oversight

The Puerto Rico Department Housing Failed To Properly Manage Its HOME Investment Partnerships Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-06-11.

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

                                                                   Issue Date
                                                                          June 11, 2010
                                                                   Audit Report Number
                                                                          2010-AT-1006




TO:        José R. Rivera, Director, Community Planning and Development, San Juan Field
              Office, 4ND

           //signed//
FROM:      James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT: The Puerto Rico Department of Housing Failed To Properly Manage Its HOME
           Investment Partnerships Program

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Puerto Rico Department of Housing (Department) HOME
             Investment Partnerships Program (HOME). We selected the Department for
             review as part of our strategic plan. The objectives of the audit were to determine
             whether the Department (1) reimbursed HOME funds on terminated activities; (2)
             expended HOME funds within U.S. Department of Housing and Urban
             Development (HUD)-established timeframes; (3) administered program income,
             repayments, and recaptured funds in accordance with HOME requirements; (4)
             reported accurate and supported HOME commitments in HUD’s Integrated
             Disbursement and Information System (information system); and (5) maintained
             its financial management system in compliance with HUD requirements.

 What We Found

             The Department did not reimburse the HOME program more than $2 million for
             three activities that were terminated and did not meet HOME objectives and
             generate the intended benefits. In addition, it failed to reprogram and put to better
             use more than $1.84 million in unexpended HOME funds assigned to one of the
             terminated activities. As a result, HUD had no assurance that funds were used
             solely for eligible purposes and that HOME objectives were met.
         The Department did not always comply with HUD’s regulations in its
         disbursement of HOME funds that it drew down from its treasury account. It
         failed to disburse more than $1.43 million in 2002 HOME funds within HUD-
         required deadlines. As a result, more than $1.43 million in unexpended HOME
         funds was not recaptured in accordance with requirements.

         The Department did not comply with HUD’s regulations in its administration of
         HOME loans and repayments. It failed to collect more than $1.26 million in
         overdue loans and did not return to the United States Treasury more than
         $275,000 in repayments. As a result, HOME funds were not available for other
         eligible activities.

         The Department did not monitor the accuracy of commitments and other
         information entered into HUD’s information system. It reported to HUD more
         than $6.4 million in HOME commitments without executing written agreements.
         As a result, HUD had no assurance that the Department met HOME objectives
         and commitment requirements.

         The Department’s financial management system did not account for more than
         $991,000 in HOME receipts, did not support the allocability of more than
         $301,000 in disbursements, and allowed the use of more than $151,000 for
         ineligible expenditures. In addition, the Department did not deposit in its bank
         account more than $137,000 in HOME receipts and failed to disburse funds in a
         timely manner. As a result, HUD lacked assurance that funds were adequately
         accounted for, safeguarded, and used for authorized purposes.

What We Recommend

         We recommend that the Director of the San Juan Office of Community Planning
         and Development require the Department to repay more than $3.58 million for
         ineligible expenditures associated with terminated activities, unexpended 2002
         HOME funds, and unallowable administrative costs. The Director should also
         require the Department to collect and/or reprogram and put to better use more
         than $3.62 million for HOME funds for terminated activities, uncollected loans,
         repayment funds not remitted to its treasury account, receipts not deposited in its
         bank account, and unsupported commitments. The Department should also
         provide all supporting documentation to demonstrate the allocability and
         eligibility of more than $1.29 million in HOME disbursements.

         The Director should also require the Department to develop and implement an
         internal control plan to ensure that the HOME program has (1) a financial
         management system that complies with HUD requirements and (2) controls and
         procedures which ensure that HOME requirements are followed and accurate
         information is reported to HUD. We also recommend that the Director reassess
         the Department’s annual commitment requirement from prior years and recapture
         any shortfalls. In addition, the Director should impose sanctions against the

                                           2
           Department in accordance with HUD requirements for its continued deficient
           performance and increase monitoring of the Department’s performance in the
           administration of its HOME program.

