Issue Date
October 20, 2006
Audit Report Number
2007-LA-1001
TO: William F. Bolton, Director, Los Angeles Multifamily Housing, 9DHMLA
Margarita Maisonet, Director, Departmental Enforcement Center, CV
R. Faye Austin, Regional Counsel, 9AC
FROM: Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA
SUBJECT: The Associates Group Pioneer Pines Park, Bakersfield, California, Did Not
Follow the Provisions of the Regulatory Agreement
HIGHLIGHTS
What We Audited and Why
We audited The Associates Group Pioneer Pines Park (Pioneer Pines), located in
Bakersfield, California, in response to a request from the U.S. Department of
Housing and Urban Development’s (HUD) Departmental Enforcement Center.
Our audit objectives were to assess HUD’s concerns about potential equity
skimming and to determine whether the project was administered in compliance
with the regulatory agreement and HUD rules and regulations.
What We Found
Pioneer Pines failed to collect $195,202 in rental payments from its mobile home
dealers; paid $133,049 in unsupported wages; made payments of $373,827 for
ineligible expenses, of which $27,515 remains outstanding; commingled funds
and repaid advances while in a non-surplus-cash position; failed to maintain its
vacant spaces in good repair and condition; and failed to make required mortgage
payments.
We attribute the deficiencies to the president of Pioneer Pines’ insufficient
understanding and in some cases disregard of HUD and regulatory agreement
requirements and the lack of adequate internal controls and procedures. As a
result, project funds were used improperly, which unnecessarily increased the risk
to HUD. Furthermore, Pioneer Pines’ failure to properly maintain the vacant lots
in a rent-ready condition may have adversely impacted potential homeowners’
decisions to move to Pioneer Pines, and thus, hampered its ability to maximize its
occupancy rate.
What We Recommend
We recommend that the director of HUD’s Los Angeles Multifamily Hub require
The Associates Group for Affordable Housing, Inc. (owner), to develop and
implement new procedures and lease agreements to collect full rent from
affiliated companies once spaces are leased, which will result in $195,202 in
funds to be put to better use. In addition, we recommend that HUD require the
owner to repay Pioneer Pines’ project account from non-project funds for the
$195,202 in uncollected rent, the $133,049 in unsupported salary expenses related
to non-project activities, and the $27,515 in ineligible expenses. Further, we
recommend that HUD require the owner to correct the deficiencies relating to the
vacant spaces we inspected. We recommend that the president discontinue
commingling funds and repaying advances while in a non-surplus-cash position
and attend training on HUD’s regulatory agreement and other pertinent rules to
assure future compliance with the requirements. We also recommend that HUD’s
Regional Counsel, in conjunction with HUD’s director of the Los Angeles
Multifamily Housing HUB and HUD’s Office of Inspector General (OIG), pursue
double damages remedies against the owner for the inappropriate disbursements
that were used in violation of the regulatory agreement.
In addition, we recommend the director of the Departmental Enforcement Center
pursue action under the Program Fraud Civil Remedies Act against the president,
impose civil money penalties and pursue administrative sanctions against the
president for his part in the regulatory violations cited in this report, and impose
administrative sanctions against Pioneer Pines and its owner for the inappropriate
disposition of project assets cited in this report.
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.
2
Auditee’s Response
We provided Pioneer Pines a draft report on September 5, 2006, and held an exit
conference with Pioneer Pines’ president on September 18, 2006. Pioneer Pines
provided written comments on September 25, 2006. Pioneer Pines generally
disagreed with our report findings.
The complete text of the auditee’s response, along with our evaluation of that
response, can be found in appendix B of this report.
3
TABLE OF CONTENTS
Background and Objectives 5
Results of Audit
Finding 1: Pioneer Pines’ Owner Failed to Administer the Project in 7
Compliance with the Regulatory Agreement and HUD Rules and Regulations
Scope and Methodology 18
Internal Controls 19
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 20
B. Auditee Comments and OIG’s Evaluation 21
C. Criteria 53
D. Schedule of Uncollected Rental Income and Utilities – New Homes 56
E. Schedule of Uncollected Rental Income and Utilities – Used Homes 57
4
BACKGROUND AND OBJECTIVES
Built originally in 1973, The Associates Group Pioneer Pines Park (Pioneer Pines) is a 336-space
mobile home park located in Bakersfield, California, and is insured by the U.S. Department of
Housing and Urban Development (HUD) (project number 122-00225) for $7.83 million under
the Section 207(m) program of the National Housing Act. This federal mortgage program is for
new construction and substantial rehabilitation and insures lenders against loss on mortgage
defaults. The project is also funded by the Housing Authority of the County of Kern with
$350,000 Series 2002 B and $1,517,677 Series 2002 C tax-exempt bonds.
The Associates Group for Affordable Housing, Inc. (owner), was formed in 1988 as a California
nonprofit corporation dedicated to providing persons and families of low and moderate income
with affordable housing. The owner’s initial purchase of Cedar Hill, a 281-space condominium
conversion park, in 1999 was a success. In November 2002, the owner purchased Pioneer Pines
with the intention of mirroring that success. In September 2002, the owner’s board of directors
unanimously agreed to create a supporting organization, The Associates Group Pioneer Pines
Park, to manage the operations of the park. The Internal Revenue Service did not designate the
nonprofit status of the new entity until December 2002 and thus forestalled the transfer of the
project to the new entity. It was held in abeyance until the transfer was made in December 2004.
In the meantime, the owner assumed the role as the supporting organization and stripped itself of
its assets and liabilities to enable it to act as the single asset entity for the park. The former
entity’s assets and liabilities were transferred to another non-HUD-related organization, The
Associates Group Cedar Hill, LLC (The Associates Group Cedar Hill). In February 2004, The
Associates Group Cedar Hill transferred all of its rights and title in the park to Pioneer Pines.
Before HUD’s limited management review, the president shared the managing responsibilities
with management company La Cumbre Management, which was hired in November 2002 and
also manages The Associates Group Cedar Hill.
Pioneer Pines has not achieved the success of The Associates Group Cedar Hill. As of April
2006, Pioneer Pines had a 34 percent vacancy rate and is currently in default on its mortgage
obligation, with the last payment received on July 14, 2006, for the November 1, 2005 loan
payment. As of January 13, 2004, Pioneer Pines has struggled to pay its mortgage obligation and
has requested disbursements from the working capital and operating deficit reserves.
The Los Angeles HUD Multifamily Hub conducted an on-site limited management review of
Pioneer Pines in October 2004, which resulted in nine findings and one observation.
