oversight

The Maine State Housing Authority, Augusta, Maine, Needs to Improve Controls over Its Administration of the HOME Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-01-18.

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

                                                                Issue Date
                                                                        January 18, 2008
                                                                Audit Report Number
                                                                             2008-BO-1003




TO:        Robert C. Paquin, Director, Community of Planning and Development, 1AD


FROM:      John A. Dvorak, Regional Inspector General for Audit, 1AGA

SUBJECT: The Maine State Housing Authority, Augusta, Maine, Needs to Improve
         Controls over Its Administration of the HOME Program


                                   HIGHLIGHTS

 What We Audited and Why



             We audited the HOME Investment Partnerships program (HOME) administered
             by the Maine State Housing Authority, Augusta, Maine (Authority), as part of our
             annual audit plan. The Authority received more than $21 million in U.S.
             Department of Housing and Urban Development (HUD) funding for its federal
             HOME program from 2005 to 2007.

             Our audit objective was to determine whether the Authority administered its
             HOME program in compliance with HUD regulations. We focused on whether
             the Authority (1) had adequate internal controls over its management process,
             accounting, and data processing; (2) used HOME program funds for eligible
             activities and adequately supported expenditures; (3) had adequate monitoring
             practices; and (4) properly accounted for HOME program income.


 What We Found


             The Authority generally administered its HOME program in accordance with
             HUD regulations. It had adequate internal controls over its accounting and data
         processing and properly accounted for HOME program income. However, we
         identified two areas in which the Authority needs to improve its management
         controls, including improving its monitoring practices and ensuring that HOME
         program funds are used for eligible activities. Specifically, the Authority failed to
         track the status of outstanding housing quality standards deficiencies it found
         during annual compliance reviews and ensure that corrective actions were taken
         in a timely manner. The Authority also failed to ensure that two homes met HUD
         health safety standards before disbursing HUD funds to assist homebuyers.
         These deficiencies occurred because the temporary transition of personnel
         assigned to perform monitoring duties and the heavy workload of the Authority’s
         only inspector for the Home Repair and Maine American Dream Initiative
         (MADI) programs impeded efforts to address corrective action items in a timely
         manner. Also, the Authority was unaware that the two homes failed to meet HUD
         standards because it did not maintain inspection reports, relying on the
         community action agency’s (CAA) certifications that homes met HUD standards.
         As a result, several homeowners were living in homes that were not decent, safe,
         and sanitary. Also, the Authority’s disbursement of $13,686 to two homebuyers
         for homes that were not decent, safe, and sanitary was not the best use of funds.

What We Recommend


         We recommend that the Director of the Office of Community Planning and
         Development in Boston require the Authority to (1) review all HOME Repair and
         Maine’s American Dream Initiative (MADI) program annual compliance reviews
         performed during the period of temporary transition of personnel assigned
         monitoring duties and ensure that all corrective action items have been adequately
         addressed, (2) evaluate whether procedures to better coordinate and schedule
         inspections for its HOME Repair and MADI programs should be implemented,
         (3) consider hiring or using additional inspectors to assist with inspections for its
         HOME Repair and MADI programs, (4) obtain all documentation and evidence
         necessary to substantiate that all deficiencies were corrected to ensure that
         $13,686 provided for the two homes was put to the best use, (5) maintain copies
         of all inspection reports based on CAAs’ inspections of homes funded under
         MADI, and (6) ensure that CAAs provide evidence of correction of housing
         quality standards violations such as invoices for repairs to correct deficiencies on
         homes funded under MADI.

         For each recommendation in the report without a management decision, please
         respond and provide status reports in accordance with HUD Handbook 2000.6,
         REV-3. Please also furnish us copies of any correspondence or directives issued
         because of the audit.