           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 discussed the findings with HUD and the Department during the audit. We
           provided a copy of the draft report to the Department on April 27, 2010, for its
           comments and discussed the report with Department officials at the exit
           conference on May 11, 2010. The Department provided its written comments to
           our draft report on June 1, 2010. In its response, the Department generally
           disagreed with the findings and recommendations.

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




                                            3
                            TABLE OF CONTENTS

Background and Objectives                                                             5

Results of Audit
      Finding 1: The Department Did Not Reimburse the HOME Program for                7
                 Terminated Activities
      Finding 2: The Department’s Controls Over the Timeliness of Its Disbursement   10
                 of HOME Program Funds Were Inadequate
      Finding 3: Controls Over the Department’s Loans and Repayments Were            12
                 Inadequate
      Finding 4: The Department Did Not Have Procedures and Controls Regarding       15
                 Commitments Entered Into HUD’s Information System
      Finding 5: The Department’s Financial Management System Did Not Comply         19
                 With HUD Requirements

Scope and Methodology                                                                26

Internal Controls                                                                    28

Follow-up on Prior Audits                                                            30

Appendixes
   A. Schedule of Questioned Costs and Funds To Be Put to Better Use                 31
   B. Auditee Comments and OIG’s Evaluation                                          32
   C. List of Repayments, Recaptured Funds, and Program Income Receipts              35
      Reviewed
   D. List of Overdue CHDO Loans                                                     36




                                            4
                       BACKGROUND AND OBJECTIVES


The HOME Investment Partnerships Program (HOME) is authorized under Title II of the
Cranston-Gonzalez National Affordable Housing Act as amended. The U.S. Department of
Housing and Urban Development (HUD) allocates funds by formula to eligible State and local
governments for the purpose of increasing the supply of decent, safe, sanitary, and affordable
housing to low- and very low-income families. State and local governments that become
participating jurisdictions may use HOME funds to carry out multiyear housing strategies
through acquisition, rehabilitation, new housing construction, and tenant-based rental assistance.

Participating jurisdictions are required to commit HOME funds within 24 months and expend
them within 5 years after the last day of the month in which HUD notifies the participating
jurisdiction of HUD’s execution of the HOME agreement. Participant jurisdictions draw down
HOME funds through HUD’s Integrated Disbursement and Information System (information
system). HUD’s information system is also used to monitor and track HOME commitments,
program income, repayments, and recaptured funds, among other things.

The Puerto Rico Department of Housing (Department) has administered the State HOME
program since 1992. It is the largest participating jurisdiction in Puerto Rico administering
nearly $50 million in HOME funds as of January 2010. HUD’s information system reflected
expenditures exceeding $24 million during the fiscal year ending June 30, 2009, for the
following activities:

                                 Activity type                     Amount expended
              Units for rental                                       $11,866,058
              Home-buyer                                               4,589,875
              Community housing development organization (CHDO)        2,620,766
              Planning and administration                              2,487,586
              Units for sale                                           1,902,876
              Homeowner                                                1,031,362
              Total                                                   $24,498,523

During the last 6 years, the Department has received the lowest overall performance ranking
when compared with the other 50 State participating jurisdictions.

The Department’s HOME office was responsible for administering HOME funds. Its books and
records were maintained at 606 Barbosa Avenue, San Juan, PR. We audited the Department’s
HOME program as part of the HUD Office of Inspector General’s (OIG) strategic plan. The
Department was selected for review based on the amount of HUD funding provided.

The objectives of the audit were to determine whether the Department (1) reimbursed HOME
funds on terminated activities; (2) expended HOME funds within HUD-established timeframes;
(3) administered program income, repayments, and recaptured funds in accordance with HOME

                                                 5
requirements; (4) reported accurate and supported HOME commitments in HUD’s information
system; and (5) maintained its financial management system in compliance with HUD
requirements.