Shortly after meeting with HUD staff in March 2005, the president employed a certified public
accountant to examine the backup documentation (invoices, checks, and vouchers) for all of
Pioneer Pines’ bank accounts to reconcile the questionable items and determine the amount due
back to the project. The accountant identified $346,312 in unauthorized distributions of project
funds relating to the purchase, refurbishment, installation, and transport of mobile home units
and questionable salary, tax, and travel expenses. The total amount was repaid to the project in
the form of home sale proceeds, The Associates Group Cedar Hill loans/advances, and
intercompany transfers.
5
In a February 2006 memorandum, the Departmental Enforcement Center recommended we
review the operations of Pioneer Pines for potential equity skimming. The project was an
elective financial referral from the Los Angeles Multifamily Hub for unauthorized distribution of
project funds. HUD’s Real Estate Assessment Center also referred the project to the
Departmental Enforcement Center for review as a result of the bank accounts not being in the
name of the project, unauthorized distribution of project funds, an unauthorized loan, and
collection of receivables on behalf of an affiliate.
Our audit objectives were to assess HUD’s concerns about potential equity skimming and to
determine whether Pioneer Pines was administered in compliance with the regulatory agreement
and HUD rules and regulations.
6
RESULTS OF AUDIT
Finding 1: Pioneer Pines’ Owner Failed to Administer the Project in
Compliance with the Regulatory Agreement and HUD Rules and
Regulations
Pioneer Pines’ owner failed to administer the project in accordance with requirements relating to
the receipt and expenditure of project funds and did not properly maintain the project. Pioneer
Pines
Failed to collect $195,202 in rental income and utilities for the project,
Paid $133,049 in unsupported payroll charges for grounds worker wages,
Inappropriately used $373,827 in project funds for ineligible expenses,
Commingled project and non-project funds,
Failed to properly maintain 90 of the 114 vacant lots on the premises, and
Failed to make required mortgage payments.
We attribute these deficiencies to the president’s insufficient understanding and in some cases
disregard of HUD and regulatory agreement requirements and the lack of effective internal
controls and procedures. As a result, project funds were used improperly, which unnecessarily
increased the risk to HUD. Furthermore, Pioneer Pines’ failure to properly maintain the vacant
lots in a rent-ready condition may have adversely impacted potential homeowners’ decisions to
move to Pioneer Pines, and thus, hampered its ability to maximize its occupancy rate.
Pioneer Pines Failed to Collect
$195,202 in Rental Income and
Utilities
The president of Pioneer Pines failed to collect $195,202 in rental income for spaces
used by 17 new homes that were brought into the park and 46 used homes that were
purchased and rehabilitated by two of the president’s affiliated companies, Homes of
the West and The Associates Group Cedar Hill. Homes of the West is a home
dealership located on the Pioneer Pines premises and owned by the president’s son.
The Associates Group Cedar Hill operates like a home dealership, except that it
purchases, rehabilitates, and resells used homes rather than new homes, as does
Homes of the West.
According to the accommodations lease agreement between Pioneer Pines and the
two dealers, they would lease a space on the park for the purpose of rehabilitating
and selling the mobile home unit located on the space. Monthly rental for the space
would be $1 (plus utilities) until the mobile home located on the space was
7
rehabilitated to the president’s satisfaction, at which time, the monthly rent would
increase to $350 per month plus utilities.
Paragraph 18(b) of the regulatory agreement requires that rent paid by dealers for a
space shall be a set rate and no special consideration will be given to any specific
dealer (see appendix C). While there is no evidence showing that the two dealers
actually paid the $1 monthly rent plus utilities, the other home dealers were not
given the same benefit. Other dealers, like Accent Homes, Wall Street Capitol,
LLC, and Rimer Homes, were required to pay the full rent amount while they
rehabilitated the used homes on the lot.
The president contended that Pioneer Pines could not charge rent for homes that
were not ready for occupancy (i.e., homes that had not been properly installed with
electricity and inspected). He also stated that once the homes were habitable,
Pioneer Pines would charge rent to the dealer or third parties and would continue to
do so until the home was sold to an interested homebuyer. The owner’s contention
is obviously not true, as evidenced by the fact that Pioneer Pines charged non-
affiliated dealers full rent while they rehabilitated the used homes on the lots.
Therefore, it is apparent that the owner disregarded the regulatory agreement to give
preferential treatment to its affiliated dealers. We also noted that a majority of the
homes might sit on their respective lots for a period of time before being inspected.
For instance, a home was placed on space 86 in January 2004, yet it was not
inspected until January 2006, which prolonged the period before rent was paid.
After homes were inspected, the president did not require the two dealers to pay the
monthly rent; rather, rental payments were received only when the home was sold to
a homebuyer. Pioneer Pines stood to gain a substantial amount of rental income had
it properly charged the dealers the full rent. Appendixes D and E list the affected
spaces, separated by new and used homes on the lot, and the corresponding amounts
of uncollected rents.
Pioneer Pines Paid $133,049 in
Unsupported Payroll Charges
Pioneer Pines paid $133,049 in unsupported payroll charges related to grounds
worker wages because it failed to log work activities that supported the time spent
on maintaining and operating the park versus other non-project activities.
8
Two currently employed grounds workers told us they did some work on mobile
home units a couple of years ago, but they were not specific on which units and
how much time was spent on those units. The April 2004 to December 2005
payroll journals, time sheets, and time cards sent to La Cumbre Management for
review did not adequately disclose the number of hours spent on each work
activity. As a result, we could not determine the number of hours these and past
grounds workers expended on non-project-related activities.
The former manager stated that logging work activities and related hours were a
waste of time and he abandoned the entire process. It was partly for this reason
that the president terminated the manager from his position. The current manager,
however, told us that Pioneer Pines has been logging work for the past four years,
but the logs are destroyed after a year and are not sent to La Cumbre Management
for review before payroll is processed. Although the manager was not able to
locate the 2004 grounds maintenance reports, she provided samples of the 2005
reports. The reports listed the activities; however, they did not accurately record
and report the time spent on each task. Also, they did not appear to have been
reviewed by the supervisor in charge, although the current manager assured us
that she verified the work reported once a week. For the rest of the week, she
relied on her foreman to supervise. She also told us that the former foreman and
manager consistently supervised the crew, yet according to the president, another
reason the former manager was terminated from his duty was because he
fraternized too much with the grounds workers and would not insist that they
complete their work.