                                           2
Auditee’s Response


           We provided Authority officials with a draft audit report on January 4, 2008, and
           requested a response by January 17, 2008. We held an exit conference with
           Authority officials on January 11, 2008, to discuss the draft report, and we
           received their written comments on January 15, 2008. The auditee’s response can
           be found in appendix B of this report.




                                           3
                              TABLE OF CONTENTS

Background and Objectives                                                  5

Results of Audit
    Finding 1: The Authority Did Not Always Effectively Monitor Its HOME   7
    Program
    Finding 2: The Authority Did Not Always Ensure That Homes Receiving    10
    HUD Funding Met Housing Quality Standards

Scope and Methodology                                                      13

Internal Controls                                                          15

Appendixes
    A. Schedule of Funds to Be Put to Better Use                           16
    B. Auditee Comments                                                    17
    C. Criteria
                                                                           21




                                           4
                     BACKGROUND AND OBJECTIVES

The HOME Investment Partnerships program (HOME) was created by Title II of the Cranston-
Gonzalez National Affordable Housing Act of 1990. In general, the purpose of the HOME
program is twofold: (1) to expand the supply of decent, safe, and affordable housing for very
low-income and low-income Americans and (2) to strengthen public-private partnerships in the
production and operation of such housing. As a housing block grant, the HOME program gives
participating jurisdictions discretion over which housing activities to pursue. These activities
may include acquisition, rehabilitation, new construction, and resident-based rental assistance.
In addition, participating jurisdictions may provide assistance in a number of eligible forms,
including loans, advances, equity investments, and interest subsidies. Up to 10 percent of the
HOME funds received by a participating jurisdiction may be used to administer the program.

The Maine State Housing Authority (Authority) is a unit of local government approved by the
U.S. Department of Housing and Urban Development (HUD) as a participating jurisdiction to
receive HOME funds. The Authority operates under a director and a five-member board of
commissioners. In addition to state tax credits and bonds and continuum of care funding, it
receives formula-based allocations of HOME funds to administer four main programs, including
(1) the Rental Assistance Coupon Plus program, (2) Maine’s American Dream Initiative (MADI)
program, (3) the HOME Repair program, and (4) the Rental Loan program. The Authority is
currently emphasizing use of HOME program funds to (1) shelter its homeless, (2) renovate
multifamily homes for low-income tenants, and (3) provide opportunities for first-time
homebuyers.

In recent years, the Authority has adapted its HOME program to provide a wider range of
services that are provided in conjunction with state aid and incentives that help support lending
institution programs and community action agency (CAA) programs as well. The Authority
contracts with CAAs to deliver programs including the HOME Repair and MADI programs to
qualified applicants. The CAAs originate and underwrite loans under these programs and submit
loan packages to the Authority for review, approval, and purchase. The MADI program loans
are provided for downpayment assistance, closing costs, and rehabilitation assistance to eligible
first-time homebuyers.

The following table shows the amount of HUD funds the Authority used for the HOME program
in program years 2005 to 2007.
                                    Year                 HOME
                         Jan 1, 2005, to Dec 31, 2005   $7,276,212
                         Jan 1, 2006, to Dec 31, 2006   $6,951,013
                         Jan 1, 2007, to Dec 31, 2007   $6,871,920
                                    Total              $21,099,145

Our audit objective was to determine whether the Authority complied with HUD regulations in
the administration of its HOME programs. Specifically, we wanted to determine whether the
Authority (1) had adequate internal controls over its management process, accounting, and data



                                                5
processing; (2) used HOME funds for eligible activities and adequately supported costs; (3) had
adequate monitoring practices; and (4) properly accounted for HOME program income.




                                               6
                                 RESULTS OF AUDIT

Finding 1: The Authority Did Not Always Effectively Monitor Its HOME
Program

The Authority did not always monitor its HOME program in accordance with federal regulations
and its own policies and procedures. Specifically, it did not always adequately track the status of
outstanding housing quality standards deficiencies found during its annual compliance reviews
or always substantiate that corrective actions were taken in a timely manner. This condition
occurred because the temporary transition of personnel assigned to perform monitoring duties
and the heavy workload of the Authority’s only inspector for the HOME Repair and the MADI
programs impeded efforts to monitor corrective actions in a timely manner. As a result, several
homeowners were living in homes that were not decent, safe, and sanitary.