                                            6
                                RESULTS OF AUDIT

Finding 1: The Department Did Not Reimburse the HOME Program for
           Terminated Activities
The Department did not reimburse the HOME program more than $2 million for three activities
that were terminated and did not meet HOME objectives and generate the intended benefits. In
addition, it failed to reprogram and put to better use more than $1.84 million in unexpended
HOME funds assigned to one of the terminated activities. This condition occurred because the
Department did not develop and implement adequate procedures and controls to ensure
compliance with HUD requirements. As a result, HUD had no assurance that funds were used
solely for eligible purposes and that HOME objectives were met.



 HOME Objectives Not Met


              HUD’s regulations at 24 CFR (Code of Federal Regulations) 92.1 state that
              HOME funds are allocated to participating jurisdictions to strengthen public-
              private partnerships to expand the supply of decent, safe, sanitary, and affordable
              housing to very low-income and low-income families. Regulations at 24 CFR
              92.205(e) also provide that a HOME-assisted activity that is terminated before
              completion, either voluntarily or otherwise, constitutes an ineligible project and
              any HOME funds invested must be repaid to the participating jurisdiction’s
              treasury account.

              Contrary to HUD’s regulations, the Department failed to ensure that three
              activities met HOME objectives, and it did not reimburse all of the funds to its
              treasury account. The Department disbursed more than $2 million in HOME
              funds on three activities that were terminated between September 2005 and
              August 2008. According to the Department’s records, the three activities were for
              the construction of 210 dwelling units at various sites within Puerto Rico. The
              following table shows the activity number, activity name, agreement date, funded
              and drawn amounts, and last draw date for the project developments that were
              terminated and the intended benefits were not provided.




                                               7
                                         Grant                                Last
                 Activity Activity     agreement    Funded        Drawn       draw
                 number    name           date      amount1      amount1      date            Comment
                                                                                      Developer defaulted on
                           Quintas      June 6,                            2 Mar. 12, the construction loan.
                  7775                             $3,247,000   $1,403,318
                          de Coamo       2005                                 2007 Activity was declared in
                                                                                      default in August 2008.
                                                                                      Developer defaulted on
                           Jardines     Dec. 30,                             Dec. 29, the construction loan.
                  6295                               518,030        518,030
                           de Ciales     2003                                 2004 Activity was declared in
                                                                                      default in June 2006.
                                                                                      Grant recipient cancelled
                           Bello        Feb. 19,                             Dec. 16,
                  6290                                 82,008        82,008           the activity in September
                          Amanecer       2004                                 2004
                                                                                      2005.
                              Total                $3,847,038    $2,003,356

                 The Department did not take the appropriate measures to cancel the activities in
                 HUD’s information system. The information system reflected all three as open
                 activities. In addition, activity number 7775 was shown as having unexpended
                 obligations of more than $1.84 million.

                 The Department could not provide a reason why it did not cancel the activities in
                 HUD’s information system or why the unexpended HOME funds were not
                 reprogrammed. The Department did not have in place controls and procedures to
                 properly track the status of the activities and enforce HOME requirements and the
                 terms of grant agreements.


    Conclusion


                 The Department failed to ensure that activities met HOME objectives and did not
                 reimburse funds to its treasury account. This condition occurred because the
                 Department did not develop and implement adequate procedures and controls to
                 ensure compliance with HUD requirements. As a result, HUD had no assurance
                 that funds were used solely for their authorized purposes and that HOME
                 objectives were met. The Department paid more than $2 million for projects that
                 did not provide the intended benefits. In addition, it failed to reprogram and put
                 to better use more than $1.84 million in unexpended HOME obligations.




1
  Information obtained from HUD’s information system as of February 9, 2010.
2
  The total drawn amount was more than $1.9 million from which the Department repaid $548,199 at the time of the
review.