Based on our review of the grounds reports, we could not identify the number of
hours that were spent by the grounds workers on non-project expenses and,
therefore, question their wages and related Social Security and Medicare costs. A
breakdown of the 2004 and 2005 unsupported payroll charges is as follows:
April to December 2004
Pioneer Pines ground workers wages and taxes
Employer
Total Employer
Employee Social Total
earnings Medicare
Security
1 $ 12,504 $ 775 $ 181 $ 13,460
2 $ 13,871 $ 860 $ 201 $ 14,932
3 $ 8,306 $ 515 $ 120 $ 8,941
4 $ 14,226 $ 882 $ 206 $ 15,314
5 $ 1,676 $ 104 $ 24 $ 1,804
6 $ 3,713 $ 230 $ 54 $ 3,997
Subtotal $ 54,296 $ 3,366 $ 786 $ 58,448
2005 Pioneer Pines ground workers wages and taxes
1 $ 13,226 $ 820 $ 192 $ 14,238
2 $ 19,988 $ 1,239 $ 290 $ 21,517
3 $ 3,676 $ 228 $ 53 $ 3,957
4 $ 11,663 $ 723 $ 169 $ 12,555
5 $ 20,747 $ 1,286 $ 301 $ 22,334
Subtotal $ 69,300 $ 4,296 $ 1,005 $ 74,601
Total $ 123,596 $ 7,662 $ 1,791 $ 133,049
9
Pioneer Pines Spent $373,827 in
Ineligible Expenses
Between November 2002 and December 2004, Pioneer Pines paid $373,827 in non-
project-related expenses as follows:
Questionable costs
Other Removal and
Payroll Mobile home
Description Salary Travel entity installation of Total
tax purchase
expenses homes
Balance of accounts as of December 31, 2003 $ 42,796 $ 12,347 $ 5,808 $ 6,477 $ 11,040 $ 60,501 $ 138,969
Balance of accounts as of February 28, 2004 $ 49,410 $ 13,346 $ 7,954 $ 7,982 $ 11,040 $ 95,168 $ 184,900
Balance of accounts as of March 1 to December 31, 2004 $ 26,735 $ 4,708 $ 5,772 $ 20,164 $ 57,000 $ 47,033 $ 161,412
Balance of accounts as of December 31, 2004 $ 76,145 $ 18,054 $ 13,726 $ 28,146 $ 68,040 $ 142,201 $ 346,312
We verified that $346,312 was repaid through proceeds derived from the sale of
mobile home units, intercompany transfers, and loans/advances given by The
Associates Group Cedar Hill. However, based on our independent review of
invoices, checks, and vouchers, we identified $27,515 in ineligible expenses that
was not repaid as follows:
Pioneer Pines ineligible
expenses identified by OIG
Description Amount
October 2003 - January 2006 invoices $ 8,793
Total advertising expense $ 18,722
Total $ 27,515
Between October 2003 and January 2006, $8,793 was spent on expenses such as
electric bills, supplies, and termite fumigation for mobile home units; cable
charges for the manager’s unit; and other ineligible expenses that should have
been paid by the individual mobile home owners. In addition, $18,722 was spent
on advertising consulting fees (supplies, hotels, meals, telephone) incurred by a
couple who resided on the premises. During HUD’s review, HUD identified the
same items as questionable and stated that it had not resolved the matter with
Pioneer Pines. HUD contended that the president did not provide documentation
to substantiate the nature of the relationship or provide any documentation to
show the services that were rendered. We were only provided a copy of the
checks and pay stubs for review.
10
Pioneer Pines Inappropriately
Commingled Funds and Repaid
Advances While in a Non-
Surplus-Cash Position
Contrary to paragraph 6(e) of the regulatory agreement, Pioneer Pines
inappropriately commingled project and non-project funds and repaid them while in
a non-surplus-cash position (see appendix C). At the president’s request, funds were
transferred from The Associates Group Cedar Hill to Pioneer Pines to meet
operating cash shortfalls. Similarly, Pioneer Pines’ mortgage funds were transferred
into an account the president maintained (now closed) and used for both project and
non-project expenses. Both types of transactions contributed to the mortgage default
and unnecessarily increased the risk to HUD’s insurance fund. Some examples are
as follows:
• Between 1999 and November 2002, Pioneer Pines’ expenses were primarily
funded by The Associates Group Cedar Hill. In November 2002, Red
Mortgage Capital, Pioneer Pines’ lender, transferred $288,487 from escrow
to its project account, of which $278,487 was used to repay The Associates
Group Cedar Hill advances. Pioneer Pines used the remaining $10,000 for
operating expenses. (We could not determine whether Pioneer Pines was in
a non-surplus-cash position since a financial report was not required for
2002.) Since the funds were fully expended, The Associates Group Cedar
Hill was again required to cover Pioneer Pines’ operating expenses through
additional advances.
• On October 20, 2003, Pioneer Pines repaid The Associates Group Cedar Hill
$47,527 for advances while in a non-surplus-cash position. Pioneer Pines
used the remainder of its operating funds to pay its November 2003
mortgage obligation but then defaulted on its December 2003 payment.
• Between March 11, 2003, and July 16, 2004, La Cumbre Management made
several fund transfers from the project account it maintained to the account
maintained by the president. The combined amount of $365,487 was spent
on project and non-project expenses. By April 7, 2004, the funds were fully
expended, and The Associates Group Cedar Hill again covered Pioneer
Pines’ operating expenses. While we are not taking issue with the
expenditures for project expenses, the transfer and use of project funds for
non-project expenses was improper.
Between January and July 2005, The Associates Group Cedar Hill transferred a total
of $108,333 into the current Pioneer Pines operating account that La Cumbre
Management maintains. Based on the work prepared by the certified public
accountant, The Associate Group Cedar Hill still owed Pioneer Pines $27,237 for
non-project expenses incurred. Therefore, the outstanding advance still owed to
11
The Associates Group Cedar Hill for advances made was $81,096. Details are as
follows:
Deposits made into La Cumbre
Management account in 2005
Deposits made by
Deposit
The Associates
slip date
Group Cedar Hill
July 11, 2005 $ 9,502
June 10, 2005 $ 25,000
May 11, 2005 $ 21,830
March 7, 2005 $ 25,000
February 2, 2005 $ 30,000
Trustee fees $ (3,000)
Total $ 108,333
Less nonproject expenses
incurred $ 27,237
Net balance of advances still
outstanding for The Associates
Group Cedar Hill $ 81,096
Collectively, the equity skimming that occurred when the advances were repaid
precluded Pioneer Pines from making required mortgage payments.
Pioneer Pines Failed to Ensure the
Project Was in Good Repair and
Condition
Paragraph 7 of the regulatory agreement requires the owner to maintain the
mortgaged premises, accommodations, and the grounds and equipment in good
repair and condition (see appendix C). The owner disregarded this requirement.
Our on-site review performed in April 2006 determined that 90 of the 114 vacant
spaces observed contained at least one deficiency. We devised a rating schedule
to assist us in quantifying the number of identified deficiencies and established a
rating scale to measure the gravity of the deficiencies. A summary of the results
follows.
