oversight

The City of Los Angeles Housing Department Did Not Comply with HOME Affordability Monitoring and Inspection Requirements for Its HOME-Assisted Rental Housing

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-18.

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

                                                                  Issue Date
                                                                     September 18, 2008
                                                                  Audit Report Number
                                                                     2008-LA-1016




TO:         William Vasquez, Director, Los Angeles Office of Community Planning and
              Development, 9DD



FROM:       Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: The City of Los Angeles Housing Department Did Not Comply with HOME
           Affordability Monitoring and Inspection Requirements for Its HOME-
           Assisted Rental Housing


                                    HIGHLIGHTS

 What We Audited and Why

      We audited the City of Los Angeles Housing Department (Department) as a result of an
      earlier audit of its HOME Investment Partnerships Program (HOME) rehabilitation
      program, which detected problems with the Department’s monitoring of HOME-assisted
      rental units. Our audit objective was to determine whether the Department complied with
      HOME affordability monitoring and inspection requirements regarding HOME-assisted
      rental units.


 What We Found


      The Department did not comply with HOME affordability monitoring and inspection
      requirements for its HOME-assisted rental housing. It failed to maintain the required
      tenant eligibility information for 26 HOME-assisted rental housing projects totaling
      nearly $38 million. In addition, it did not maintain complete tenant eligibility
      information for 27 tenants living in seven projects, resulting in $103,693 in unsupported
      costs. Further, it did not ensure that its contractor conducted occupancy monitoring in
      accordance with HOME program requirements or its professional services agreement.
      Finally, it failed to inspect HOME-assisted rental housing projects when required and
     ensure that projects met local housing code regulations. Improvements on controls would
     ensure that $226,483 in funds could be put to better use. We attribute these deficiencies
     to the Department’s overreliance on its contractor to obtain the required documentation,
     compounded by its inability to effectively monitor its contractor due to high staff
     turnover; its inadequate database for tracking its HOME-assisted rental housing and
     tenants; and poor record keeping.

What We Recommend


     We recommend that the Director of the Los Angeles Office of Community Planning and
     Development require the Department to properly support or repay from nonfederal funds
     more than $38 million in unsupported expenses. Additionally, we recommend that the
     U.S. Department of Housing and Urban Development (HUD) require the Department to
     establish and implement effective procedures and controls to ensure that its contractor
     and all HOME-assisted rental housing projects and units are monitored and units are
     inspected in accordance with HOME requirements because such corrective actions would
     ensure that $226,483 in funds could be put to better use.

     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 report to the Department on August 29, 2008, and held
     an exit conference on September 8, 2008. The Department provided its written response
     on September 15, 2008 and agreed with our report findings and recommendations.

     The complete text of the auditee’s response, along with our evaluation of that response,
     can be found in appendix B of this report.




                                             2
                              TABLE OF CONTENTS

Background and Objectives                                                                 4

Results of Audit
   Finding 1: The Department Failed to Maintain Required Tenant Eligibility               5
              Information for HOME-Assisted Rental Housing Projects
   Finding 2: The Department Failed to Monitor Its Occupancy Monitoring Contractor        7
   Finding 3: The Department Failed to Inspect HOME-Assisted Rental Housing               11
              Projects and Ensure That Projects Met Local Housing Code Regulations
   Finding 4: The Department Had Inadequate Controls over the Monitoring of Its           19
              HOME-Assisted Rental Housing Projects

Scope and Methodology                                                                     22

Internal Controls                                                                         24

Followup on Prior Audits                                                                  26

Appendixes
   A.   Schedule of Questioned Costs and Funds to Be Put to Better Use                    27
   B.   Auditee Comments and OIG’s Evaluation                                             28
   C.   Criteria                                                                          33
   D.   Schedule of 26 Home-Assisted Rental Housing Projects That Lacked Sufficient       38
        Tenant/Unit Eligibility Information
   E.   Schedule of 27 Tenant Files (Seven Projects) with Incomplete Tenant Eligibility   40
        Information
   F.   Schedule of 52 HOME-Assisted Properties Not Inspected in Accordance with          41
        HOME Requirements
   G.   Schedule of Violations Identified during Our Inspections                          43
   H.   Schedule of Funds To Be Put To Better Use Calculations                            47




                                               3
                     BACKGROUND AND OBJECTIVES

The City of Los Angeles (City) is a participating jurisdiction overseen by the U.S. Department of
Housing and Urban Development’s (HUD) Office of Community Planning and Development,
which executes the HOME Investment Partnerships Program (HOME). The City administers all
of its HOME programs under the City of Los Angeles Housing Department (Department). Due
to the variety of HOME program activities allowed under the law and the size of the entitlement
grant, the Department divides its HOME program activities under the following major
organizational units: the Major Projects Division manages the acquisition, new construction, or
rehabilitation of large affordable rental housing projects; and the Homeownership and
Preservation Division manages single-family or small multifamily purchase acquisition projects
under its Homeownership Unit and manages single-family and small multifamily rehabilitation
projects under its Preservation Unit.

The Department is the administrator of the City’s HOME entitlement program. It follows
monitoring standards and procedures to review and fund affordable housing developments to
ensure compliance with HUD’s program regulations. For example, it reviews the status of the
HOME grant to ensure that the 24-month deadline to commit and five-year deadline to expend
funds are complied with, monitors and reports on the HOME match requirements to ensure that
the 12.5 percent match requirement is met, ensures that HOME-assisted rental units are inspected
with the required frequency and comply with housing quality standards, and ensures that
homebuyer and rental properties follow the applicable period of affordability. During the period
of affordability, it reviews tenant household incomes and rents for compliance with HOME and
other program requirements.

The Department’s Occupancy Monitoring Unit is responsible for monitoring property owners’
compliance with regulations, regulatory agreements, and covenants associated with affordable
housing. The unit monitors properties funded through the Department with federal funds,
properties funded with its issued tax-exempt mortgage revenue bonds, and properties developed
with land use concessions available under the Planning Department’s Affordable Housing
Incentives Program or properties subject to Mellow Act affordable housing set-asides.
Monitoring activities include review of owner compliance with tenant income and rent ceilings
as well as ensuring compliance with any underlying federal regulations, such as HUD housing
quality standards.

The objective of the audit was to determine whether the Department complied with HOME
affordability monitoring and inspection requirements regarding HOME-assisted rental units.




                                                4
                                RESULTS OF AUDIT

Finding 1: The Department Failed to Maintain Required Tenant
Eligibility Information for HOME-Assisted Rental Housing Projects
The Department failed to maintain required tenant eligibility information for 26 HOME-assisted
rental housing projects to show that projects met affordability and income targeting requirements
for affordable housing. This condition occurred because of the Department’s overreliance on its
contractor to obtain the required documentation, compounded by its failure to effectively
monitor its contractor (see finding 2). As a result, neither the Department nor HUD was assured
that nearly $38 million in HOME funds expended for the 26 projects complied with the HOME
program’s intent to house and support low-income persons.



 Tenant Eligibility Information
 Not Maintained for Projects
 Totaling Nearly $38 Million


       Contrary to 24 CFR [Code of Federal Requirements] 92.508(a)(3)(v) (see appendix C),
       the Department failed to maintain tenant eligibility information for 26 projects to show
       that projects met affordability and income targeting requirements for affordable housing.
       The records for all 26 HOME-assisted rental housing projects lacked tenant information
       required by HOME and the Department’s policies and procedures (see appendix C).