                                                       8
Recommendations



          We recommend that the Director of the San Juan Office of Community Planning
          and Development

          1A.     Require the Department to reimburse its HOME treasury account from
                  non-Federal funds $2,003,356 for disbursements associated with
                  terminated activities that did not meet HOME objectives.

          1B.     Require the Department to reprogram and put to better use $1,843,682
                  associated with unexpended funds for activity number 7775.

          1C.     Require the Department to update in HUD’s information system the
                  correct status of the three terminated activities.

          1D.     Require the Department to establish and implement controls and
                  procedures for its HOME program to ensure that HUD requirements and
                  grant agreements are enforced, ineligible funds are reimbursed to the
                  HOME program in a timely manner, and terminated activities are
                  cancelled in HUD’s information system in a timely manner, including the
                  timely deobligation of funds.




                                          9
Finding 2: The Department’s Controls Over the Timeliness of Its
           Disbursement of HOME Program Funds Were Inadequate
The Department did not always comply with HUD’s regulations in its disbursement of HOME
funds that it drew down from its treasury account. It failed to disburse more than $1.43 million
in 2002 HOME funds within HUD-required deadlines because it lacked procedures and controls
to ensure that HUD regulations and instructions were appropriately followed. As a result, more
than $1.43 million in unexpended HOME funds was not recaptured in accordance with
requirements.



 $1.43 Million in HOME Funds
 Not Disbursed in a Timely
 Manner


              The Department withdrew from its treasury account $1.86 million in fiscal year
              2002 HOME funds during the months of July through September 2009. HUD
              regulations at 24 CFR 92.502(c)(2) state that HOME funds drawn down from a
              participating jurisdiction’s treasury account must be expended for eligible costs
              within 15 days. Any unexpended drawdowns must be returned to HUD.
              Requirements of the National Defense Authorization Act of 1991 (Public Law
              101-510, dated November 5, 1990, codified at 31 U.S.C. §1552) state that on
              September 30 of the fifth fiscal year after the period of availability for obligation
              of a fixed appropriation account ends, the account shall be closed and any
              remaining balance (whether obligated or unobligated) in the account shall be
              canceled and thereafter shall not be available for obligation or expenditure for any
              purpose. Therefore, unexpended 2002 HOME funds remaining after the
              expenditure deadline must be recaptured by the United States Treasury.

              Contrary to HUD’s regulations, the Department failed to disburse drawdowns
              totaling more than $1.43 million (77 percent) in HOME funds within 15 days and
              before the September 30, 2009, expenditure deadline. Further, it did not return
              any of the HOME funds to its treasury account.

              The following table shows the voucher and activity number, date of drawdown,
              and the HOME funds for the drawdowns that were not disbursed within the
              established timeframes.




                                               10
              Voucher      Activity   Date of draw-
              number       number        down       HOME funds*                Comment
                                                                     No grant agreement executed
                 5009944    12043     Sept. 23, 2009    $1,100,000
                                                                     at the time of the drawdown
                                                                     No grant agreement executed
                 5010668    12041     Sept. 24, 2009      292,434
                                                                     at the time of the drawdown
                 5011623    7494      Sept. 28, 2009       36,251    Duplicate drawdown
                                                                     No support showing that the
                 5011595    10784     Sept. 28, 2009        3,638
                                                                     funds were expended
                             Total                     $1,432,323
             *
              As of November 30, 2009, the drawdowns had not been used for the approved activities for
             which the Department requested the funds.


Conclusion


             The Department did not comply with HUD’s regulations when it did not disburse
             HOME funds drawn down from its treasury account within the required deadlines.
             The weaknesses regarding the Department’s lack of timeliness in disbursing
             HOME funds occurred because the Department lacked adequate procedures and
             controls to ensure that it appropriately followed HUD regulations. The
             Department could not provide a reason why it did not disburse funds within the
             prescribed timeframes or why it did not return the funds to HUD. As a result,
             HUD lacked assurance that HOME funds were used efficiently and effectively.
             In addition, more than $1.43 million in unexpended 2002 HOME funds was not
             returned to HUD and/or recaptured in accordance with the National Defense
             Authorization Act of 1991.