Rating Number of spaces Percentage
Excellent condition (0 to 1 deficiency) 29 25
Good condition (2 deficiencies) 32 28
Fair condition (3 deficiencies) 22 19
Marginal condition (4 deficiencies) 14 12
Poor condition (5 or more deficiencies) 17 15
Total 114 100
*Percentages do not add up to 100 percent due to rounding.
Of the 114 spaces inspected, 17 (15 percent) were in poor condition and contained
five or more deficiencies. The most common deficiencies identified relate to the
pedestal, utility hook-ups, and spaces that had uncapped sewer lines; needed
12
repainting; were missing pedestal panels; had exposed wiring, rusted pipes,
uneven surrounding surfaces, missing or cracked base, or overgrown
weeds/bushes; and needed cleaning.
A majority of spaces with poor conditions were located within the block of spaces
from 285 to 334. The photographs below illustrate a few examples of spaces that
received a rating of poor condition.
Space 306 - The pedestal needed painting, the pipes had large rusted sections,
and the sewer line was uncapped. In addition, the entire space needed to be
cleaned.
Space 315 - The pedestal needed painting and was missing a cover panel. The
gas and water pipes had rusted sections, and the surrounding area needed to be
cleared of weeds.
Space 327 – The entire top section of the pedestal was missing, while the
bottom half needed painting. There was some exposed wiring, and the gas
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and water pipes had rusted areas. There were also trash and debris around the
pedestal.
Pioneer Pines Failed to Make
Required Mortgage Payments
Pioneer Pines failed to make its required mortgage payments in a timely fashion
and as of April 2006, is currently in default on its mortgage obligation, with the
last payment received on July 14, 2006, for the November 1, 2005 loan payment.
Due to the loan advancements made during the early part of the loan term,
mortgage payments were made timely until January 13, 2004, the date of Pioneer
Pines’ first default. The loan is paid up through October 2005 through
disbursements from the working capital reserve or operating deficit reserve funds.
After HUD withdrew permission to draw from these funds in June 2004, the loans
were paid through a series of rolling defaults. That is, once a loan is past 30 days
late it is in default and to reinstate the loan to current, Pioneer Pines would need
to make any outstanding payments due by the current month they are paid in.
Since Red Mortgage Capital has requested extending the election to assign the
loan to HUD several times due to Pioneer Pines’ failure to pay its mortgage, they
appear to be satisfied with the efforts of the owner to try and make the project
viable.
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Pioneer Pines Failed to
Establish an Adequate Internal
Control Environment
Pioneer Pines lacked an adequate internal control environment, which contributed
to the deficiencies found during our audit. Pioneer Pines failed to segregate work
duties and provide adequate supervision as discussed below.
Failure to Segregate Duties
La Cumbre Management was not independent of the president’s control and
could not assure that the president would not circumvent any controls it had in
place. Also, La Cumbre Management was unaware of the provisions of the
regulatory agreement and did not know that mobile home unit expenses were
non-project-related until told by the president, who was also unaware until
after the results of HUD’s limited management review. During our review,
we determined that
La Cumbre Management paid for non-project expenses related to air
conditioning repairs, paint and supplies for the mobile home units, door
locks for the units, etc.
While Pioneer Pines was in a non-surplus-cash position between 2003 and
2004, La Cumbre Management transferred $365,487 in project funds to
the account maintained by the president. These funds went to pay for
project and non-project expenses at the president’s discretion. When
asked whether La Cumbre Management ever refused to cut a check for the
president, the bookkeeper stated, “they could have refused, but he was the
president so they just wrote the check and believed him.”
The bookkeeper incorporated expenses incurred by the president through
the bank account he maintained into Pioneer Pines’ general ledger based
on the check register amounts that were faxed to La Cumbre Management.
La Cumbre Management’s bookkeeper neglected to determine whether
those transactions were proper and for the purpose of maintaining and
operating the property.
Lack of Adequate Supervision
The president failed to provide adequate oversight on the premises to ensure
that the work was being completed and documented as required.
A week before we inspected the park, the managers, a husband and wife
team hired in April 2005, were dismissed. The president claimed that they
were let go because they failed to complete their managerial duties
15
competently. The husband fraternized too much with employees, which
ultimately reduced his ability to get the employees to accomplish their
tasks. The husband also did not have adequate organizational skills and
eliminated the process of logging the work completed. The wife was
unable to use the computer software and relied heavily on the aid of the
assistant manager. Contrary to the president’s claim of visiting the park at
least once a week, the assistant manager stated that he visited the park
infrequently. Had there been adequate supervision, the president would
have been aware of the problems with the managers. With inadequate
oversight and poor record keeping on the part of the grounds workers (see
Failure of Pioneer Pines Employees to Log Work Activities section
above), we cannot be assured that the grounds workers were performing
their duties as required (see Failure to Ensure Project Was in Good Repair
and Condition section above).
Based on our discussion with the president and our inspection of the park, it
appears that the former manager did not closely supervise the grounds
workers as required. As evidenced by our site review, maintenance work was
not sufficient to satisfy the conditions of the regulatory agreement. The
current assistant manager stated that she reviewed the work completed once a
week and had deferred most of the supervisory responsibility to the foreman.
We were told that Pioneer Pines hired another grounds worker who started on
June 21, 2006, to assist the current manager in this task.
Conclusion
We attribute the deficiencies noted to the president’s insufficient understanding
and in some cases disregard of HUD and regulatory agreement requirements.
Another contributing cause was the lack of adequate internal controls and
procedures. As a result, the president failed to collect $195,202 in rental income
and utilities, paid $160,564 in ineligible and unsupported expenses, and
inappropriately commingled funds and repaid advances while in a non-surplus-
cash position. These deficiencies resulted in fewer project funds being available
for mortgage repayment, which unnecessarily increased the risk to HUD. Further,
the president failed to adequately maintain the Pioneer Pines property in good
repair and promptly pay its mortgage payments.
Recommendations
We recommend that the director of HUD’s Los Angeles Multifamily Housing Hub
require the owner to
1A. Repay Pioneer Pines project account for the $195,202 (funds to be put to better
use) in uncollected rental income (appendixes D and E) from non-project funds.
16
1B. Develop and implement new procedures and lease agreements to collect the
full rent from affiliated companies (dealers) once the spaces are leased or terminate
all work with its affiliated companies.
1C. Provide documentation to support the portion of the $133,049 in grounds
workers’ wages that was related to non-project activities and repay the Pioneer Pines
project account from nonfederal funds for that amount.
1D. Repay the Pioneer Pines project account for the $27,515 in ineligible expenses
from non-project funds.