       We examined records for the 26 projects provided by the Department and found that the
       records failed to contain all required documentation (see appendix D) in accordance with
       HOME requirements and the Department’s policies and procedures, which indicated that
       the following tenant information was to be maintained:

           Lease application
           Lease or lease waiver
           Initial income source verification documentation
           Tenant income and rent certification forms (tenant form)
           Mandatory addendum to the lease or rental agreement

       However, none of the 26 projects had complete documentation. A majority of the records
       consisted of regulatory agreements and random documents of continued occupancy
       certifications and some tenant information that did not identify whether the tenants
       resided in the HOME-assisted units. Consequently, we were unable to determine whether
       HOME funds expended for the 26 projects complied with HOME requirements.
       As a result of these deficiencies, the Department expended nearly $38 million in HOME
       funds for which it was unable to support that it housed and supported low-income persons

                                                5
     in the 26 HOME projects. It was unable to provide adequate tenant information to show
     that projects met HOME affordability and income targeting requirements for affordable
     housing. For the majority of the projects, records did not distinguish which units were
     HOME-assisted units, thus making it difficult to ensure that the required documentation
     was maintained.


Conclusion


     We attribute the deficiencies noted above to the Department’s overreliance on its
     contractor to obtain the required documentation, compounded by its failure to effectively
     monitor its contractor. Department officials explained that the Department’s inability to
     effectively monitor its contractor was due to high staff turnover, lack of an adequate
     database for tracking its HOME-assisted rental units, and poor record keeping. These
     conditions hindered the Department’s monitoring ability because it could not effectively
     perform checks and balances to identify which projects and tenants were monitored by
     the contractor and whether adequate tenant eligibility information was maintained to
     show that projects met affordability and income targeting requirements for affordable
     housing. The contractor did not obtain the required documentation because it
     misunderstood its professional services agreement (see finding 2). Consequently, neither
     the Department nor HUD was assured that nearly $38 million in HOME funds expended
     for the 26 projects complied with the HOME program’s intent to house and support low-
     income persons.

Recommendations



     We recommend that the Director of the Los Angeles Office of Community Planning and
     Development require the Department to

     1A. Provide documentation for 26 HOME-assisted rental projects to support that each
         HOME-assisted unit was occupied by a family that was income eligible and the
         projects met the affordability and income targeting requirements for the entire
         period of affordability or repay HUD $37,999,014 in unsupported costs from
         nonfederal funds.

     1B. Ensure adequate controls are in place to ensure that the HOME assisted units meet
          program requirements for the entire affordability period.




                                             6
Finding 2: The Department Failed to Monitor Its Occupancy
Monitoring Contractor

The Department did not ensure that its contractor conducted occupancy monitoring of the
HOME-assisted projects as required. Consequently, it did not maintain required tenant
information for its HOME-assisted projects (finding 1). We attribute the deficiency to the
Department’s lack of knowledge of the HOME program monitoring requirements. The
Department had not developed or implemented contractor monitoring policies to ensure that the
contractor performed the services required under its contract with the Department or the HOME
program regulations, resulting in $103,693 in unsupported costs. As a result, neither HUD nor
the Department was assured that its HOME-assisted projects met HOME program requirements.
In addition, the Department paid $551,306 in HOME funds for contracted services, which were
not fully performed as intended under the contract.


 Contractor Monitoring Not
 Performed


       Pursuant to 24 CFR 92.504(a), the Department had a responsibility to manage day-to-day
       operations of its HOME program to ensure that HOME funds were used in accordance
       with all program requirements. Although the Department paid a contractor to conduct
       occupancy monitoring, it was not relieved of this responsibility. It was required to
       review the performance of its contractor at least annually (see appendix C). However, it
       did not monitor its contractor annually and did not have policies or procedures to ensure
       that it met the requirement.

       The housing services manager for the Department acknowledged there were no policies
       and procedures for monitoring its contractor but stated that the agreement between the
       Department and the contractor (see appendix C) stipulated an end-of-contract
       performance evaluation. The Department contracted the functions in April 2003 and
       conducted a performance evaluation of the contractor in December 2005, found the
       contractor’s performance to be satisfactory, and renewed the contract. No other formal
       monitoring had taken place since that time.

       We interviewed the Department’s management analyst, who stated that the Department
       had planned to visit the contractor twice per year but the Occupancy Monitoring Unit was
       understaffed and unable to do the planned monitoring. The interview also disclosed that
       the analyst was not fully knowledgeable of the HOME requirements related to the
       occupancy monitoring or the contract provisions. Specifically, the analyst did not

          Know what the professional services agreement required the contractor to do,


                                               7
        Know that the Department was required to monitor the contractor at least annually,

        Know that HOME regulations required the Department to maintain tenant files and
        that the use of a contractor did not relieve it of this responsibility,

        Have procedures in place to determine whether the contractor provided all required
        documentation to the Department, or

        Verify whether the cash receipts received from the contractor were valid before
        approving payment.

Contractor Procedures
Inadequate


     The professional services agreement between the Department and its contractor required
     the contractor to establish and maintain records for all HOME-assisted projects to support
     that each family was income eligible and each project met affordability and income
     targeting requirements of HOME regulations. We reviewed the contractor’s policies and
     procedures used to conduct occupancy monitoring for the Department. The contractor’s
     policies and procedures were not adequate to ensure compliance with HOME program
     regulations and the professional services agreement. Specifically, the contractor did not
     have procedures in place to obtain and retain tenant/unit information needed by HUD to
     ensure that the tenant/unit met HOME program regulations.

     The contractor was unaware of the project file record retention requirement set forth in
     the professional services agreement (contract). The contract stated that original forms for
     all documents specified in the agreement shall be maintained for a period of five years
     after the termination of the agreement and after final disposition of pending matters. The
     contractor stated that it had “purged” requested documentation and sent it to the
     Department because of limited storage space. However, the Department disputed the
     statement by stating that it did not have the documentation the contractor reportedly sent.

     The contractor was also unaware of the requirement to obtain full documentation for all
     tenants residing in HOME-assisted units, which included tenants that had been in the
     units before the execution of the 2003 contract. The contractor stated that it was not
     required to collect documentation for “existing” tenants, resulting in $103,693 in
     unsupported costs for the tenant files we reviewed. Of the 27 tenant records reviewed, 24
     (89 percent) did not have initial move-in source documentation (see appendix E). During
     the review of the 27 tenant records (seven projects that contained documentation)
     provided by the contractor, we also found that

        25 of 27 (93 percent) tenant files were missing one or more years of tenant
        recertification documents,



                                              8
             Seven of eight (88 percent) tenant files did not contain full source documentation
             required at the sixth year,1 and

             27 of 27 (100 percent) tenant files did not contain tenant application/lease documents
             (see appendix E).

         Although tenant eligibility information was missing, the Department paid the contractor
         for services performed with HOME funding for the above units. However, we did not
         recommend recovery of the related amount since it was immaterial.

         In addition, the contractor did not perform document collection cycles in accordance with
         the contract. The contract stated that if the project owner did not submit the required
         documentation, the contractor was to perform “up to three Collection Activity Cycles” to
         obtain compliance. If the required documentation was not obtained through the
         collection activity cycles, the contractor was required to schedule and conduct a site visit.
         The contractor did not conduct site visits for noncompliant2 projects and did not inform
         the Department of the projects’ noncompliant status. Therefore, five projects were
         noncompliant for up to three years (finding 1) (see appendix D).


