Issue Date April 30, 2008 Audit Report Number 2008-CH-1008 TO: Robert E. Nelson, Director of Public Housing Hub, 5FPH FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA SUBJECT: The Lansing Housing Commission, Lansing, Michigan Failed to Follow HUD’s Requirements for Its Nonprofit Development Activities HIGHLIGHTS What We Audited and Why We audited the Lansing Housing Commission’s (Commission) nonprofit development activities. The review of public housing authorities’ development activities is set forth in our fiscal year 2007 annual audit plan. We selected the Commission because it was identified as having high-risk indicators of nonprofit development activity. Our objective was to determine whether the Commission diverted or pledged resources subject to its annual contributions contract (contract), other agreement, or regulation for the benefit of non-U.S. Department of Housing and Urban Development (HUD) developments. What We Found The Commission defaulted substantially on its contract when it improperly pledged resources for the benefit of the Lansing Housing Commission Nonprofit Development Corporation (Corporation) and the Oliver Gardens Limited Dividend Housing Association Limited Partnership (Partnership), organizations created by the Commission without HUD approval. In May 2006, the Commission inappropriately and without conditions guaranteed the obligations of the Partnership’s general partner, the Oliver Gardens Limited Liability Company, in a guaranty agreement. Further, the Commission executed another guaranty agreement in September 2006 that unconditionally and irrevocably guaranteed the full and punctual payment of a loan entered into by the Corporation. As of February 29, 2008, the Commission has placed $1.4 million in federal assets at risk by entering into the guaranty agreements which made it responsible for all operating deficits and potential judgments of the Corporation and Partnership. The Commission also inappropriately used more than $745,000 in Public Housing funds for two nonfederal developments, Oliver Gardens and The Abigail. Lastly, the Commission managed and provided Section 8 housing assistance to the Oliver Gardens, a 30-unit senior housing project that the Partnership owns, and it performed unit inspections of the project’s units, thus creating a conflict of interest. We informed the Commission’s executive director and the Director of HUD’s Detroit Office of Public Housing of minor deficiencies through a memorandum, dated April 17, 2008. What We Recommend We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to amend the guaranty agreements regarding the Corporation and the Partnership to remove the Commission’s pledging of its federal assets, submit the amended guaranty agreements to HUD for review and approval to ensure that they comply with its contract with HUD, reimburse the applicable programs for the improper use of Public Housing funds and its receipt of Section 8 administrative fees related to Oliver Gardens, contract with an independent third-party to perform housing quality standards inspections of Oliver Gardens as required by HUD, and implement procedures and controls to address the findings cited in this audit report. We also recommend that the Director refer the Commission’s substantial default of its contract to HUD headquarters and request appropriate action be taken against the Commission. For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06 REV-3. Please furnish us copies of any correspondence or directives issued because of the audit. Auditee’s Response We provided our discussion draft audit report to the Commission’s executive director, its board president, and HUD’s staff during the audit. We held an exit conference with the Commission on March 28, 2008. We asked the Commission’s executive director to provide comments to our discussion draft report by April 10, 2008. The executive director provided written comments, dated, April 10, 2008. The executive director generally agreed with our findings 2 and recommendations with the exception that the Commission’s Public Housing funds were not available for its intended purposes, and unit inspections and rent reasonableness determinations were improper. The complete text of the written comments, except for two attachments consisting of four pages of documentation that were not necessary to understand the Commission’s comments, along with our evaluation of that response, can be found in appendix B of this report. A complete copy of the Commission’s comments plus the documentation was provided to the Director of HUD’s Detroit Office of Public Housing. 