,161 3,114 Owyhee Place 2,329 Payette Plaza 4,188 4,011 13,850 Riverside Senior Housing 17,882 Silver Hills 1,455 1,375 South Meadow 13,000 6,195 6,150 Totals 2,115 49,961 33,252 19,604 25,921 15,408 13,828 22,175 *Information on the invoice was insufficient Total 2001-2004 expenditures without required bids $ 75,116 Total 2001-2004 expenditures without required invoices $107,148 49 Appendix E EXCESSIVE MANAGEMENT FEES (FINDING 4) Project Mgt fee1 Mgt fee1 Mgt fee1 Maximum Excess 2002 2003 2004 mgt fee2 mgt fee4 per year a b c d e Briarwood $ 21,624 $ 23,592 $ 23,705 $ 16,800 $ 18,521 Bristlecone 15,484 17,899 17,515 12,600 13,098 Lake Country 23,314 26,060 25,359 18,480 19,293 Meadowview and Pondside 22,940 26,153 26,152 18,480 19,805 Gardens Owyhee Place 15,719 19,304 19,041 13,440 13,744 South Meadow 20,939 23,334 23,675 17,220 16,288 Village Community Gardens and 26,814 31,405 32,573 23,940 18,972 Village Gardens Westside Court3 - - 14,400 12,600 1,800 Total $ 146,834 $167,747 $182,420 $ 120,960 $ 121,521 1 This is the actual management fee paid by the owner from project funds according to each project’s annual audited financial statements. 2 This is the maximum allowable management fee based on 100 percent occupancy and HUD’s maximum $35 per-unit-per-month residential management fee range for Idaho. The amount shown for each project equals the number of units multiplied by the $35 fee multiplied by 12 months. 3 Westside Court did not have a change in management fee or management agent until 2004. Therefore, there is not a value listed in the table above for 2002 and 2003. 4 For all projects except Westside Court, e=(a+b+c)-(d*3). Since Westside Court had no changes in management fees until 2004, e=c-d. 50
Idaho Housing and Finance Association, Bosise, Idaho, Did Not Monitor Subsidized Multifamily Projects in Accordance with Regulations or its Annual Contributions Contract with HUD
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-01-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)