 Housing Quality Standards
 Violations Not Addressed in a
 Timely Manner

               Our review of two annual compliance reviews performed by the Authority for two
               subrecipients (CAAs) found that the Authority failed to monitor all outstanding
               deficiencies and ensure that corrective actions were taken. In accordance with its
               procedures for annual compliance reviews of CAAs, the Authority is required to
               track deficiencies not yet cleared, and if a response is not received from the CAA
               in a timely manner, the appropriate Authority manager is required to contact the
               CAA for a status report. Based on our review, the Authority did not always
               follow these procedures.

               The first compliance review, performed on October 10 and 11, 2006, for one
               CAA (the Penquis Community Action Agency or Penquis), included a review of
               the HOME Repair and MADI programs. This review identified a home funded
               under the MADI program with significant housing quality standards violations
               involving lead-based paint hazards that were not corrected in a timely manner.
               During the compliance review, the Authority inspected six HOME Repair and
               four MADI homes. The HOME Repair inspections identified findings in one
               home, and the MADI inspections identified findings in three homes. The
               Authority also reviewed six HOME Repair and four MADI files. The HOME
               Repair file review identified findings for six homes, and the MADI file review
               identified findings for one home. The Authority informed Penquis that it had
               until November 24, 2006, to take corrective actions on violations.

               Penquis addressed all findings with the exception of the home with the significant
               housing quality standards violations involving lead-based paint hazards. These
               same deficiencies were found during an April 14, 2006, inspection when the
               homebuyer applied for closing cost assistance under the MADI program;
                                                 7
                 however, this assistance was later approved without correction of the violations.
                 On December 15, 2006, Penquis approved a HOME Repair loan to address the
                 home’s deficiencies found in the compliance review. The Authority’s records did
                 not show any evidence that it routinely tracked the status of the outstanding
                 deficiencies. We requested that the Authority obtain an updated status on the
                 corrective actions and learned that the initial contractor, hired to correct
                 deficiencies, delayed the work and a new contractor was hired to complete the
                 work by October 17, 2007. The deficiencies that were initially found on April 14,
                 2006, had not been corrected as of November 1, 2007.


    Files Lacked Evidence That
    Corrective Action Measures
    Had Been Taken

                 A second compliance review (performed on June 12 and 26 and July 3, 2006, of
                 another CAA, the York County Community Action Corporation or York County)
                 included inspections of five MADI homes and a review of five MADI files.
                 There were no findings noted on the file reviews, but the inspection reports cited
                 housing quality standards deficiencies in three of five homes inspected. The
                 corrective actions were to have been completed by September 29, 2006, and
                 supporting documentation (photographs and inspection reports) provided.
                 However, the Authority’s files lacked documentation showing that the
                 deficiencies had been adequately addressed. At our request, the Authority
                 contacted York County for updated information, and it was determined that
                 repairs had not been completed on two of the three homes. The information
                 provided disclosed that York County had contested the violations and felt
                 satisfied, based on a November 2006 conversation with the Authority, that the two
                 homes complied with housing quality standards and repairs were unnecessary.
                 The Authority’s inspector was unaware of any formal notification regarding the
                 two homes.

                 In addition, there was no evidence that housing quality standards violations on the
                 remaining home had been addressed. The Authority had required York County to
                 contact it for a followup inspection once the work on the home was completed.
                 Although York County contacted the Authority on November 14, 2006, indicating
                 that work had been completed and the home was ready to be reinspected, the
                 homeowner’s file did not include an inspection report to substantiate that the
                 Authority performed a follow up inspection.