    Conclusion


         The problem occurred because the Department did not have monitoring procedures in
         place to ensure that the contractor performed the services required under the contract.
         The problem was compounded by the fact that the Department’s management analyst and
         contractor staff were not fully knowledgeable of the HOME requirements related to
         occupancy monitoring or the contract provisions. As a result, neither HUD nor the
         Department was assured that its HOME-assisted projects met HOME tenant eligibility
         requirements (finding 1). In addition, the Department paid $551,306 in HOME funds for
         contracted services, which were not fully performed as intended under the contract. Once
         the Department implements monitoring procedures to ensure that the contractor performs
         the occupancy monitoring as required, it will allow these $110,2613 in funds to be put to
         better use in the future.




1
  Of 27 tenants, only 8 were required to have full source documentation for the sixth-year certification.
2
  These noncompliant projects are projects for which the contractor did not perform the required site visits to obtain
the required documentation to satisfy tenant/unit documentation related to HOME-assisted units.
3
  Average annual contract cost (1/5 the amount of the $551,306 incurred over a five year period).

                                                           9
Recommendations


    We recommend that the Director of the Los Angeles Office of Community Planning and
    Development require the Department to

    2A. Develop and implement policies and procedures to ensure that it monitors its
        contractor to ensure that the contracted services are performed as intended. Such
        action will ensure that the contract amount of $110,261 in HOME funds can be put
        to better use in the future.

    2B. Provide missing tenant documentation for the 27 tenants to support that each family
        was income eligible and that projects met affordability and income targeting
        requirements of HOME regulations or repay $103,693 in unsupported costs.

    2C. Provide training to the responsible Department and contractor staff to ensure that
        they are fully knowledgeable of the HOME regular occupancy monitoring
        requirements as well as the contract provisions.




                                           10
Finding 3: The Department Failed to Inspect HOME-Assisted Rental
Housing Projects and Ensure That Projects Met Local Housing Code
Requirements

The Department failed to inspect HOME-assisted rental housing projects as frequently as
required and ensure that the projects met local housing code requirements. It did not conduct the
required number of inspections during our three-year audit period for 36 of 52 properties. In
addition, 69 of 165 units (42 percent) inspected did not meet the local code requirements. The
problem occurred because the Department did not have adequate controls in place to ensure that
HOME-assisted rental housing units were properly inspected and recorded as HOME-assisted
units. As a result, neither the Department nor HUD was assured that the HOME-assisted rental
units were safe and sanitary and complied with local code requirements.




 Projects Not Inspected as
 Required


       Pursuant to 24 CFR 92.504(d), the participating jurisdiction must perform on-site
       inspections of HOME-assisted rental housing to determine compliance with the property
       standards of section 92.251 no less than

           Every three years for projects containing one to four units,
           Every two years for projects containing 5 to 25 units, and
           Every year for projects containing 26 or more units.

       The Department did not conduct the required number of inspections during our three-year
       audit period for 36 of 52 properties (69 percent) in our sample. In addition, six of these
       properties did not receive any inspections during our audit period. A schedule of the
       properties that were not inspected as required is shown in appendix F.

       The problem occurred because the Department did not have adequate procedures in place
       to ensure that the HOME-assisted rental housing properties were properly inspected and
       recorded in the Systematic Code Enforcement Program’s information system as HOME-
       assisted projects. This condition caused the properties to fall under the Systematic Code
       Enforcement Program’s ordinance, which requires only one inspection of each
       multifamily residential unit every three years.




                                                11
         Nevertheless, as reported in the City’s audit report,4 the Department exceeded this three-
         year requirement, and it took six years to complete the first cycle of inspections. In
         addition, the information systems and databases used by staff (Occupancy Monitoring
         Unit and Systematic Code Enforcement Program) are all stand-alone systems that do not
         interface with each other and do not enable the Department to efficiently track, monitor,
         and reconcile data related to HOME-assisted rental housing units (see finding 4).

    Local Code Requirements Not
    Met



         Regulations at 24 CFR 92.251(a)(2) require that HOME-assisted housing meet all
         applicable state and local housing quality standards and code requirements (see appendix
         C).

         We inspected 165 HOME-assisted rental units (20 properties) to determine whether they
         met housing code regulations. Of the 165 units, 69 (42 percent) did not meet the local
         code requirements and had 407 housing code violations (see appendix G). Of the 69
         units, 41 (59 percent) (within 10 projects) were in material noncompliance and comprised
         113 of the 407 housing code violations as shown below.

               Project
           assessor parcel         Number of units           Number of units with                 Total violations
               number                inspected               significant violations                  identified
             5028001028                  11                            11                                40
             5163013009                  10                            10                                18
             5028001021                   5                             5                                23
             5546005001                  10                             3                                 5
             2210019013                  10                             3                                 5
             5155029010                  10                             3                                 6
             5148011001                  11                             3                                10
             5148012006                  10                             1                                 1
             5408017023                  10                             1                                 2
             5141001018                   7                             1                                 3
                Total                       94                         41                               113

         These units had significant violations that created substantially unsafe tenant living
         conditions, including exposed electrical contacts or wiring, broken exterior door locks




4
  It is the internal audit report issued July 16, 2007, by the City’s Office of the Controller. It was a followup audit of
the Housing Department’s Systematic Code Enforcement Program regarding the audit conducted in 2001, which
found that the Department did not have a systematic approach to prioritize the properties that require inspections,
lacked effective systems to report the inspection results and the program’s performance, and needed to reassess the
funding of the program.


                                                           12
     and hinges, deficient windows that did not lock, and mildew. By contrast, those units
     that were not considered to be materially deficient had less severe violations such as
     cracked or broken window glass panes; inoperative burners on stove; air conditioner filter
     dirty (lint); excessive grease on kitchen counter, stove, and wall; excessive debris; sink
     not properly sealed around counter; and garbage disposal leakage. These types of
     deficiencies also affected tenant health and safety but not to a high enough degree to
     cause the units to be considered materially deficient.

Examples of Violations


     Our inspector identified 75 violations (see appendix G) relating to the failure to maintain
     windows, doors, cabinets, and frames in operable, clean, and sanitary condition and in
     good repair for 8 (37 units) of the 20 properties inspected. The violations included
     cracked window glass, water damage at top of cabinet area, bathroom window frames
     damaged with hole and wood rot, defective window lock/latch, kitchen cabinets and sink
     wood rot due and water damage, entry door dead bolt not penetrating striker, bathroom
     medical cabinet corroded, and bathroom with excessive buildup of mildew. The
     following pictures are examples of the violations we observed:




     Assessor parcel numbers 5546005001 and 5028001028: J trap leaking, taped in an attempt to prevent from
     continuing to leak under sink. Water damage, wood rot, warped floor boards, holes, and mildew existed
     under the interior of bottom sink cabinet.




                                                  13
Assessor parcel numbers 5028001021, 5155029010, and 5028001028: Entry door to living room - door frame/trim
split, damaged, insecure, and/or missing door hinges. A unit (3 rd picture) had a hollow door used as the exterior
door to the living room. The hollow door does not provide basic standards of security, weatherization, and barrier
against fire and smoke.




Assessor parcel numbers 5028001028 and 5163013009: Broken glass raises concerns for safety of tenants and
poses a cutting hazard.




                                                        14
In addition, our inspector identified 36 violations relating to the failure to maintain safe
and sanitary floor covering for nine projects (26 units). The violations identified included
shower floor tiles exposed with missing grout/seal and mildew; carpet worn/torn, with
holes, and/or lifted, creating ripples with potential tripping hazard; kitchen and room
flooring in a rough subflooring condition; and linoleum lifted at tub and shower area.
The following are some examples of the violations we observed:




Assessor parcel numbers 5141001018, 5028001028, 5148012006, and 5028001021: Worn and torn carpets
and floors with missing tiles and mildew growth poses potential health and safety problems and tripping
hazards. A picture shows that duct tape was used in an attempt to cover up the mildew.