3 TABLE OF CONTENTS Background and Objective 5 Results of Audit Finding 1: The Commission Substantially Defaulted on Its Contract and Inappropriately Used Public Housing Funds for Nonfederal Development Activities 6 Finding 2: The Commission Violated HUD’s Section 8 Requirements Regarding the Oliver Gardens Development 10 Scope and Methodology 12 Internal Controls 13 Appendixes A. Schedule of Questioned Costs and Funds to Be Put to Better Use 15 B. Auditee Comments and OIG’s Evaluation 16 C. Federal Requirements 23 4 BACKGROUND AND OBJECTIVE The Commission is a public housing agency created by the City of Lansing (City), Michigan on August 2, 1965, to provide decent, safe, and sanitary housing for low- and moderate-income families under the Housing Act of 1937. The Commission entered into contracts with the U.S. Department of Housing and Urban Development (HUD). Under its annual contributions contract (contract), the Commission operates 833 units of subsidized housing in the City for its Public Housing program. Under a separate contract with HUD, the Commission manages a Section 8 Housing Choice Voucher (Section 8) program with subsidies for 1,700 vouchers for qualifying low- and moderate-income households. The Commission also received Shelter Plus Care grant funds to address homelessness in the City from HUD’s Office of Community Planning and Development. Further, the Commission operates a homeownership program under an administrative use agreement with HUD, dated April 1, 1993. This program is funded from monies forgiven by HUD under the Turnkey III Homeownership Program. As of December 31, 2007, the Commission has funded 10 homeownership properties since 1993. In July 2003, the Commission formed the Lansing Housing Commission Nonprofit Development Corporation (Corporation), a 501(c)(3) nonprofit entity, to promote the advancement of affordable housing through loans, development, and other financial and technical assistance. The Corporation and its nonfederal developments (Oliver Gardens and The Abigail) are instrumentalities of the Commission. The Commission is a member of the Corporation and oversees its affairs. The Commission also formed the Oliver Gardens Limited Dividend Housing Association Limited Partnership (Partnership) on June 21, 2005, to provide housing for low- and moderate- income families. The Partnership constructed the Oliver Gardens development on land obtained from the Commission. The Commission provides Section 8 housing assistance to and manages the Oliver Gardens Section 8 Project-Based Voucher program for the Partnership. On October 13, 2006, the Corporation purchased a large track of land formally known as the School for the Blind to develop a portion of the land for low-income housing and for the Commission’s administrative offices. In April 2007, the Corporation formed the Abigail Limited Dividend Housing Association Limited Liability Company (Company) to own and operate low- and moderate-income housing on the land purchased from the Corporation. A five-member board of commissioners, appointed by the City’s mayor governs the Commission. HUD has classified the Commission as a standard performer or a high performer under its Public Housing Assessment System since fiscal year 1999. The Commission’s books and records are located at 310 Seymour Avenue, Lansing, Michigan. Our objective was to determine whether the Commission diverted or pledged resources subject to its contract, other agreement, or regulation for the benefit of non-HUD developments. 5 RESULTS OF AUDIT Finding 1: The Commission Substantially Defaulted on Its Contract and Inappropriately Used Public Housing Funds for Nonfederal Development Activities The Commission substantially defaulted on its contract when it executed guaranty agreements related to the Corporation’s and the Partnership’s nonfederal developments. It improperly and without conditions guaranteed the obligations of the Partnership’s general partner, the Oliver Gardens Limited Liability Company in May 2006. Further, the Commission unconditionally and irrevocably guaranteed the full and punctual payment of a loan entered into by the Corporation in September 2006. The Commission also inappropriately used Public Housing funds for the nonfederal developments. These conditions occurred because the Commission lacked procedures and controls to ensure that it complied with federal requirements. As a result, more than $1.4 million of the Commission’s federal funds could be subject to seizure in the event of default on the agreements and more than $745,000 of the Commission’s Public Housing funds were not available for their intended purpose. Guaranty Agreement Violates the Commission’s Contract On September 7, 2006, the Commission executed a guaranty agreement with the Local Initiatives Support Corporation to induce it to enter into and disburse $867,900 pursuant to a loan agreement in order for the Corporation to purchase land to develop The Abigail, a nonfederal development. The Commission did not seek prior approval from HUD before entering into the agreement. The guaranty agreement makes the Commission unconditionally and irrevocably responsible for all liabilities under the Corporation’s loan agreement. The agreement states that the Commission is responsible for the loan agreement and all other indebtedness, obligations, and liabilities of the Corporation under or in connection with the agreement whether for principal, interest, fees, expenses, or otherwise including without limitation any and all reasonable expenses that may be paid or incurred by the Local Initiatives Support Corporation in collecting