1E. Correct the deficiencies related to the conditions of the spaces with poor
ratings so they comply with the regulatory agreement, and develop an inspection
process and controls to ensure the inspection process is working effectively.
1F. Implement procedures and controls to ensure that future disbursements for
project expenses comply with the regulatory agreement and HUD requirements.
1G. Discontinue commingling of funds and seek HUD’s approval before making a
repayment of loan advances to an affiliated company.
1H. Attend training on HUD’s regulatory agreement and other pertinent rules to
assure future compliance with the requirements.
We also recommend that HUD’s regional counsel, in coordination with the
director of HUD’s Los Angeles Multifamily Housing Hub and HUD’s Office of
Inspector General (OIG),
1I. Pursue double damages remedies against the responsible parties for the
inappropriate disbursements that were used in violation of the project’s regulatory
agreement.
We also recommend that the director of HUD’s Departmental Enforcement
Center
1J. Pursue civil money penalties and administrative sanctions, as appropriate,
up to and including debarment, against responsible parties for their part in the
regulatory violations cited in this report.
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SCOPE AND METHODOLOGY
We performed our audit work at Pioneer Pines, Bakersfield, California, and La Cumbre
Management, Santa Barbara, California. We conducted our fieldwork from March 20 through July
21, 2006. Our review generally covered the period from April 9, 1999, through February 28, 2006.
We expanded the scope of the audit as necessary.
To accomplish our objectives, we
• Reviewed the HUD requirements and regulations and the regulatory agreement.
• Obtained an understanding of Pioneer Pines’ procedures, including its controls to ensure that
the project was properly managed.
• Interviewed Pioneer Pines’ president, park staff, certified public account, and construction
and management company staff to acquire an understanding of the operation’s procedures.
• Reviewed Pioneer Pines’ loan, operating deficit fund, working capital, and reserve accounts
provided by the lender.
• Interviewed HUD multifamily and Departmental Enforcement Center personnel.
• Reviewed the work of Pioneer Pines’ certified public accountant, including the invoices,
bank statements, and checks related to the financial activities of the park.
• Reviewed the timesheets, time cards, and payroll journals for Pioneer Pines employees
between 2004 and 2005.
• Reviewed January 2003 through April 2006 rent rolls, monthly traffic reports, additions to
income reports, deductions to income reports, deposit slips, and the president’s collection
reports pertaining to the new and used homes that were purchased and placed on the lots.
• Performed a site review to determine whether the park was adequately maintained as
required by the regulatory agreement.
• Reviewed HUD’s October 2004 limited management review report to determine whether the
monitoring identified any findings or concerns that pertain to the scope of our audit work.
• Reviewed Pioneer Pines’ audited financial statements for years ending 2004 through 2005 to
determine whether the independent auditor identified any findings that pertain to the scope of
our audit work.
We performed our review in accordance with generally accepted government auditing
standards.
18
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:
• Policies and procedures that management implemented to reasonably ensure
that the HUD-insured project is administered in conformity with the
regulatory agreement and HUD requirements.
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.
Significant Weaknesses
Based on our review, we believe the following items are significant weaknesses:
• Pioneer Pines lacked effective internal controls and procedures to ensure that
the project was administered in compliance with the regulatory agreement.
19
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible 1/ Unsupported 2/ Funds to be put
number to better use 3/
1A $195,202
1B $133,049
1C $27,515
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
polices or regulations. The $27,515 represents ineligible costs that are unnecessary to
the project’s operation or disallowed because they were incurred contrary to the
regulatory agreement.
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. The $133,049 represents unsupported payroll
charges related to grounds worker wages.
3/ “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
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. The $195,202 represents rental
income for spaces the park failed to collect for the 17 new homes that were brought into
the park and 46 used homes that were purchased and rehabilitated by two of the
president’s affiliated companies, Homes of the West and The Associates Group Cedar
Hill.
8,793 was spent on expenses such as electric bills, supplies, and termite fumigation for mobile
home units; cable charges for the manager’s unit; and other ineligible expenses that should have
been paid by the individual mobile home owners. In addition, $18,722 was spent on advertising
consulting fees (supplies, hotels, meals, telephone) incurred by a couple who resided on the
premises.
20
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
21
Comment 2
22
Comment 3
Comment 4
23
Comment 5
Comment 6
24
Comment 7
Comment 8
25
Comment 9
Comment 10
26
27
Comment 5
Comment 5
Comment 4
28
Comment 10
29
Comment 10
Comment 7
30
31
Comment 11
Names Redacted for Privacy
32
33
34
Comment 12
35
Comment 13
Comment 14
36
Comment 15
37
Comment 5
Comment 3
Comment 16
38
Comment 17
Comment 18
39
Comment 19
Comment 20
40
41
42
Comment 21
43
Comment 22
Comment 21
44
45
46
OIG Evaluation of Auditee Comments
Comment 1 We disagree. The rental income should have been collected by the owner
pursuant to Paragraph 11(b) of the regulatory agreement. Since the rental income
was not collected, the owner violated the regulatory agreement. Pursuant to Title
12 of the United States Code, Section 1715z-4a, the Secretary of Housing and
Urban Development may request the Attorney General to bring an action in a
United States district court to recover any assets or income used by any person in
violation of a regulatory agreement that applies to a multifamily project whose
mortgage is insured or held by the Secretary under Title II of the National
Housing Act.
Comment 2 We acknowledge and empathize with the owner’s marketing burdens and
difficulty in increasing the occupancy rate. Based on the comments provided by
the auditee, we have removed any references to our contacts with other mobile
home parks in the Orange County area, since we agree they may not be similar to
mobile home parks in Bakersfield. However, we disagree that the conclusions are
erroneous. The underlying issue is the park’s failure to collect rental income from
two of the president’s affiliated dealers. We also note that our position is
consistent with HUD’s position that it took when it raised the issue of uncollected
rent in its monitoring review.
Comment 3 The auditee did not provide any information that changes our conclusion about
the disparity between third party dealers and affiliated dealers. Comments 15
through 18 specifically address the attached commentary and narrative the
president prepared in response to our report.
Comment 4 Any work performed related to the rehabilitation of mobile home units while
being paid out of project funds is in violation of the regulatory agreement. When
we interviewed two of the park’s maintenance employees, we were given the
impression that rehabilitating of the homes was a secondary part of their
functions. Because the records did not document the hours spent and duties
performed on specific tasks, we were compelled to question the entire grounds
crew’s salaries. We agree that a portion of the salaries is eligible; however, we
were unable to determine what portion. During the audit resolution process, the
owner can provide documentation evidencing the portion of the salaries that are
eligible to resolve the issue. In addition, we noted that the written response did
not include the entire relevant portion of HUD Handbook 4381.5, which states
that an agent's generalist staff must document hours spent and duties performed
47
on front-line activities for each project and those spent on the central office
functions. Weekly timesheets are an acceptable method of documenting hours
spent on front-line tasks.