                 The Authority believed that the temporary transition 1 of personnel (between the
                 Energy and Housing Services and Homeownership departments) assigned to
                 perform monitoring duties impeded the monitoring process over the short term.
                 In addition, the Authority indicated that it had only one inspector covering the

1
 This temporary transition involved training of Authority personnel in the various duties performed in the
Homeownership department.

                                                         8
             entire state of Maine for its MADI and HOME Repair programs. Therefore, the
             inspector would sometimes encounter difficulty in completing tasks in a timely
             fashion.


Conclusion


             The Authority failed to adequately monitor and ensure that all outstanding
             housing quality standards deficiencies were corrected in a timely manner. As a
             result, several homeowners were living in homes that were not decent, safe, and
             sanitary. The temporary transition of Authority personnel ordinarily assigned to
             perform monitoring duties and the heavy workload of the Authority’s only
             inspector, who was responsible for two of its primary programs, contributed to its
             failure to address housing quality standards violations in a timely manner. The
             Authority needs to take steps to improve procedures to prevent similar
             deficiencies from occurring.



Recommendations


             We recommend that the Director of the Office of Community Planning and
             Development in Boston require the Authority to

             1A. Review all HOME Repair and MADI program annual compliance reviews
                 performed during periods of temporary transition of personnel assigned
                 monitoring duties and ensure that all corrective action items have been
                 adequately addressed.

             1B. Evaluate whether procedures to better coordinate and schedule inspections
                 for its HOME Repair and MADI programs should be implemented and
                 implement any needed procedures.

             1C. Consider hiring or using additional inspectors to assist with
                 inspections for its HOME Repair and MADI programs.




                                              9
                                RESULTS OF AUDIT

Finding 2: Authority Did Not Always Ensure That Homes Receiving HUD
Funding Met Housing Quality Standards

The Authority did not always ensure that homes receiving HUD funding met housing quality
standards. Specifically, one of the Authority’s subrecipients (CAA) incorrectly certified that two
homes met housing quality standards, although concurrent inspections showed that the homes
failed to meet HUD standards. The Authority was unaware that the homes failed because it did
not maintain inspection reports but relied instead on the CAAs’ certifications that homes met
HUD property standards. As a result, the Authority’s disbursement of $13,686 to two
homebuyers for homes that were not decent, safe, and sanitary may not have been the best use of
funds.


 Home with Serious
 Deficiencies Improperly
 Certified as Meeting Housing
 Quality Standards

               We identified two instances in which a CAA, Penquis, incorrectly certified that
               homes funded under the MADI program met housing quality standards, although
               recent inspections showed that homes did not meet HUD’s standards. Since the
               Authority did not maintain copies of the inspection reports, we requested that the
               Authority obtain inspection reports from Penquis.

               The first instance involved a home with significant violations found in the
               Authority’s October 2006 annual compliance review (see finding 1). On May 3,
               2006, Penquis certified that the home met housing quality standards on the date of
               inspection and that no rehabilitation work was necessary. However, the Penquis
               inspection report, dated April 14, 2006, showed that the home had significant
               violations, causing the home to fail. The homebuyer received $3,836 in funding
               for GAP/closing cost assistance and closed on the purchase of the property on
               May 3, 2006. There were indications that the inspector certified that the home
               conditionally met housing quality standards contingent upon rehabilitation work
               being performed within a short timeframe. However, as of November 1, 2007,
               the required rehabilitation work had not been performed.

 MADI Funds Disbursed for
 Homes That Failed to Meet
 Housing Quality Standards


               The second instance involved a home requiring a housing quality standards
               inspection based on a homebuyer’s application, dated July 19, 2006, for closing
                                               10
             cost assistance under the MADI program. The home failed to meet housing
             quality standards based on concerns with the home’s central heating system and
             because the home was missing handrails in two locations. The homebuyer
             received $9,850 in funding for GAP/closing costs based on Penquis’s
             certification, dated November 21, 2006, that the completed rehabilitation work
             brought the home up to standards. However, this certification was made before
             the work on the home’s central heating system, including the removal of a
             monitor heater and gas tank and installation of the new furnace, was completed on
             December 6, 2006. HUD funds were not used for the rehabilitation work. The
             Authority’s records did not contain documentation to determine whether the
             missing handrails were replaced.