any or all of the obligations or enforcing any rights under the agreement. The note stipulates that payment of the principal balance and unpaid interest are due by October 1, 2009. Further, the guaranty agreement warrants to the Local Initiatives Support Corporation that no authorization, consent, approval, license, exemption of or filing a registration with any court of government department, commission, board, bureau, agency, or instrumentality is or will be necessary to the valid execution, 6 delivery, or performance of the agreement. Additionally, the Commission warrants that execution of the agreement would violate no law, rule, regulations, writ, judgment, injunction, or decree. The terms of the guaranty agreement amount to a pledge of the Commission’s assets without limitation or restriction of the source of funds. As of January 2008, the Commission was entirely dependent on HUD for its funding and lacked any nonfederal assets or income. Guaranty Agreement Inappropriately Encumbered Public Housing Funds On May 9, 2006, the Commission executed a guaranty agreement with the National Equity Fund Assignment Corporation to induce it to invest in the Partnership. The agreement relates to the Partnership’s nonfederal development, Oliver Gardens. The Commission guaranteed the due and punctual performance by the Partnership’s general partner, Oliver Gardens Limited Liability Company, of all of its obligations under the terms of the Partnership and development agreements. The guaranty agreement states that the liabilities of the Partnership’s general partner will not exceed the total sum of payments received by the Commission from the Partnership including but not limiting to the development fee. Under the terms of the development agreement, the fee was $561,933. Further, the guaranty agreement provides that the Commission will directly or indirectly through affiliates receive certain fees and other benefits from the development of the Oliver Gardens development. Per this statement, the Commission could possibly be responsible for an affiliate’s funds due under the guaranty. Hence, the guaranty makes the Commission unconditionally responsible for all obligations of the Partnership’s general partner. Further, the guaranty agreement provides that the Commission indemnify the National Equity Fund Assignment Corporation. The agreement also states that the Commission hereby agrees to indemnify and hold the Partnership and the National Equity Fund Assignment Corporation free and harmless from and against actual loss, cost, damage, and expenses including reasonable attorneys’ fees and costs that the Partnership or the National Equity Fund Assignment Corporation may sustain because of the inaccuracy or breach of any of the representations and warranties. 7 The Commission Transferred Public Housing Funds to Nonfederal Developments The Commission inappropriately used $745,436 (The Abigail $499,716, Oliver Gardens $230,7601, and the Corporation $14,960) in Public Housing funds for nonfederal development activities as of June 30, 2007. It began inappropriately using Public Housing funds in September 2004. As a result, the Commission’s Public Housing funds were not available for their intended purpose, which is to provide decent, safe, and sanitary housing for low-income families, the elderly, and persons with disabilities for HUD-approved housing projects. The Commission’s contract allows it to withdraw money from its Public Housing funds only for payment of the costs and operation of the projects covered under the contract. The nonfederal developments were not approved projects under the contract. PIH Notice 2007-15 states that Public Housing funds may be used for costs related to forming an affiliate or instrumentality; however, the development must contain Public Housing units. HUD’s Notice further states funds may be withdrawn from the Commission’s general fund only for: (1) the payment of the costs of development and operation of projects under contract with HUD, (2) the purchase of investment securities approved by HUD, and (3) such other purposes as may be specifically approved by HUD. The Commission did not obtain HUD approval for the use of the Public Housing funds related to the nonfederal developments. The Commission Lacked Procedures and Controls The Commission lacked procedures and controls to address developing, constructing, financing, and operating nonfederal properties. Its board of commissioners also did not employ a monitoring process to ensure that the Commission did not use Public Housing funds for its nonfederal developments without prior HUD approval. The executive director said he was not aware that the guaranty agreements did not comply with the terms of the contract nor did the Commission’s legal counsel advise him of the noncompliance. He also said the Commission’s legal counsel did not identify any problem with the guaranty agreements and considered them as normal routine agreements required by the investor when there is a lack of experience or satisfactory financial position by the borrower. 