Comment 5 According to HUD’s Multifamily Housing officials, advertising of the vacant
spaces is a function incumbent on the management company, and the expenses
should be borne by the management company. Although the Management
Agent’s Certification signed on April 1, 2002 by the president of The Associates
Group and March 25, 2002 by the president of La Cumbre Management Company
does not specifically state that advertising is a function of the management
company, the management company agreed to “ensure that all expenses of the
project are reasonable and necessary.” Upon review of the $18,722 in advertising
and consulting fees incurred within a two and a half month period (January 12 to
March 23, 2004), we determined that these expenses were questionable because
the auditee did not provide any documentation to substantiate the services
provided in order to support that the expenses were reasonable and necessary to
the project operations. Although The Associates Group claimed that La Cumbre
Management Company’s services did not involve mobile home sales, our review
showed that La Cumbre Management performed the bookkeeping and collecting
of the mortgage premiums of these mobile home sales. In November 2004 the
president instructed the manager of Pioneer Pines to stop billing residents who
owe The Associates Group Cedar Hill for payments not made.
Comment 6 By definition, equity skimming is the use of project funds for other than actual or
necessary expenses when the mortgage is in default or the project is in a non
surplus cash position. There is no required level of intent. Whether the owner
willfully, negligently, or without knowledge, utilized project funds for other than
actual or necessary expenses, it is still equity skimming. We agree that the
$81,096 can be used to offset the ineligible expenses; however, this needs to be
reflected in the general ledger before we can consider the issue resolved. The
main purpose of this section of the report is to point out that there exists a pattern
of requiring advances to be repaid while the park is in a nonsurplus cash position,
which is considered equity skimming, and needs to be addressed so that the
practice does not continue.
Comment 7 We acknowledge that our inspection was not a Real Estate Assessment Center
inspection, nor was it meant to be in compliance with Real Estate Assessment
Center requirements. The Real Estate Assessment Center inspection score
differed from the results of our inspection because the scopes of the inspections
were different. Real Estate Assessment Center inspected the common areas, but
did not inspect the vacant spaces that we did. Had Real Estate Assessment Center
inspected the vacant spaces then the score may have been different. As
recommended in the report, the owner can provide information to HUD during the
audit resolution process to demonstrate that corrective action has been taken.
48
Comment 8 We amended the report to state that the mortgagee was apparently satisfied with
the efforts of the owner to try and make the project viable, and thus has requested
extension of the loan’s assignment to HUD. We also corrected the misstatement
that the project’s physical conditions resulted in the lack of funds to pay the
mortgage.
Comment 9 Since the owner agreed that the internal controls were deficient, we have no
further comment. Comments on the uncollected rent, ineligible expenses, and
project condition are specifically addressed in comments 1 through 3, and 20.
Comment 10 We amended the report recommendation regarding the repayment of $29,015, to
$27,515 (due to removal of trustee fee, see comment 14 below) as agreed upon at
the exit conference. The recommendations we proposed were directed to the Los
Angeles Office of Multifamily Housing and the Departmental Enforcement
Center, thus the appropriateness of the recommendations can be addressed during
the audit resolution process. We also want to point out that the owner was given
15 days to respond to the draft report, which is the same amount of time given to
all our external auditees. The owner was given finding outlines back in July,
nearly two months before the draft report, but chose not to provide us any
comments at that time. We have given serious consideration to the written
comments provided in finalizing the audit report. We agree that advances may be
used to offset any ineligible expenses; however, this needs to be addressed with
HUD during the audit resolution process. With regard to the $97,000 that HUD
has not released, we have no comment on the issue since it was not within the
scope of our audit.
Comment 11 As stated in Comment 4, these declarations conflict with information provided to
us during our audit fieldwork and are insufficient to resolve the issue of
unallowable expenses of maintenance personnel at this time. Documentation
evidencing the amount of time spent on eligible activities can be provided to
HUD during the audit resolution process to resolve this issue.
Comment 12 As discussed in Comment 10, we have reduced the ineligible expenses in
response to your comments. We have provided comments on some of the specific
expense items raised by the auditee in Comments 5, and 16 through 19.
Comment 13 While the cable expense may be relatively small, it is an unnecessary expense to
the park operations, and thus, ineligible.
Comment 14 We removed the $1,500 in trustee’s fees from the questioned costs, but we
maintain that $27,515 should be repaid back out of non-project funds. Specific
comments on some of the other ineligible expenses are as follows:
49
December 22, 2004 $55 payment – This underpayment was the result of a
balance carry forward for rental of space number 135. The balance forward as
of November 2004 was $952.46 and a payment of $620 was received,
bringing the balance to be carried forward down to $332.46 in January of
2005. However, only $277.46 was carried over to January 2005, which was
an understatement of $55. The president explained to us that the renter was to
receive a renter’s credit of $105 per month and had been inadvertently (due to
clerical error) been given a $160 renter’s credit, which is an overstatement of
$55 and should be repaid back to the project.
Christmas Trees and Flowers – As with the cable expenses, these expenses are
unnecessary to the project operations, and thus, are ineligible.
Trustee Fees – We verified with the internal auditor that this trustee fee was
reversed as an accounting entry and resolved. We have removed this from the
ineligible expenses.
Comment 15 We cannot provide the space numbers that were involved with the disallowed
electrical and gas charges dated between February to October 2003 because the
documentation did not clearly delineate those charges as did the other Pacific,
Gas, and Electric bills. This is the reason why we questioned those expenses.
During the audit resolution process, the owner can provide documentation to
HUD to show the break down of the costs and the proper allocation towards each
mobile home unit.
Comment 16 As stated in Comment 3, the owner did not provide any additional information
that changed our conclusion. Between the dates December 2003 and March 2004,
the rent roll shows that space number 73 was occupied by Accent Homes. The
same information appears on the president’s collection report. During Accent
Homes’ occupation of this space, two deposits in the amount of $350 were made,
one on January 13, 2004 and another for $350 on February 4, 2004. It was not
until March of 2004 did the dealer stop paying its rent and incurred a balance
forward of $350. The March 2004 Delinquency report even shows that Accent
Homes has an amount due of $350 and it’s “on its way out.” Accent Homes was
required to pay rent while it was rehabilitating the home while it sat on space
number 73. The Associates Group’s response even admits that Accent Homes
was required to pay rent while it was rehabilitating the home, although the rent
was refunded back to the dealer due to non performance, which is irrelevant.