             The Authority concurred that these actions violated its policies and procedures,
             which dictate that program funds will not be disbursed in connection with a home
             until the home satisfies all program requirements, including meeting housing
             quality standards. The Authority assumed that the two homes met HUD standards
             based on certifications made by Penquis. The director of the Authority’s
             Homeownership department stated that the Authority changed its policy for
             borrower applications dated after July 1, 2006. This policy now requires CAAs to
             submit all documentation relevant to an applicant’s funding/loan requests,
             including inspection reports. In the second instance, this policy was not followed
             because the application was dated July 19, 2006, and an inspection report was not
             included in the homebuyer’s file.


Conclusion


             The Authority failed to ensure that two homes met housing quality standards
             before providing funds to assist homebuyers under MADI. As a result, $13,686 in
             HUD funds was improperly disbursed to two homebuyers for homes that were not
             decent, safe, and sanitary. This condition occurred because the Authority was
             unaware that the homes failed to meet housing quality standards by relying on the
             certifications made by the CAA (Penquis) that one home met standards on the
             date of inspection and that a second home’s completed rehabilitation work
             brought the home up to HUD property standards.


Recommendations


             We recommend that the Director of the Office of Community Planning and
             Development in Boston require the Authority to

             2A. Obtain the documentation necessary to substantiate that all deficiencies
                 regarding the two homes identified were corrected to ensure that the
                 $13,686 in funding provided for the two homes was put to the best use.

                                             11
2B. Ensure that it maintains copies of all inspection reports based on CAA
    inspections of homes funded under MADI.

2C. Ensure that CAAs provide evidence of correction of housing quality
    standards violations such as invoices for repairs to correct deficiencies on
    homes funded under MADI.




                                12
                         SCOPE AND METHODOLOGY

We performed an audit of HOME programs administered by the Authority. Our fieldwork was
completed at the Authority’s offices located at 353 Water Street, Augusta, Maine, from August
to November 2007. Our audit generally covered the period January 2005 to June 2007 and was
extended when necessary to meet our objectives. To accomplish our audit objectives, we