1 The $230,760 includes $163,529 in insurance proceeds the Commission received in May 2001 and June 2007 resulting from two fires in February 2000, that occurred at the Commission’s Oliver Towers. The Commission received approval for disposition of Oliver Towers from HUD’s Special Applications Center in May 2001. 8 Unless the Commission implements procedures and controls to address developing, constructing, financing, and operating nonfederal developments, we estimate that it could improperly pledge or use $652,581 in federal funds over the next year. We determined this amount by adding the $867,900 for the guaranty agreement related to the Corporation, the $561,933 for the guaranty agreement related to the Partnership, and the $745,436 of Public Housing funds used for the nonfederal developments divided by 40 months (total time for the improper pledging and use of Public Housing funds) times 12 months. Recommendations We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to 1A. Amend the guaranty agreements related to the pledging of the Commission’s federal assets for the Corporation ($867,900) and the Partnership ($561,933) to protect the $1,429,833 cited in this finding. 1B. Submit the amended guaranty agreements to HUD for review and approval to ensure that they comply with its contract. 1C. Implement procedures and controls to ensure that it does not pledge and/or use its federal assets contrary to HUD’s requirements. By implementing procedures and controls, the Commission should help to ensure that $652,581 in federal assets would be appropriately used to provide decent, safe, and sanitary housing for its Public Housing households. 1D. Reimburse its Public Housing program $745,436 from nonfederal funds for the improper use of funds cited in this finding. We also recommend that the Director of HUD’s Detroit Office of Public Housing 1E. Refer the Commission’s substantial default of its contract to HUD headquarters and request that appropriate action be taken against the Commission based upon the information in this audit report. 9 Finding 2: The Commission Violated HUD’s Section 8 Requirements Regarding the Oliver Gardens Development The Commission violated HUD’s Section 8 requirements when it performed housing quality standard unit inspections and rent reasonableness determinations for the Oliver Gardens development. This is a conflict of interest prohibited by HUD’s Section 8 regulations. The improper unit inspections and rent reasonableness determinations occurred because the Commission lacked procedures and controls to ensure that its Section 8 program met HUD’s requirements. As a result, the Commission improperly received Section 8 administrative fees related to the development. The Commission Created a Conflict of Interest In January 2006, the Michigan State Housing Development Authority approved the Commission as the management agent for the Oliver Gardens development. In addition to managing the development, the Commission inspected Oliver Garden’s Section 8 housing units and performed contract rent reasonableness reviews. HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.352 require a public housing agency with its own housing or substantially controlled housing to use the services of an independent party approved by HUD to perform unit inspections before assistance can be provided. HUD also requires that an independent party handle contract rent reasonableness and rent negotiations. By failing to comply with HUD’s requirements regarding unit inspections and rent reasonableness the Commission not only violated HUD’s requirements, but also created a conflict-of-interest relationship. The Commission Lacks Procedures and Controls The Commission lacked procedures and controls to ensure that federal requirements were appropriately followed. As previously mentioned, the Commission violated HUD’s Section 8 requirements when it performed housing quality standards unit inspections and the rent reasonableness determinations while managing Oliver Gardens. As a result, HUD lacks assurance of the reliability of the unit inspections and that contracted rents were reasonable. The Commission provided Section 8 assistance at Oliver Gardens without an independent third party performing the unit inspections and rent reasonableness determinations since it started on-site management in August 2007. From August 2007 to February 2008, the Commission paid more than $35,000 in housing 10 assistance and received more than $8,000 in administrative fees related to Oliver Gardens. HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.152(d) states that HUD may reduce or offset any administrative fee to a public housing authority, in the amount determined by HUD, if the authority fails to perform its administrative responsibilities correctly or adequately under the Section 8 program. Given the Commission’s noncompliance with HUD’s requirements, it should not receive the Section 8 administrative fees. Additionally, unless the Commission improves its operations for the Section 8 program, we estimate that it could improperly receive $14,410 ($8,406 divided by 7 months times 12) in Section 8 administrative fees for Oliver Gardens during the next 12 months. The executive director said that he was not aware of any conflict with HUD’s Section 8 regulations by the Commission’s legal counsel and plans to contract out future Section 8 housing unit inspections and rent reasonableness reviews starting in May 2008. Recommendations We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to 2A. Reimburse its Section 8 program $8,406 from nonfederal funds for the improper administrative fees cited in this finding. 