Our inspector identified other violations, including but not limited to rotting/peeling
interior and exterior paint, inoperable smoke detectors, exposed wires, aged and dirty
vents for air conditioner and heater, leaking drain pipes, garbage and debris in and around
HOME-assisted rental units, missing handrails on stairways, and loose toilets. The
following pictures are a few examples of other violations identified in the Department’s
HOME-assisted rental units inspected.




                                             15
        Assessor parcel numbers 5028001021, 2210019013, 5408017023, and 5546005001: Toilets with no cover,
        inoperable smoke detectors, dirty heating and ventilation system, and exposed wiring pose health and
        safety concerns.

        As previously mentioned, the Department did not conduct the required number of
        inspections during our three-year audit period for 36 of 52 (69 percent) properties.
        Performing inspections at the required intervals could have prevented, or at least reduced,
        the amount of time that units were in noncompliance and in unsafe or unsanitary
        condition. Improvements to the Department’s inspection controls to ensure that
        inspections are conducted when required will enable $106,8625 in HOME funds to be put
        to better use in the future.




5
  The amount represents a prorated amount of HOME funds invested in the HOME-assisted rental units that failed
inspection. See appendix H for details on the calculation.

                                                      16
    Department Not Aware of
    Vacant Units


         During our inspections, we also identified six units that had been vacant between 12 and
         27 months, although there was nothing precluding these units from being occupied. In
         accordance with 24 CFR 92.351(a)(1), participating jurisdictions are to affirmatively
         market units by having owners adopt procedures to inform and solicit applications from
         persons in the housing market area who are not likely to apply for the housing without
         special outreach. We brought the vacant units to the attention of the housing services
         manager and learned that the Department was unaware that the units were vacant and in
         violation of HOME regulations. These vacant units could have been occupied by eligible
         tenants. However, the Department and the owner did not maximize the effectiveness of
         the HOME program’s intent to house low-income households for the time the units were
         vacant. Improvements to the Department’s controls to ensure that vacant units are
         identified and then occupied by eligible tenants in a timely manner will ensure that
         $9,3606 in HOME funds can be put to better use in the future.

    Conclusion



         Collectively, we attribute the deficiencies noted above to the Department’s not having
         adequate controls in place to ensure that HOME-assisted rental housing units were
         inspected when required and that they complied with local code requirements.
         Consequently, neither the Department nor HUD was adequately assured that HOME-
         assisted rental units were safe and sanitary units that complied with local code
         requirements. Improvements to the Department’s controls will ensure that $116,222 in
         HOME funds can be put to better use in the future.


    Recommendations



         We recommend that the Director of the Los Angeles Office of Community Planning and
         Development require the Department to

         3A. Take action to ensure that units that failed inspection during our site visit (appendix
             G) are repaired by the project owners. Such corrective action will ensure that rental
             housing assisted with $106,862 in HOME funds can be put to better use.

6
  The amount represents a prorated amount of HOME funds invested in the HOME-assisted rental units that were
vacant. If controls are implemented to ensure that vacant units are identified and then occupied by eligible tenants
in a timely manner, funds would be put to better use for the vacant units that we identified. See appendix H for
details on the calculation.

                                                         17
3B. Take action to ensure that vacant HOME-assisted rental housing units identified
    during our inspections are occupied as soon as possible by eligible tenants and
    identify whether there are other vacant units that also need to be occupied. Such
    corrective action will ensure that rental housing assisted with $9,360 in HOME
    funds can be put to better use.

3C. Implement adequate policies and procedures (internal controls) to ensure that
    HOME-assisted rental housing is transferred from the Occupancy Monitoring Unit
    to the Systematic Code Enforcement Program in a timely manner and appropriately
    recorded in its system so that all HOME-assisted rental projects are inspected in a
    timely manner to identify and correct housing code violations.




                                       18
Finding 4: The Department Had Inadequate Controls over the
Monitoring of Its HOME-Assisted Rental Housing Projects

The Department had inadequate controls over the monitoring of its HOME-assisted rental
housing projects. The Department’s databases are inefficient and incomplete because they are
stand-alone systems that do not interface with each other and do not provide user-friendly
reporting. We compared the databases used by the Department and its contractor and found
discrepancies with the number of HOME-assisted rental units and projects recorded as well as
inaccurate property addresses. The problem occurred because of the lack of a uniform database,
compounded by high staff turnover and poor record keeping. Without adequate oversight,
neither HUD nor the Department can adequately ensure that the HOME-funded projects comply
with HOME requirements.



 Inadequate Controls over
 Monitoring of HOME-Assisted
 Rental Housing Projects


       Contrary to Office of Management and Budget Circular A-133 (see appendix C), the
       Department did not have adequate internal controls in place to monitor its HOME-
       assisted rental housing projects to ensure that they complied with HOME requirements.
       We reviewed the various databases used by the Department and found the following
       problems and issues:

          Capital Budget Tracking System – It is a text database used by the Department that
          contains project management, fund source, and loan service information; however, it
          does not have information on the number of HOME-assisted units.

          Integrated Disbursement Information System – It is HUD’s database system that
          allows grantees to request grant funding and report on program accomplishments;
          however, the Department’s HOME-funded project addresses were not always
          accurate.

          Contractor’s database – The contractor was unable to export information from its
          database on the universe of tenant records and could not retrieve individual tenant
          data because all data were entered using project addresses rather than individual
          tenants’ names.

          Systematic Code Enforcement Program’s spreadsheet – It is a spreadsheet kept by the
          Systematic Code Enforcement Program on all of its HOME-assisted rental housing


                                              19
            projects for use in scheduling and conducting physical inspections; however, it did
            not distinguish HOME-assisted units from non-HOME-assisted units.

         The systems also showed different numbers of HOME-assisted rental housing projects
         and units. The table below illustrates the numbers reported by the various systems:

                                  Capital         Integrated                          Systematic
                                  Budget        Disbursement                            Code
                                 Tracking        Information       Contractor's      Enforcement
                                  System            System          database           Program
           Number of
           HOME-assisted
           projects                 308               536               254              530 7

         As evidenced above, the contractor’s database shows that it had only 254 HOME-assisted
         rental housing projects, versus the 536 shown in HUD’s Integrated Disbursement
         Information System. Thus, there were 282 projects that were not monitored by the
         contractor, and there was no assurance that those projects complied with HOME and
         affordability requirements.

         Collectively, the different systems used by the Department and its counterparts to manage
         and monitor the projects are ineffective and inaccurate because they do not interface with
         one another.


    Corrective Action



         The Department’s system staff was developing an in-house system, the Housing
         Information Management System. According to the City’s audit report, the new system
         should have been operational by December 2007; however, we learned that the
         Occupancy Monitoring Unit’s database will not be implemented until possibly fiscal year
         2009. The housing services manager was aware of the problem with the databases and
         agreed that a problem existed and required correction. The manager also stated that once
         the Department transitions to the Housing Information Management System from its
         Capital Budget Tracking System, it will need to reconcile the data with HUD’s Integrated
         Disbursement Information System.




7
  Although it appears that the Systematic Code Enforcement Program had more HOME-assisted rental projects when
compared to other databases, we found that the projects within our sample were not properly recorded as HOME in
its Code, Compliance, and Rent Information System and/or did not show up in its spreadsheet.