       •   Reviewed applicable legislation, HUD regulations, and HUD notices.
       •   Reviewed the Authority’s policies and procedures for cost allocation, procurement
           practices, and monitoring policies to ensure that they were consistent with HUD
           requirements.
       •   Evaluated internal controls and conducted sufficient tests to determine whether
           controls were functioning as intended.
       •   Identified and examined controls over computer systems, including identifying what
           computer-processed data exist, the extent of use, and the reliability of the systems,
           and verified that the Authority entered information into HUD’s Integrated
           Disbursement and Information System.
       •   Reviewed independent public auditors’ reports and HUD monitoring reviews.
       •   Identified activities that were slow to reach completion and determined whether the
           Authority’s accomplishments reported in the consolidated annual performance
           evaluation report were in agreement with the Authority’s records.
       •   Evaluated the Authority’s procurement practices through a review of procurements.
           Focusing on construction projects completed in fiscal year 2006, we reviewed a
           nonrepresentative sample of three HOME procurements, totaling $10,781,033, from a
           universe of five procurements, totaling $16,467,540, based on large dollar amounts.
       •   Selected a nonrepresentative sample of three categories of administrative expenses
           excluding payroll from the universe, totaling $337,011, based on our knowledge of
           HUD programs and those categories of expenditures that have a higher risk. We
           selected three invoices, one from each of the three categories of expenses, for review.
           From the categories education/training and printing, totaling $33,081 and $16,849,
           respectively, we selected the largest education/training expense, at $28,500, and the
           largest printing expense, at $3,078, for review. From the business travel account,
           totaling $13,817, we identified the name of the most frequent traveler in that year and
           selected that person’s largest invoice, totaling $350, for review. We evaluated these
           expenditures to ensure that they were eligible, reasonable, and appropriately
           supported.
       •   Determined whether $160,846 in HOME program income was accounted for.
       •   Evaluated procedures for recording and tracking HOME program complaints.
       •   Evaluated accountability over interfund/interprogram transfers.
       •   Evaluated the Authority’s cost allocation system by selecting a payroll, reflecting 50
           employees, charged to the HOME program, representing seven departments. Using
           the universe of 50 employees, we selected two employees from each of the seven
           departments who had the largest year-to-date balances in hours charged to HOME for
           a total of 14 employees. The total hours representing the universe of employees are
           10,602.
                                               13
       •   We selected Penquis for review of homeowner files under the HOME Repair program
           based on Penquis’s incurring the largest amount of project costs ($930,912) of the
           seven CAAs using federal HOME funding for the HOME Repair program in program
           year 2006. We selected a nonrepresentative sample of five homeowners, incurring
           project costs totaling $525,911, from a universe of 23 homeowners, incurring project
           costs totaling $930,912, to test procedures and controls to ensure eligibility of
           applicants, projects, and work performed; that projects met HUD property standards
           upon completion of work; and that proper documents existed, including application,
           mortgage deed, environmental review, lead-based paint disclosure, and certain
           procurement-related documentation.
       •   We selected York County for review of homeowner files under the MADI program
           based on York County’s receiving the next to largest amount of federal HOME
           funding, totaling $39,275, of the four CAAs receiving $111,772 in federal HOME
           funding for the MADI program in program year 2006. We excluded Penquis, which
           actually received the largest amount of federal HOME funding ($39,340), because
           Penquis was already selected for review under the HOME Repair program and
           selecting York County allowed for a more representative review of CAAs. We
           reviewed 100 percent (total of four loans) of York County’s homeowner loans in
           2006 to ensure eligibility of applicants, projects, and work performed; that projects
           met HUD property standards upon completion of work; and that proper documents
           existed, including application, mortgage deed, environmental review, lead-based paint
           disclosure, and certain procurement-related documentation.
       •   We selected Penquis for review of the Authority’s annual compliance reviews to
           determine whether the Authority is adequately monitoring its subrecipients under the
           HOME Repair program. Penquis was selected because it incurred the largest amount
           of project costs ($930,912) of the seven CAAs using federal HOME funding for the
           HOME Repair program in program year 2006.
       •   We selected York County for review of the Authority’s annual compliance reviews to
           determine whether the Authority is adequately monitoring it subrecipients under the
           MADI program. York County was selected because it received the next to largest
           amount of federal HOME funding, totaling $39,275, of the four CAAs receiving
           $111,772 in federal HOME funding for the MADI program in program year 2006.
           We excluded Penquis, which actually received the largest amount of funding
           ($39,340), because Penquis was already selected for review under the HOME Repair
           program and selecting York County allowed for a more representative review of
           CAAs.
       •   Determined whether the Authority met its matching requirements. We also selected a
           nonrepresentative sample of four matching contributions, totaling $8,296,579 in
           leveraged funds, from a universe of 161 matching contributions, totaling
           $11,989,091, based on the largest contributions to determine whether Authority was
           leveraging from private resources.

We performed our review in accordance with generally accepted government auditing standards.




                                              14
                              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:
                    •   Controls over administrative expenses.
                    •   Controls to ensure that the grantee adequately monitors subrecipient
                        performance.
                    •   Controls over procurement.
                    •   Controls over the matching and leveraging of funds.
                    •   Controls over interfund transfers.
                    •   Controls over tracking program complaints.
              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 item is a significant weakness:
                    •   Controls to ensure that the grantee adequately monitors subrecipient
                        performance (findings 1 and 2).