50
Comment 17 In the spreadsheet provided by the president, he stated that the home on space
#136 “was under contract to LLC and turned over to an outside dealer who later
sold the home after some remodel.” The response contradicts that statement and
states the contract for the home was never finalized and Rimer Homes made a
deal with the homeowner and not the park or LLC. Our review of the dated
March to July 2005 rent rolls and collection report shows space 136 to be
occupied by Rimer Homes. It was not until the August 2005 rent roll and
collection report did the name change to reflect the current tenant. A rent receipt
record shows rent to have been paid in April 8, 2005, May 9, 2005, and July 8,
2005. Also, according to the spreadsheet, the park received the tenant application
in July 2005 and signed the lease agreement on August 2005, which leads us to
conclude that Rimer Homes was required to make rental payments for the time
they spent rehabilitating the home.
Comment 18 According to the spreadsheet provided by the owner, homes were moved into
space number 180 and 181 on January 2005 and passed its inspection on January
7, 2005. Also, these homes were certified habitable on September 2005 and June
2005, respectively. We acknowledge that no rent was collected for these spaces
until the homes were sold; however, our position is that other dealers were
required to pay the full rent amount. It is evidenced by the balance in the balance
and credit forward reports that these dealers are required to pay the full rent
amount. The December 2004 and January 2005 balance and credit forward
reports show an increasing balance in the amount of rent expected to be collected
from Wall Street Capital for utilizing spaces 180 and 181. In The Associates
Group’s response, they openly admitted to collecting back rent when each home
was sold. Even before the homes were certified as habitable and suitable for
occupancy, rent was expected from Wall Street Capital. By June 2005, the
balance forward owed by Wall Street Capital for homes on space number 180 and
181 amounted to $2,172 each. So although The Associates Group’s claims to
charge rent after a home passes state inspection and is fit for full-time occupancy,
the treatment for homes on space numbers 180 and 181 illustrates that they either
do not follow the policy or do not adhere to it consistently.
Comment 19 As requested by the auditee, we reviewed other homes noted as having been
installed by other dealers. Based on the spreadsheet provided by the president,
only two other spaces were occupied by another dealer, Visalia Homes. Given
that the home was occupied immediately by a tenant or the park’s records
conflicted with one another, we could not make a determination whether
differential treatment was made with regard to Visalia Homes. Therefore, we
were unable to support the auditee’s contention that there was no disparate
treatment between the affiliated and non-affiliated dealers.
51
According to the rent roll and collection report, space number 225 was vacant
between January 2003 and November 2005. In the month of December 2005, as
evidenced by the Pioneer Pines Changes for the Month of December 2005 report
and December 2005 rent roll and collection report, a new tenant moved into the
space and paid rent on January 4, 2006.
According to the rent roll report, space number 259 was vacant between January
2003 and August 2005; however the collection report shows the space as vacant
between January 2003 and December 2005. In such a case, we can not make an
accurate determination because the records seem to conflict with one another.
Comment 20 As discussed in Comment 2, the underlying issue is the park’s failure to collect
rental income from two of the president’s affiliated dealers. Based on the
auditee’s comments, we have removed all references to our contacts with other
mobile home parks. However, we noted that based on our analysis above in
Comments 16 through 19, the owner was indeed charging rent to non-affiliated
dealers during the rehabilitation phase, and in other cases it was unclear whether
there was disparate treatment or not.
Comment 21 As recommended in our report, the owner can provide evidence of the corrective
action taken to resolve the issues during the audit resolution process. Specifically
with regard to the wiring, we are aware that the exposed wiring is not electrical
wiring and does not pose a health violation; however, we identified it as a
deficiency due to the fact that the exposed wires may be a safety hazard. Children
who may play in the vacant lots or even residents may trip over them.
Comment 22 With regard to the deficiency on the uneven surrounding surfaces, these are
situations where there is a pile of dirt and debris on the front end of the slab and
the ground surface beside it is dangerously uneven (see space number 328)
52
Appendix C
CRITERIA
Regulatory Agreement
We extracted the pertinent paragraphs from the executed regulatory agreement.
Paragraph 6(e):
The owner shall not without the prior written approval of the Secretary [of HUD] make, or
receive and retain, any distribution of assets or any income of any kind of the project except
surplus cash and except on the following conditions: 1) all distributions shall be made only as of
and after the end of a semiannual or annual fiscal period, and only as permitted by law of the
applicable jurisdiction; 2) no distribution shall be made from borrowed funds, before the
completion of the project or when there is any default under the regulatory agreement or under
the note or mortgage; 3) any distribution of any funds of the project, which the party receiving
such funds is not entitled to retain hereunder, shall be held in trust separate and apart from any
other funds; and 4) there shall have been compliance with all outstanding notices of requirements
for proper maintenance of the project.
Paragraph 7:
The owner shall maintain the mortgaged premises, accommodations, and the grounds and
equipment in good repair and condition.
Paragraph 11(b):
The owner will collect all rents and charges in connection with the operation of the project and
use such collections to pay the owners’ obligations under the regulatory agreement and under the
note and mortgage and the necessary expenses of preserving the property and operating the
project.
Paragraph 15:
The owner warrants that he has not, and will not, execute any other agreement with provisions
contradictory of, or in opposition to, the provisions hereof, and that, in any event, the
requirements of the regulatory agreement are paramount and controlling as to the rights and
obligations set forth and supersede any other requirements in conflict therewith.
53
Paragraph 18 and 18(b):
The mortgagor shall not use or permit the use of any portion of the mortgaged premises for
demonstrating mobile home models or for other sales purposes, except the mortgagor may rent
up to 10 percent of the total number of spaces in the project to mobile home dealers for the
purpose of demonstrating their sales model providing:
The rental paid by dealers for a space shall be the rate set forth on Form HUD 92458, and no
special consideration will be given to any specific dealer.
24 CFR [Code of Federal Regulations] Part 24
According to 24 CFR 24.305, 24.411, 24.700, and 24.1110, HUD is permitted to take
administrative sanctions against recipients of HUD assistance who violate HUD’s requirements.
The sanctions include limited denials of participation, suspensions, and debarments.
An authorized HUD official may issue a limited denial of participation against a person based
upon adequate evidence of any of the following causes:
Failure to honor contractual obligations or to proceed in accordance with contract
specifications or HUD regulations;
Failure to satisfy, upon completion, the requirements of an assistance agreement or contract;
and
Violation of any law, regulation, or procedure relating to the application for financial
assistance, insurance, or guarantee or to the performance of obligations incurred pursuant to a
grant of financial assistance or pursuant to a conditional or final commitment to insure or
guarantee.