                                                      20
Conclusion



     The problem occurred because of the lack of a uniform database, compounded by high
     staff turnover within the Department’s Occupancy Monitoring Unit and poor record
     keeping. Without adequate controls, the Department may not have provided the required
     level of oversight to its HOME-assisted rental units to ensure that requirements were met.
     As a result, HUD may have provided HOME funding to projects that did not meet its
     affordability requirements. Without adequate oversight, neither HUD nor the Department
     can adequately ensure that the HOME-funded projects comply with HOME requirements.


Recommendations



     We recommend that the Director of the Los Angeles Office of Community Planning and
     Development require the Department to

     4A.     Implement a plan and coordinate with all of the divisions and programs within the
             Department to assure that data and reporting needs are properly addressed during
             the system development of the Housing Information Management System. In the
             interim, the Department should reconcile the various databases and ensure that all
             HOME-assisted rental housing projects are properly accounted for and monitored.




                                             21
                            SCOPE AND METHODOLOGY

We performed our on-site audit work at the Department, located in Los Angeles, California,
between January and June 2008. Our audit generally covered the period January 1, 2005,
through December 31, 2007. Our objective was to determine whether the Department complied
with HOME affordability monitoring and inspection requirements regarding HOME-assisted
rental housing units.

We gained an understanding of how the City administered its HOME grants through interviews
with officials from the

    HUD Los Angeles Office of Community Planning and Development,
    Los Angeles Housing Department and its Occupancy Monitoring and Systematic Code
    Enforcement Division, and
    The Department’s contractor responsible for the functions of occupancy monitoring.

To accomplish our audit objectives, we reviewed

    The applicable federal laws, regulations, and HUD guidance for the HOME program;
    Office of Management and Budget regulations for local grantees;
    Reports from HUD’s Integrated Disbursement Information System;
    The City’s annual action plans and consolidated annual performance evaluation reports;
    The Department’s housing code standards, accounting records, policies and procedures, and
    file documentation;
    The Department’s and contractor’s databases; and
    Internal audit reports from the City’s Office of the Controller.

HUD’s Integrated Disbursement Information System identified 536 completed HOME-assisted
rental housing projects as of February 4, 2008. We obtained and reconciled the Department’s
databases and spreadsheets used to monitor its HOME-assisted rental projects and compared
them to the Integrated Disbursement Information System. In doing so, we organized the projects
by seven potential areas of concern. We then selected projects with the highest HOME funding
amount8 per seven potential areas of concern. Based on a sample, we identified HOME-assisted
rental housing projects with potential concerns with a high amount of HOME funding. We
requested and reviewed the following:

        1. Tenant information for all HOME-assisted units within the 26 projects because these
           projects did not show up in the contractor’s database for occupancy monitoring.

        2. Tenant information for 37 projects (116 tenants) from the contractor for review of
           tenant eligibility because these projects showed up in the contractor’s database.


8
 We selected projects with the highest HOME funding amount. For those projects that did not have a HOME
amount listed, we defaulted to projects with the most rental units per project.

                                                     22
       3. HOME inspections for 52 HOME-assisted rental properties because these fell within
          our sample and should be inspected by the HOME inspectors from the Systematic
          Code Enforcement Program.

       4.   On-site inspections for 20 HOME-assisted properties. We selected for inspections
            projects in which the Department was able to identify which were HOME-assisted
            units within the projects and a majority of the projects that did not show up in the
            Systematic Code Enforcement Program’s database as HOME projects.

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




                                                23
                             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 had in place to ensure that hard-
                  copy and database occupancy monitoring records for all HOME projects were
                  current, valid, and reliable.

                  Policies and procedures that management had in place to ensure that
                  occupancy monitoring occurred in a manner that complied with applicable
                  laws and regulations and met program objectives.

                  Policies and procedures that management had in place to ensure that hard-
                  copy and database physical inspection records for all HOME projects were
                  current, valid, and reliable.

                  Policies and procedures that management had in place to ensure that physical
                  inspections monitoring occurred in a manner that complied with applicable
                  laws and regulations and met program objectives.

       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.




                                               24
Significant Weaknesses


     Based on our review, we believe the following items are significant weaknesses:

                The Department did not have a reliable database that held current, valid, and
                reliable records for occupancy monitoring (findings 1 and 4).

                The Department did not have policies and procedures for monitoring its
                occupancy monitoring contractor (finding 2).

                The Department did not have policies and procedures in place to ensure that
                hard-copy and database physical inspection records were current, valid, and
                reliable (finding 3).

                The Department did not have policies and procedures to ensure that it
                conducted its physical inspections in accordance with regulations (finding 3).




                                            25
                     FOLLOWUP ON PRIOR AUDITS


Audit of the City of Los Angeles
Housing Department - HOME -
Assisted Rehabilitation
Program, 2008-LA-1004, Dated
January 15, 2008


     We audited the Department’s HOME-assisted rehabilitation construction. The report
     contained four findings that the Department did not ensure that all HOME-assisted
     rehabilitation work on single-family and small multifamily properties met all applicable
     construction standards and/or was complete. On May 14, 2008, we entered into
     management decisions with HUD to correct the items in the recommendations, which
     have a target completion date of May 14, 2009.




                                             26
                                   APPENDIXES

Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

      Recommendation                    Unsupported 1/                     Funds to be put
          number                                                            to better use 2/
              1A                           $37,999,014
              2A                                                                 $110,261
              2B                              $103,693
              3A                                                                 $106,862
              3B                                                                   $9,360

            Total                          $38,102,707                           $226,483


1/   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 unsupported expenses are HOME funds
     expended on 26 projects for which we could not determine whether the HOME-assisted
     rental units were occupied by tenants that met the eligibility requirements. The
     unsupported costs also include a prorated amount expended on the projects for which the
     Department was unable to provide tenant eligibility information for 27 tenants residing in
     seven of the HOME-assisted projects.

2/   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 any other savings
     which are specifically identified. In this instance, if the auditee implements our
     recommendations and improves its controls, it will ensure that HOME funds expended on
     contractors’ fees and projects would be funds put to better use in the future. Appendix H
     provides more details on our calculations.




                                             27
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         28
29
Comment 2




            30
31
                         OIG Evaluation of Auditee Comments

Comment 1   Thank you for the cooperation extended to us during the audit and for your
            proactive efforts to address the audit recommendations as detailed in your
            response. HUD will work with you during the audit resolution process to resolve
            the audit recommendations.

Comment 2   Your statement gives the impression that all HOME-assisted units were inspected
            for code violations, but this is not the case. We found instances where some
            properties did not receive any HOME or Systematic Code Enforcement Program
            inspections. Both types of inspections require that all units in the properties are
            inspected thoroughly by inspectors for code violations. There were instances
            where we found properties only received complaint and/or urgent repair
            inspections. Complaint and urgent repair inspections were unit(s) and violation(s)
            specific. Consequently, HOME-assisted units in the properties did not necessarily
            receive regular inspections.




                                            32
Appendix C
                                       CRITERIA
A. 24 CFR Part 92, Home Investment Partnerships Program

      Section 92.203(a) states, “ The HOME program has income targeting requirements for
      the HOME program and for HOME projects. Therefore, the participating jurisdiction
      must determine each family is income eligible by determining the family’s annual
      income.”

      Section 92.203(a)(1) states, “For families who are tenants in HOME-assisted housing
      and not receiving HOME tenant-based rental assistance, the participating jurisdiction
      must initially determine annual income using the method in paragraph (a)(1)(i) of this
      section.”

      Section 92.203(a)(1)(i) states, “Examine the source documents evidencing annual
      income (e.g., wage statement, interest statement, unemployment compensation statement)
      for the family.”

      Section 92.203(a)(1)(ii) states, “Obtain from the family a written statement of the amount
      of the family’s annual income and family size, along with a certification that the
      information is complete and accurate. The certification must state that the family will
      provide source documents upon request.”