                                               15
                                  APPENDIXES


Appendix A

     SCHEDULE OF FUNDS TO BE PUT TO BETTER USE

                           Recommendation        Funds to be put
                                  number          to better use 1/
                                         2A              $13,686


1/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
     interest subsidy costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and other savings
     which are specifically identified. In recommendation 2A, the $13,686 represents the
     HOME funds that would be used more effectively with the assurance that homes
     receiving HUD funding have complied with housing quality standards.




                                            16
Appendix B

         AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation         Auditee Comments
See page 20 for evaluation.    See below.




                               17
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         18
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         19
                   OIG Evaluation of Auditee Comments

The Auditee agreed with all the findings and recommendations, and the proposed planned
actions resolve the conditions cited in the audit findings and respond to all the
recommendations in the report.




                                      20
Appendix C
                                          CRITERIA


According to 24 CFR (Code of Federal Regulations) 92.504(a), the participating jurisdiction is
responsible for managing the day-to-day operations of its HOME program, ensuring that HOME
funds are used in accordance with all program requirements and written agreements and taking
appropriate action when performance problems arise. The use of state recipients, subrecipients,
or contractors does not relieve the participating jurisdiction of this responsibility. The
performance of each contractor and subrecipient must be reviewed at least annually.

In accordance with the Authority’s written standard operating procedures on annual compliance
reviews of CAAs, the Authority is required to track deficiencies not yet cleared, and if a response
is not received from the CAA in a timely fashion, the appropriate Authority manager is required
to contact the CAA for a status report.

In accordance with the program agreements between the Authority and two CAAs (Penquis and
York County), the CAAs agree to comply with requirements and procedures set forth in the
MADI program guide.

Chapter 5, section A, of the Authority’s MADI program guide states that program funds may
only be used in connection with the acquisition and rehabilitation of an existing or newly
constructed home that satisfies specific requirements. One of those requirements noted in
chapter 5, section H(1), of the program guide states that all homes shall comply with HUD’s
housing quality standards at the time of occupancy by the borrower.

Chapter 7, section Q(7), of the MADI program guide states that if the inspection of a home
shows that the home contains lead hazards, the lender (CAA) should not proceed with the
purchase of the home and should work with the borrower to find another eligible home. Section
Q(7) further states that a borrower may not live in the home until the home complies with
property standards (housing quality standards) and is free of all noted defects.

Chapter 8, section A, of the MADI program guide states that a borrower may not occupy a home
unless and until the home complies with applicable state and local building codes and housing
quality standards and is free of lead hazards, regardless of whether the borrower has children
under the age of six.

Chapter 8, section B, of the MADI program guide dictates that the rehabilitation necessary to
bring a home into compliance with housing quality standards must be completed within six
months of the date the borrower purchases the home. It further states that the borrower and the
borrower’s family may not occupy the home until the home complies with housing quality
standards. In addition, chapter 8, section B, stipulates that the Authority will not disburse
program funds to a lender (CAA) in connection with a home until the home satisfies all program
requirements, including without limitation the property standards (housing quality standards).




                                                21
HUD regulations at 24 CFR 92.251(a)(2) state that housing acquired with program funds must
meet all applicable state and local housing quality standards and code requirements. If there are
no such housing quality standards or code requirements, the housing must meet HUD’s housing
quality standards.

HUD regulations at 24 CFR 92.612(b) state that housing assisted with initiative funds must meet
the property standards in 24 CFR 92.251.

HUD Regulations at 24 CFR 92.508(a) state that each participating jurisdiction must establish
and maintain sufficient records to enable HUD to determine whether the participating
jurisdiction has met requirements of this part. The participating jurisdiction must maintain
records demonstrating that each project meets the property standards of 24 CFR 92.251.




                                               22