An authorized HUD official may issue a debarment or suspension against a person based upon
adequate evidence of any of the following causes:
Violation of the terms of a public agreement or transaction so serious as to affect the integrity
of an agency program, such as
(1) A willful failure to perform in accordance with the terms of one or more public
agreements or transactions,
(2) A history of failure to perform or of unsatisfactory performance of one or more public
agreements or transactions, or
(3) A willful violation of a statutory or regulatory provision or requirement applicable to
a public agreement or transaction.
54
HUD may debar a person from participating in any HUD programs or activities for material
violation of a statutory or regulatory provision or program requirement applicable to a public
agreement or transaction including applications for grants, financial assistance, insurance, or
guarantees or to the performance of requirements under a grant, assistance award, or
conditional or final commitment to insure or guarantee.
Title 12, United States Code, section 1715z-4a
Section 421 of the Housing and Community Development Act of 1987, 12 United States Code,
section 1715z-4a, contains double damages remedy for unauthorized use of multifamily housing
project assets and income. The double damages remedy is a civil remedy rather than an
administrative remedy. It permits the secretary of HUD to request that the attorney general bring
an action in a United States district court to recover any assets or income used by any owner or
agent of the owner in violation of a regulatory agreement that applies to a multifamily project
whose mortgage is insured or held by the secretary under Title II of the National Housing Act
and any applicable regulations.
55
Appendix D
SCHEDULE OF UNCOLLECTED RENTAL INCOMEAND UTILITIES –
NEW HOMES
Space Potential rent Trash, sewer & Number of months rental income not collected
Count Period
number from dealer water (utilities) from Homes of the West
1 4 $3,615 $355 10 1/2 March 2005 to first half of January 2006
2 5 $2,445 $241 7 1/2 April to part of November 2005
3 18 $2,800 $273 8 July 2005 to February 2006
4 32 $4,140 $406 12 March 2005 to February 2006
5 36 $1,340 $133 4 March to June 2005
6 49 $1,690 $166 5 March to July 2005
7 51 $1,050 $101 3 June to August 2005
8 53 $2,780 $271 8 May to December 2005
9 55 $3,110 $304 9 April to December 2005
10 82 $2,450 $240 7 August 2005 to February 2006
11 93 $1,750 $171 5 October 2005 to February 2006
12 99 $2,100 $205 6 September 2005 to February 2006
13 103 $1,750 $171 5 October 2005 to February 2006
14 110 $863 $85 2 1/2 August to first half of October 2005
15 168 $2,100 $205 6 September 2005 to February 2006
16 189 $3,600 $353 10 1/2 April 2005 to first half of February 2006
17 358 $1,050 $103 3 August to October 2005
Total $38,633 $3,783 $ 42,416
The highlighted items indicate that the space was occupied initially by a used home, then a new home.
56
Appendix E
SCHEDULE OF UNCOLLECTED RENTAL INCOME AND
UTILITIES– USED HOMES
Number of months rental income not collected
Space Trash, sewer &
Count
number
Potential rent from The Associates Group LLC or Homes of Period
water (utilities) the West
August to December 2003, June to August 2004,
1 1 $ 6,580 $ 672 20
and March 2005 to February 2006
2 15 $ 3,750 $ 370 11 January to November 2005
3 16 $ 2,450 $ 240 7 August 2005 to February 2006
4 18 $ 3,470 $ 366 11 January and March to December 2004
5 19 $ 290 $ 33 1 Apr-04
6 22 $ 660 $ 67 2 June to July 2004
7 28 $ 1,050 $ 103 3 October to December 2004
8 33 $ 7,400 $ 739 22 May 2004 to February 2006
9 37 $ 990 $ 100 3 August to October 2004
10 46 $ 1,400 $ 137 4 August to November 2005
11 53 $ 1,160 $ 133 4 July to October 2003
12 60 $ 4,170 $ 433 13 March 2004 to March 2005
13 61 $ 2,110 $ 233 7 January to July 2004
14 65 $ 4,170 $ 433 13 March 2004 to March 2005
15 67 $ 7,980 $ 805 24 March 2004 to February 2006
16 71 $ 1,860 $ 200 6 March to August 2004
17 72 $ 3,335 $ 349 10 1/2 March 2004 to first half of January 2005
18 73 $ 580 $ 67 2 November to December 2003
19 78 $ 8,560 $ 872 26 January 2004 to February 2006
20 83 $ 2,110 $ 233 7 January to July 2004
21 85 $ 8,270 $ 839 25 February 2004 to February 2006
22 86 $ 8,210 $ 838 25 January 2004 to January 2006
23 88 $ 870 $ 100 3 January to March 2004
24 90 $ 2,450 $ 240 7 August 2005 to February 2006
25 97 $ 700 $ 68 2 August to September 2005
26 100 $ 4,090 $ 433 13 January 2004 to January 2005
27 110 $ 1,740 $ 200 6 July to December 2003
28 136 $ 1,320 $ 133 4 November 2004 to February 2005
29 139 $ 7,280 $ 737 22 March 2004 to November 2005 and February 2006
30 154 $ 6,450 $ 639 19 August 2004 to February 2006
31 154 $ 2,970 $ 300 9 November 2004 to July 2005
32 158 $ 5,460 $ 539 16 November 2004 to February 2006
33 158 $ 2,970 $ 300 9 November 2004 to July 2005
34 159 $ 580 $ 67 2 November to December 2003
35 162 $ 2,520 $ 266 8 March to October 2004
36 173 $ 3,400 $ 336 10 January to October 2005
37 174 $ 870 $ 100 3 March to May 2004
38 179 $ 580 $ 67 2 April to May 2004
39 212 $ 1,900 $ 233 7 April to October 2003
40 228 $ 3,810 $ 373 11 April 2005 to February 2006
41 230 $ 2,125 $ 266 8 March to October 2003
42 236 $ 1,900 $ 233 7 April to October 2003
43 303 $ 330 $ 33 1 Feb-05
44 311 $ 1,940 $ 200 6 May to October 2004
45 344 $ 990 $ 100 3 September to November 2004
46 350 $ 700 $ 68 2 January to February 2006
Total $ 138,500 $ 14,286 $ 152,786
The highlighted spaces (18, 46, 53, 73, 110, and 212) indicate the space was occupied initially by a used home, then a new home.
The highlighted spaces (16 and 90) indicate that it was a space identified in new home list the owner provided; however, it appears to have had a used home sitting on the lot.
57
The Associates Group Pioneer Pines Park, Bakersfield, Did Not Follow the Provisions of the Regulatory Agreement
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-10-20.
Below is a raw (and likely hideous) rendition of the original report. (PDF)