      Section 92.203(a)(1)(iii) states, “Obtain a written statement from the administrator of a
      government program under which the family receives benefits and which examines each
      year the annual income of the family.”

      Section 92.251(a)(1) states, “…The Participating jurisdiction must have written
      standards for rehabilitation that ensure that HOME-assisted housing is decent, safe, and
      sanitary...”

      Section 92.251(a)(2) states, “All other HOME-assisted housing (e.g., acquisition) must
      meet all applicable State and local housing quality standards and code requirements and
      if there are no such standards or code requirements, the housing must meet the housing
      quality standards in 24 CFR 982.401.”

      Section 92.252 states, “The HOME-assisted units in a rental housing project must be
      occupied only by households that are eligible as low-income families and must meet the
      following requirements to qualify as affordable housing…”

      Section 92.252(a) requires that there be a rent limitation. The maximum HOME rents
      are the lesser of (1) the fair market rent for existing housing for comparable units in the
      area as established by HUD under 24 CFR 888.111 or (2) a rent that does not exceed 30
      percent of the adjusted income of a family whose annual income equal 65 percent of the

                                               33
median income for the area, as determined by HUD, with adjustments for number of
bedrooms in the unit.

Section 92.252(b) requires that for rental projects with five or more HOME-assisted
rental units, 20 percent of the HOME-assisted units be occupied by very low-income
families and meet one of the following rent requirements: (1) the rent does not exceed 30
percent of the annual income of a family whose income equals 50 percent of the median
income for the area, as determined by HUD, with adjustments for smaller and larger
families; and (2) the rent does not exceed 30 percent of the family’s adjusted income.

Section 92.252(c) requires that the participating jurisdiction establish maximum monthly
allowances for utilities and services (excluding telephone).

Section 92.252(d) requires that the owner cannot refuse to lease HOME-assisted units to
a certificate or voucher holder under 24 CFR Part 982-Section 8 Tenant-Based
Assistance.

Section 92.252(e) states, “The HOME-assisted units must meet the affordability
requirements for not less than the applicable period” beginning after project completion.”

Section 92.252(f) states, “The maximum HOME rent limits are recalculated on a periodic
basis after HUD determines fair market rents and median incomes.”

Section 92.252(g) provides that changes in fair market rents and in median income over
time should be sufficient to maintain the financial viability of a project with the HOME
rent limits.

Section 92.252(h) states, “The income of each tenant must be determined initially in
accordance with section 92.203(a)(1)(i). In addition, each year during the period of
affordability the project owner must re-examine each tenant’s annual income in
accordance with one of the options in section 92.203 selected by the participating
jurisdiction. An owner of a multifamily project with an affordability period of 10 years
or more who re-examines tenant’s annual income through a statement and certification in
accordance with section 92.203(a)(1)(ii), must examine the income of each tenant, in
accordance with section 92.203(a)(1)(i), every sixth year of the affordability period.”

Section 92.252(i) requires that HOME-assisted units continue to qualify as affordable
housing despite a temporary noncompliance caused by increases in the incomes of
existing tenants if actions satisfactory to HUD are being taken to ensure that all vacancies
are filled in accordance to requirements until the noncompliance is corrected.

Section 92.252(j) states, “In a project containing HOME-assisted and other units, the
participating jurisdiction may designate fixed or floating HOME units.”

Section 92.351(a)(1) states, “Each participating jurisdiction must adopt affirmative
marketing procedures and requirements for rental and homebuyer projects containing 5 or

                                         34
more HOME-assisted housing units. Affirmative marketing steps consist of actions to
provide information and otherwise attract eligible persons in the housing market area to
the available housing without regard to race, color, national origin, sex, religion, familial
status or disability.”

Section 92.351(a)(2)(iv) requires that affirmative marketing requirements and procedures
adopted must include: “Records that will be kept describing actions taken by the
participating jurisdiction and by owners to affirmatively market units and records to
assess the results of these actions.”

Section 92.502(d)(1) states, “Complete project completion information must be entered
into the disbursement and information system, or otherwise provided, within 120 days of
the final project drawdown. If satisfactory project completion information is not
provided, HUD may suspend further project set-ups or take other correction actions.”

Section 92.503(b)(1) states, “Any HOME funds invested in housing that does not meet
the affordability requirements for the period specified in section 92.252 or 92.254, as
applicable, must be repaid by the participating jurisdiction…”

Section 92.504(a) states, “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 making
appropriate action when performance problems arise. The use of 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.”

Section 92.504(d) states, “…During the period of affordability, the participating
jurisdiction must perform on-site inspections of HOME-assisted rental housing to
determine compliance with the property standards of section 92.251 and to verify the
information submitted by the owners in accordance with the requirements of section
92.252 no less than: every three years for projects containing 1 to 4 units; every two
years for projects containing 5 to 25 units; and every year for projects containing 26 or
more units. Inspections must be based on a sufficient sample of units.”

Section 92.508(a) states, “Each participating jurisdiction establish and maintain
sufficient records to enable HUD to determine whether the participating jurisdiction has
met the requirements of this part…”

Section 92.508(a)(3)(i) states, “A full description of each project assisted with HOME
funds, including the location, form of HOME assistance, and the units or tenants assisted
with HOME funds.”

Section 92.508(a)(3)(ix) states, “Records demonstrating that each lease for an assisted
rental housing unit complies with the tenant and participation protections of section
92.253. Records must be kept for each family.”

                                         35
       Section 92.508(a)(3)(iv) states, “Records demonstrating that each project meets the
       property standards of section 92.251.”

       Section 92.508(a)(3)(v) states, “Records demonstrate that each family is income eligible
       in accordance with section 92.203.”

       Section 92.508(a)(3)(vii) states, “Records demonstrate that each rental housing project
       meets the affordability and income targeting requirements of section 92.252 for the
       required period. Records must be kept for each family assisted.”

B. Office of Management and Budget Circular A-133, Subpart C (.300b), states, the auditee
   shall: (b) maintain internal control over federal programs that provides reasonable assurance
   that the auditee is managing federal awards in compliance with laws, regulations, and the
   provisions of contracts or grant agreements that could have a material effect on each of its
   federal programs…”

C. Professional Services Agreement

       Section 416(A) states, “The Contractor, in the performance of this Agreement, shall
       comply with all applicable statutes, rules, regulations and orders of the United States, the
       State of California, the County and the City of Los Angeles, including laws and
       regulations pertaining to labor, wages, hours, and other conditions of employment, the
       City’s anti-discrimination provisions and Affirmative Action Plan requirements, the
       Housing and Community Development Act of 1974 (42 USC Section 301 et seq.) as
       amended, 24 CFR Part 500 et seq., the HOME Investment Partnerships Program Act 24
       CFR Part 92 et seq., as well as applicable Office of Management and Budget Circulars...”

       Section 416(B) states, “If Federal funds are used in the performance of this Agreement,
       the Contractor shall adhere to the rules and regulations of the Single Audit Act. P.L. 98-
       502 and the implementing OMB Circulars, City Council action dated February 4, 1987
       (C.F. No. 84-2259-S1), and any administrative regulations or field memos implementing
       the Act.”

       Section 416(H) requires that “records, in their original form, shall be maintained in
       accordance with requirements prescribed by the City with respect to all matters covered
       on file for all documents specified in the Agreement. Original forms are to be maintained
       on file for all documents specified in this agreement. Such records shall be retained for a
       period of five (5) years after termination of this Agreement and after final disposition of
       all pending matters.”