Recommendations



             We recommend that the Director of the San Juan Office of Community Planning
             and Development

             2A.       Require the Department to reimburse HUD from non-Federal funds
                       $1,432,323 for the unexpended 2002 HOME funds.

             2B.       Require the Department to implement adequate procedures and controls to
                       ensure that it disburses HOME funds for eligible activities within HUD’s
                       established timeframes.




                                                   11
Finding 3: Controls Over the Department’s Loans and Repayments Were
           Inadequate
The Department did not comply with HUD’s regulations in its administration of HOME loans
and repayments. It failed to collect more than $1.26 million in overdue loans and did not return
to the United States Treasury more than $275,000 in repayments. This noncompliance occurred
because the Department lacked procedures and controls to ensure that HUD’s regulations were
appropriately followed. As a result, HOME funds were not available for other eligible activities.



 Overdue Loans Not Collected



               HUD regulations at 24 CFR 92.301 state that HOME funds can be used to provide
               technical assistance and site control loans to community housing development
               organizations (CHDO) for the early stages of site development of an eligible
               project. The CHDOs must repay the loan to the participating jurisdiction from
               construction loan proceeds or other project income. The participating jurisdiction
               may waive the repayment of the loan if there are impediments to the project
               development that are reasonably beyond the control of the borrower.

               Contrary to HUD requirements, the Department did not require the CHDOs to
               repay more than $1.26 million in overdue loans. It awarded 18 loans to the
               CHDOs between 2000 and 2008. Pursuant to the loan agreements, the CHDOs
               were required to repay the Department the principal amount at a predetermined
               date. Of the 18 loans awarded, 17 (94 percent) were overdue between 36 and
               2,530 days, and the Department had not collected any of the $1.26 million in
               HOME funds disbursed. Appendix D contains a list of the 17 overdue loans.

               The activity files did not contain information explaining why the CHDOs did not
               repay the loans or whether the Department had waived the loan repayments
               because of impediments reasonably beyond the control of the borrower. The
               Department did not follow HUD requirements and did not enforce the terms of
               the loan agreement. The lack of procedures and adequate controls also
               contributed to the Department’s improper administration of the loans. As a result,
               it failed to put to a better use more than $1.26 million in program income to be
               generated from the repayment of the HOME loans.




                                               12
Funds Not Returned to
Treasury Account


             HUD regulations at 24 CFR 92.503(b) and 92.205(e) provide that HOME funds
             invested in housing that does not meet the affordability requirements or is
             terminated before completion be returned to HUD for deposit in the participating
             jurisdiction’s treasury account.

             Contrary to HOME requirements, the Department did not return to HUD more
             than $275,000 in HOME repayments for activities that were terminated or did not
             meet HUD affordability requirements. In April and August 2009, the Department
             deposited into its bank account $275,777 associated with the repayments for
             HOME activities that were terminated or did not meet HUD’s affordability
             requirements. It did not provide support to show that the funds were returned to
             the treasury account, reprogrammed, or used for eligible activities in accordance
             with HOME requirements. This deficiency occurred because of the lack of
             procedures and adequate controls and the failure to properly monitor program
             receipts. As a result, the Department inappropriately retained in its bank account
             more than $275,000 in HOME grants and failed to put the funds to a better use.


Conclusion


             The Department did not establish and implement adequate controls and
             procedures to ensure compliance with HUD requirements and did not enforce the
             terms of the loan agreements it had with borrowers. As a result, HOME funds
             were not available for other eligible activities because the Department failed to
             collect overdue loans and return to its treasury account the program repayments.