2B. Implement procedures and controls to ensure compliance with HUD’s regulations regarding housing quality standards unit inspections and rent reasonableness determinations related to Oliver Gardens. By implementing procedures and controls, the Commission should help to ensure that $14,410 in future Section 8 administrative fees is appropriately received. 2C. Discontinue performing the housing quality standards unit inspections, rent reasonableness determinations for the Oliver Gardens development, and contract with an independent third party to perform the inspections and determinations to ensure compliance with HUD’s requirements. 11 SCOPE AND METHODOLOGY To accomplish our objective, we reviewed Applicable laws; regulations; HUD’s program requirements at 24 CFR [Code of Federal Regulations] Parts 85, 941, 970, 982, 983, and 990; Office of Management and Budget Circulars A-87 and A-133; and the Internal Revenue Service’s requirements at 26 CFR [Code of Federal Regulations] Part 1. The Commission’s accounting records, general ledgers, bank statements, and check vouchers and invoices for fiscal year 2007; annual audited financial statements for fiscal years 2005 through 2007; the contract with HUD; by-laws; board meeting minutes; applications for financial assistance to the State of Michigan, and consulting contracts and property appraisals. HUD’s files for the Commission. The City’s Ordinance 108 and applicable amendments. The Corporation’s articles of incorporation, by-laws, board meeting minutes, accounting records, and bank statements. The Limited Partnership’s various agreements including but not limited to the purchase, guaranty, development, operating, management, marketing, regulatory, partnership, building loan, closing escrow, mortgage loan, real estate mortgage, third-party promossory note, warranty deeds, certificate of limited partnership, and housing assistance payments contract. The Corporation’s various agreements including but not limited to the loan, purchase, guaranty, mortgage, security, and repayable grant for the proposed development known as The Abigail; quit claim deed; the Abigail Limited Dividend Housing Association Limited Liability Company’s articles of organization and operating agreement; and The Abigail Manager Incorporated’s articles of incorporation and by-laws. The Oliver Gardens Limited Liablity Company’s articles of organization and operating agreement. We also interviewed the Commission’s employees and legal counsel and HUD staff. We performed our on-site audit work between July and December 2007 at the Commission’s offices located at 310 Seymour Avenue, Lansing, Michigan. The audit covered the period July 1, 2005, through June 30, 2007, and was expanded as determined necessary. We performed our audit in accordance with generally accepted government auditing standards. 12 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, • Compliance with applicable laws and regulations, and • Safeguarding resources. 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 objective: • Program operations – Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. • Validity and reliability of data – Policies and procedures that management has implemented to reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in reports. • Compliance with laws and regulations – Policies and procedures that management has implemented to reasonably ensure that resource use is consistent with laws and regulations. • Safeguarding resources – Policies and procedures that management has implemented to reasonably ensure that resources are safeguarded against waste, loss, and misuse. 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 Weakness Based on our review, we believe the following is a significant weakness: 13 • The Commission lacked procedures and controls to ensure that it complied with its contract and/or HUD’s requirements regarding the pledging of the Commission’s assets, use of Public Housing funds, and receipt of Section 8 administrative fees related to its affiliated entities (see findings 1 and 2). 14 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Funds to be put to number Ineligible 1/ better use 2/ 1A $1,429,833 1C 652,581 1D $745,436 2A $8,406 2B $14,410 Totals $753,842 $2,096,824 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or federal, state, or local policies or regulations. 