       Section 202(C)(2) states, “…If the owner does not comply with the Contractor’s
       notification and does not submit the required documentation by the Due Date, the
       Contractor shall demonstrate due diligence by completing up to three Collection Activity
       Cycles to obtain compliance…” The Collection Activity Cycles are described in the
       Professional Services Agreement.

                                                36
D. The Department’s Policies and Procedures for Occupancy Monitoring of Major
   Projects’ Neighborhood Preservation Projects

         Tenant files containing
            1. Lease application
            2. Lease or lease waiver
            3. Initial income source
            4. Tenant income and rent certification forms (tenant form)
            5. Mandatory addendum to the lease or rental agreement

E. Funding Approval and HOME Investment Partnerships Agreement

         The HOME statute imposes a significant number of data collection and reporting
         requirements. This includes information on assisted properties, on the owners or
         tenants of the properties, and on other programmatic areas. It is to permit HUD to
         determine the following:

             1. To permit HUD to determine whether each participant meets the HOME
                statutory income targeting and affordability requirements.

             2. To permit HUD to determine compliance with other statutory and regulatory
                program requirements.




                                             37
Appendix D

  SCHEDULE OF 26 HOME-ASSISTED RENTAL HOUSING
  PROJECTS THAT LACKED SUFFICIENT TENANT/UNIT
            ELIGIBILITY INFORMATION

                     Assessor parcel     Amount of HOME
                        number          funding expended


             1    5690022021                $592,783

             2    5502018010               $1,073,589

             3    6073004027                $343,160

             4    5160020051               $2,488,790

             5    5134017011               $1,800,000

             6    97041300006473           $1,750,000

             7    2111005034               $1,617,028

             8    5544021900               $1,663,839

                  5030005016 &
             9                             $4,336,873
                  5030006024

             10   5152003010               $2,872,460

             11   6031006029               $2,817,605

             12   5183003030               $2,126,109

             13   6067016049               $1,500,000

             14   5544024001               $1,326,000

             15   6032003018                $683,117

             16   2114008020                $100,000

             17   2146008035                $300,000

             18   2684018036               $1,127,000

             19   2156028267                $385,000

             20   2265002023               $1,294,118

             21   2156025020               $1,351,000

             22   5103020009                $35,000

             23   5119003010                $20,858

             24   5429008026               $1,690,959



                                   38
                                     25       5017015006                             $43,182

                                     26       5205013009                           $4,660,544

                                              Total                                $37,999,014



*Item 6: We were unable to obtain the assessor parcel number as it was unavailable. The senior housing inspector from the
Systematic Code Enforcement Program provided the application number related to the subject property.

**Items 1 through 21: The Department did not provide sufficient documentation to satisfy tenant/unit documentation (compliance)
requirements.

***Items 22 through 26: The contractor did not perform required site visits to obtain documentation to satisfy tenant/unit
documentation (compliance) requirements.




                                                                 39
Appendix E

SCHEDULE OF 27 TENANT FILES (SEVEN PROJECTS) WITH
  INCOMPLETE TENANT ELIGIBILITY INFORMATION
               Project address                                        Initial income     6th-year income
                                          Recertification                                                      Tenant         Prorated HOME
   Number of    identified by Unit number                                 source              source
                                           documents                                                         application/          funds
    projects      assessor                                           documentation       documentation      lease missing        expended
                                             missing
               parcel number                                             missing              missing
                                    Unit 101            X                     X           Not applicable           X                    $2,480
                                    Unit 103            X                     X           Not applicable           X                    $2,480
       1        5155029010
                                    Unit 107            X                     X           Not applicable           X                    $2,480
                                    Unit 108            X                     X           Not applicable           X                    $2,480
                                    Unit 410            X                     X                  X                 X                    $4,581
                                    Unit 604            X                     X                                    X                    $2,291
       2        5467012016
                                    Unit 606            X                     X           Not applicable           X                    $2,291
                                    Unit 607            X                     X                  X                 X                    $2,291
                                     Unit 1             X                     X           Not applicable           X                    $3,148
                                     Unit 2             X                     X                  X                 X                    $3,148
       3        5136001005
                                     Unit 3             X                     X           Not applicable           X                    $3,148
                                     Unit 4             X                     X           Not applicable           X                    $3,148
                                                                                            Unable to                                   $4,688
                                   Unit 124             X                     X                                    X
                                                                                            determine
                                    Unit 126            X                     X                  X                 X                    $3,125
      4         5141001018
                                                                                            Unable to                                   $4,688
                                    Unit 128            X                     X                                    X
                                                                                            determine
                                    Unit 141            X                     X                  X                 X                    $3,125
                                    Unit 104                                  X                  X                 X                      $605
      5         5144015046          Unit 201                                              Not applicable           X                      $605
                                    Unit 202            X                     X                  X                 X                      $605
                                    Unit 101            X                     X           Not applicable           X                    $1,500
                                    Unit 102            X                     X           Not applicable           X                    $1,000
       6        5148011001
                                    Unit 103            X                                 Not applicable           X                      $500
                                    Unit 104            X                     X           Not applicable           X                    $1,000
                                    Unit 202            X                     X           Not applicable           X                   $10,730
                                                                                            Unable to                                  $10,730
                                    Unit 203            X                     X                                    X
       7        5094007010                                                                  determine
                                    Unit 204            X                                 Not applicable           X                   $10,730
                                    Unit 208            X                     X           Not applicable           X                   $16,096
                                                                     Totals
                    Total             27                25                    24                *7                 27                 $103,693
                                                                 Percentages
    Percent                                         93 percent          89 percent          88 percent        100 percent


    *Only eight tenants were required to have sixth-year source documentation on file, and seven of eight did not have the required six-year
                 documentation.




                                                                      40
Appendix F

   SCHEDULE OF 52 HOME-ASSISTED PROPERTIES NOT
       INSPECTED IN ACCORDANCE WITH HOME
                  REQUIREMENTS
                                              Number of
                                             inspections
                                              performed      24 CFR
                                Number of    Jan. 1, 2005    92.504    Listed as
             Assessor parcel   inspections    – Dec. 31,    complied    HOME
                 number          required        2007       (yes/no)   (yes/no)
      1        5035031021           1              0           No         No
      2        5185015017           1              0           No         No
      3        5115022012           1              1           Yes        No
             5108002036 and
       4       5108002006          1              1           Yes        No
       5       5108002037          1              1           Yes        No
       6       6071003003          1              1           Yes        No
       7       6029017003          1              1           Yes        No
       8       5021023010          1              1           Yes        No
       9       5021018032          1              1           Yes        No
      10       5180008009          1              1           Yes        No
      11       5117007025          1              1           Yes        Yes
      12       6006010027          1              2           Yes        No
      13       5028001028          2              1           No         No
      14       5127008001          2              0           No         Yes
      15       5180002016          2              1           No         No
      16       6022015025          2              1           No         No
      17       5502018010          2              1           No         Yes
      18       5157020019          2              1           No         Yes
      19       5030006024          2              1           No         Yes
      20       5030005016          2              1           No         Yes
      21       5467017004          2              2           Yes        Yes
      22       6032003018          2              2           Yes        Yes
      23       5134017011          3              1           No         No
      24       5028001021          3              0           No         No
      25       5408017023          3              0           No         No
      26       5152003010          3              0           No         No
      27       5094007010          3              1           No         No
      28       2138006113          3              1           No         No
      29       5136001005          3              1           No         No
      30       5141001018          3              1           No         No
      31       5544021900          3              1           No         No
      32       5155029010          3              1           No         No
      33       5467012016          3              1           No         Yes
      34       6067016049          3              1           No         Yes


                                       41
            35            5148012006                  3                1               No            Yes
            36            7423005010                  3                1               No            Yes
            37            6037014029                  3                1               Yes           No
            38            5144015046                  3                2               No            No
            39            6073004027                  3                2               No            Yes
            40            5160020051                  3                2               No            Yes
            41            6031006029                  3                2               No            Yes
            42            5544024001                  3                2               No            Yes
            43            2111005034                  3                2               No            Yes
            44            5183003030                  3                2               No            Yes
            45            5161026004                  3                2               No            Yes
            46            5163013009                  3                2               No            Yes
            47            7417015039                  3                2               No            Yes
                          2210019013/
            48            2210019011                  3                2               No            Yes
            49            5148011001                  3                3              Yes            No
            50            5142023012                  3                3              Yes            Yes
            51            5546005001                  3                3              Yes            Yes
                                                                                          9
            52            5035025001                  3                1              Yes            Yes




9
  We learned that the construction was not completed until October 1, 2006. Thus, it would be logical that only one
inspection was performed on the subject property.