Recommendations



             We recommend that the Director of the San Juan Office of Community Planning
             and Development

             3A.    Require the Department to collect $1,269,032 associated with the 17
                    overdue loans and put the program income generated to better use in
                    accordance with HUD requirements.




                                             13
                 3B.      Require the Department to remit to its treasury account and put to better
                          use repayment funds totaling $82,295 in accordance with HUD
                          requirements.3

                 3C.      Require the Department to develop and implement controls and
                          procedures that permit the proper tracking and administration of program
                          income and repayments to a level that ensures compliance with HUD
                          regulations.




3
  Total repayments of $275,777 not remitted to the treasury account were adjusted to consider $193,482 questioned
in recommendation 1A.

                                                       14
Finding 4: The Department Did Not Have Procedures and Controls
           Regarding Commitments Entered Into HUD’s Information
           System
The Department did not monitor the accuracy of commitments and other information entered
into HUD’s information system. It reported to HUD more than $6.4 million in HOME
commitments without executing written agreements. In addition, it provided HUD inaccurate
information on the amount of funding awarded, the activity status, and the fund type
classification. These deficiencies occurred because the Department lacked procedures and
internal controls regarding the reporting of information in HUD’s information system. As a
result, HUD had no assurance that the Department met HOME objectives and commitments
requirements.



 Commitments Without
 Agreements


              Participant jurisdictions are required by 24 CFR 92.500(d) and 92.502 to commit
              HOME funds within 24 months of their allocation and report commitment
              information in HUD’s information system. HUD’s regulations at 24 CFR 92.2
              define “commitment” as an executed legally binding agreement with a State
              recipient, a subrecipient, or a contractor to use a specific amount of HOME funds to
              produce affordable housing or provide tenant-based rental assistance or an executed
              written agreement reserving a specific amount of funds to a CHDO or having met
              the requirements to commit to a specific local project, which also requires that a
              written, legally binding agreement be executed with the project or property owner.
              HUD also requires that the signatures of all parties be dated to show the execution
              date.

              HUD’s information system reflected that the Department committed more than
              $20 million in HOME funds between July 1, 2008, and September 30, 2009. We
              examined commitments totaling more than $14.9 million that the Department
              entered into HUD’s information system.

              The Department reported in HUD’s information system that it had committed
              more than $6.4 million in HOME funds although it did not have executed
              agreements with the recipients. The actual commitments occurred between 14
              and 232 days after the funding date, and in one of the activities, no agreement had
              been executed as of January 7, 2010. Therefore, the funds were not reported as
              committed in accordance with HUD requirements.




                                               15
                      Reported
                     commitment
                      amount in     Funding date                          Days elapsed
                        HUD’s        in HUD’s             Actual        between reporting
          Activity   information    information         agreement        and agreement
          number        system         system              date               dates
           11899      $4,328,549    Mar. 30, 2009      Nov. 17, 2009          232
           11902         471,056    Apr. 13, 2009      Nov. 17, 2009          218
           12041         292,434    Sept. 16, 2009     No agreement           113
           12043       1,100,000    Sept. 17, 2009      Dec. 23, 2009         97
           11960         126,390    May 15, 2009        July 10, 2009         56
           11929          54,000    May 12, 2009         June 8, 2009          27
           10943          53,090    Aug. 11, 2008       Aug. 25, 2008          14
           Total      $6,425,519

            We also found nine instances in which the Department reported in HUD’s
            information system the commitment of $1.27 million in HOME funds between 28
            and 523 days after the grant agreement was executed.

Other Inaccurate Reporting


            HUD’s information system contained additional inaccurate information
            concerning the Department’s HOME activities. This information included
            incorrect funding amount, activity status, and fund type classification.

            Incorrect funding amount - In six activities the awarded amount of HOME funds
            shown in HUD’s information system was incorrect. This error resulted in an
            understatement in HOME commitments of more than $681,000.