2/ Recommendations that funds to 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 any other savings, which are specifically identified. In these instances, if the Commission implements our recommendations, it will remove the pledging and/or the use of the Commission’s federal assets and ensure that Section 8 administrative fees related to Oliver Gardens are earned appropriately. Once the Commission successfully improves its controls over its pledging and/or use of assets and Section 8 administrative fees, this will be a recurring benefit. Our estimates reflect only the initial year of these benefits. 15 Appendix B AUDITEE COMMENTS AND OIG’s EVALUATION Ref to OIG Evaluation Auditee Comments 16 Ref to OIG Evaluation Auditee Comments Comment 1 17 Ref to OIG Evaluation Auditee Comments 18 Ref to OIG Evaluation Auditee Comments 19 Ref to OIG Evaluation Auditee Comments 20 Ref to OIG Evaluation Auditee Comments 21 OIG’s Evaluation of Auditee Comments Comment 1 While the Commission disagreed with our conclusion that its Public Housing funds were unavailable for their intended purpose to provide decent, safe, and sanitary housing, it inappropriately used more than $745,000 in Public Housing funds for nonfederal development activities. The Commission agreed to implement procedures and controls to ensure that it does not pledge and/or use its federal assets. 22 Appendix C FEDERAL REQUIREMENTS Finding 1 HUD’s PIH Notice 2007-15 defines affiliates and instrumentalities and applies to public housing agency nonprofit activities pursuant to HUD regulations at 24 CFR [Code of Federal Regulations] Part 941. Public housing agencies may form affiliates and instrumentalities without HUD approval. Affiliates are treated like an unrelated third party. Instrumentalities are treated like the public housing agency. Public housing funds may be used to form an affiliate created to develop mixed income housing which must contain some public housing units. However, public housing funds cannot be used to form an affiliate for a housing project using only Low-Income Housing Tax Credit units or any application fees for tax credits for a development that does not contain public housing units. These costs must come from non-public housing funds. Section 401 of the contract with HUD prohibits the Commission from using funds in its general fund for non-HUD development activities without prior HUD approval. Section 313 of the contract with HUD states: “Unless and until all temporary notes, advance notes, permanent notes, and all other indebtness of the local authority to the public housing authority have been fully paid (except repayment of annual contributions), and all bonds issued in connection with the project have been fully paid and retired or monies, sufficient for the payment and retirement thereof in accordance with the terms of such bonds, have been deposited in trust for such purpose with the fiscal agent, the local authority shall not transfer, convey, assign, lease, mortgage, pledge, or otherwise encumber, or permit or suffer any transfer, conveyance, assignment, leasing mortgage, pledge, or other encumbrance of such project, any appurtenances thereto, any rent, revenues, income, or receipts there from or in connection therewith, or any of the benefits or contributions granted to it by or pursuant to this contract, or any interest in any of the same.” Section 506 of the contract with HUD defines substantial default. Events of substantial default include the default of any of the provisions of section 313. Finding 2 HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.352 require a public housing agency with its own housing or substantially controlled housing to use the services of an independent third party approved by HUD to perform unit inspections before assistance can be provided. HUD also requires that the independent third party handle contract rent reasonableness and rent negotiations. HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.507 state that the Commission may not approve a lease until it determines that the initial rent is reasonable. The Commission must redetermine the reasonableness of the rent before an increase in the rent if there is a 5 percent decrease in the published fair market rent in effect 60 days before the contract 23 anniversary or if directed by HUD. At all times during the assisted tenancy, the rent may not exceed the reasonable rent as most recently determined or redetermined by the Commission. The Commission must determine whether the rent to the owner is reasonable in comparison to rent for other unassisted units. HUD’s regulations at 24 CFR [Code of Federal Regulations] 983.303 states that the Commission must redetermine the reasonableness of the rent whenever there is a decrease of five percent or more in the published fair market rents in effect 60 days before the contract anniversary date; whenever the Commission approves a change in the allocation of responsibilities for utilities between the owner and the tenant; whenever the housing assistance payments contract is amended to substitute a different unit in the same building; and whenever there is a change that may substantially affect the reasonable rent. 24
The Lansing Housing Commission, Lansing, Michigan Failed to Follow HUD's Requirements for Its Nonprofit Development Activities
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)