                                                          42
Appendix G

SCHEDULE OF UNITS WITH VIOLATIONS IDENTIFIED DURING OUR INSPECTIONS




                                43
44
45
                                                                      Category of violations legend
A   Failure to maintain an approved heating appliance and/or venting system.            Q    Failure to maintain habitable room(s) free from dampness.
    Failure to provide and maintain the required guard/handrail and maintain in a            Failure to maintain the plumbing system free from defective, damaged/leaking
B   secured condition.                                                                  R    faucets or plumbing fixtures.
    Failure to provide and maintain permanently wire, with battery backup, smoke
C   detectors.                                                                          S    Failure to properly install or maintain required lighting fixtures.

D   Failure to maintain safe and sanitary floor covering.                               T    Failure to properly secure loose plumbing fixtures.
    Failure to maintain plaster/drywall walls/ ceilings in a smooth and sanitary             Failure to maintain the required switch/receptacle cover plates and grounding
E   condition.                                                                          U    means in good repair and free from defects or missing portions.
                                                                                             Maintaining inoperative or defective receptacles in kitchen and/or bathroom
    Failure to maintain the required water closet, lavatory, bathtub, shower, or             and/or exterior locations; ground fault circuit interrupter type receptacle(s)
F   kitchen sink as required for a dwelling unit.                                       V    required.
                                                                                             Failure to maintain the required weatherproofing of the building, structure,
                                                                                             premises, or portion thereof in conformity with the code regulations and
G   Failure to maintain dwelling unit in a safe and sanitary condition.                 W    department approvals in effect at the time of construction.
    Failure to maintain windows, doors, cabinets, and frames operable, clean,
H   sanitary, and in good repair.                                                       X    Performing construction without obtaining the required permits or approvals.
                                                                                             Failure to maintain the electrical service, lines, switches, outlets, fixtures
                                                                                             coverings, and supports in good repair and free from broken, loose, frayed
    Failure to maintain the required combustion air openings for all fuel burning            inoperative, defective, or missing portions or wiring that may be a danger to
I   appliances.                                                                         Y    life, limb, heath, and safety.

J   Failure to maintain the required mechanical or natural bathroom ventilation.        Z    Failure to maintain the required fire extinguishing system(s) or equipment.
    Failure to provide and maintain all required plumbing faucet and/or valve                Failure to maintain the fire extinguishing system and/or equipment required by
K   handles.                                                                            A1   the Los Angeles Municipal Code.

    Unapproved use of flexible cords and/or multiple adapters as a substitute for            Failure to provide and maintain the required central or individual room heating
L   the fixed wiring of the structure.                                                  A2   appliance in good repair and operable at all times.

    Failure to provide and/or maintain an approved and/or nondefective domestic              Failure to provide and maintain a positive seal (caulk or grout) between
M   range vent.                                                                         A3   plumbing fixtures at contact points with walls and/or floors.
                                                                                             Failure to maintain the existing building, structure, premises, or portion thereof
    Failure to maintain the required appliance venting system in good and safe               in a safe and sanitary condition; in good repair; and free from graffiti, trash,
N   condition and in conformance with applicable laws at the time of installation.      A4   debris, rubbish, overgrown vegetation, offal, or similar material.
    Failure to maintain the counter/drains boards for kitchen sinks, bathroom
    lavatories, and adjacent wall and/or floor surfaces in a manner to prevent water         Failure to maintain the decking, walkways, or stairway surfaces and their
    damage and/or in a clean and sanitary condition and free from dirty or foreign           physical elements in conformity with the code regulations and department
O   materials.                                                                          A5   approvals in effect at the time of construction.

    Failure to maintain the plumbing system in conformity with the code
P   regulations and department approvals in effect at the time of construction.




                                                                                       46
Appendix H
                          SCHEDULE OF FUNDS TO BE PUT TO BETTER USE
Calculation of $106,862 in funds to be put to better use related to HOME funds invested in the HOME-assisted rental units that failed
inspection
                            A               B               C                D             E             F           G

                                                          HOME                           HOME
   Properties by          HOME                         funding per        Number      funding per     Number of   Number        Total funds put
  assessor parcel        funding       Affordability      year            of HOME     year per unit     units     of units     to better use (E x
     numbers             amount           period          (A/B)           units          (C/D)        inspected    failed              G)


 5136001005               $1,813,019             12       $151,085               48         $3,148            8            3              $9,443
 5028001021/
 5028001028                 $424,657              5         $84,931              58         $1,464           16           16             $23,429
 5163013009               $1,110,696             23         $48,291              30         $1,610           10           10             $16,097
 5141001018               $1,500,000             40         $37,500              24         $1,563            5            1              $1,563
 5185015017                 $234,664             15         $15,644               4         $3,911            4            1              $3,911
 5161026004                 $525,000             50         $10,500              43           $244            9            1                $244
 5408017023                 $525,000             50         $10,500              49           $214            9            7              $1,500
 5148012006                 $534,079             50         $10,682              55           $194           10            1                $194
 5148011001               $1,200,000             50         $24,000              48           $500           10            4              $2,000
 5144015046               $1,269,745             50         $25,395              42           $605           11            3              $1,814
 5142023012               $1,048,022             40         $26,201              12         $2,183            9            3              $6,550
 5546005001               $1,042,721             40         $26,068              10         $2,607           10            7             $18,248
 5155029010               $3,205,762             55         $58,287              47         $1,240           10            6              $7,441


 5035025001                $205,570              50          $4,111              36          $114            10            1                $114
 2210019013               $2,519,254             40         $62,981              22         $2,863           10            5             $14,314
                                                                                                                  Total                $106,862
Calculation of $9,360 in funds to be put to better use related to HOME funds invested in the HOME-assisted rental units that were
vacant.

                                                                     47
                   A              B               C           D             E               F            G            H              I               J

  Property                                                                                                                     Funds put to
identified by                                   HOME        Number        HOME         HOME funding                              better use         Total
  assessor       HOME                        funding per      of       funding per     per month per               Number of   limited to 12     funds put
    parcel      funding      Affordability       year        HOME      year per unit        unit       Vacant       months        months          to better
   number       amount          period          (A/B)        units        (C/D)        (E/12 months)    unit        vacant         (F x I)           use
                                                                                       E/12 months
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         124          20               12        $1,560
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         128          15               12        $1,560
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         141          12               12        $1,560
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         223          21               12        $1,560
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         231          22               12        $1,560
5141001018      $1,500,000              40        $37,500         24          $1,563            $130         232          27               12        $1,560

TOTAL                                                                                                                                    Total       $9,360




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