                                                       Funded amount
                     Activity      Agreement         according to HUD’s    Understated
                     number         amount           information system      amount
                      11960         $770,989               $126,390         $644,599
                      12043         1,130,000              1,100,000          30,000
                      11902           476,010               471,056            4,954
                      11959            59,000                58,000            1,000
                      10943            54,000                53,090              910
                      10851            55,000                54,672              328
                      Total        $2,544,999            $1,863,208         $681,791


            Incorrect activity status - Participant jurisdictions are required to report in HUD’s
            information system the status of each activity assisted with HOME funds.
            However, the Department did not always report accurate information associated

                                                16
           with its activities. For three activities, HUD’s information system reflected an
           inaccurate activity status. One activity was shown as an open activity although a
           prior OIG audit determined that $1,629,085 in disbursements was ineligible and
           the activity was cancelled in 2004. Two other activities were shown as having
           been completed, although the occupancy did not take place or the activity was still
           in its predevelopment phase.

           Incorrect fund type classification - Participant jurisdictions are also required to
           report in HUD’s information system the type of fund for each activity assisted
           with HOME funds. For six activities, HUD’s information system reflected an
           incorrect fund type classification. These activities included five activities, for
           which according to the activity files, the assistance to CHDOs was in the form of
           loans and not grants, and one home-buyer activity incorrectly reported as an
           administrative cost.

                             Activity type
                             classification       Activity type classification
              Activity    according to HUD’s      according to Department’s      Disbursed
              number      information system                records               amount
               6053           CHDO grant                  CHDO loan               $134,662
               3404           CHDO grant                  CHDO loan               $101,340
               7341          CHDO grant                 CHDO loan                  $71,462
               5986          CHDO grant                 CHDO loan                  $28,500
               7605          CHDO grant                 CHDO loan                  $15,050
               12060     Administrative expense       Home-buyer grant             $50,000


Lack of Controls and
Procedures

           The above deficiencies occurred because the Department lacked internal controls
           and procedures for ensuring the accuracy of the information reported in HUD’s
           information system. The Department’s information system administrator
           indicated that commitment information was reported in HUD’s information
           system when information was provided to her or when a disbursement was needed
           and that the commitment information was not necessarily based on the executed
           agreement. In addition, the Department’s written procedures did not provide for
           controls that permitted the adequate reporting or monitoring of commitment
           information reported in HUD’s information system.

           The Department also did not ensure that agreements were dated as required by
           HUD. For example, one agreement awarding more than $1.1 million to a
           recipient was signed by the parties without dates. A Department official informed
           us that the agreement remained undated days after its signature because additional
           documents were required. Therefore, the lack of controls and procedures in



                                             17
             dating grant agreements did not provide assurance regarding compliance with
             HUD commitment requirements.


Conclusion


             Because the Department lacked adequate procedures and did not implement
             adequate controls, it did not ensure the accuracy of commitments and other
             information entered into HUD’s information system. There was no assurance that
             the Department met HUD commitment requirements and that program objectives
             were met. The inaccurate data compromised the integrity of HUD’s information
             system and the degree of reliability HUD could place on the data for monitoring
             commitments and compiling national statistics on the HOME program.
             Management must improve its internal controls to ensure the accuracy of its
             reported accomplishments and that it complies with HUD requirements.

Recommendations



             We recommend that the Director of the San Juan Office of Community Planning
             and Development

             4A.    Require the Department to deobligate in HUD’s information system the
                    $292,434 associated with an activity reported as committed but for which
                    no agreement was executed.

             4B.    Require the Department to review all grant agreements for each activity
                    entered into HUD’s information system and correct any inaccurate
                    information, including funding amount, activity status, and fund type
                    classification.

             4C.    Reassess the Department’s annual commitment compliance and recapture
                    any amounts that have not been committed within HUD-established
                    timeframes.

             4D.    Require the Department to establish and implement adequate controls and
                    procedures to ensure that accurate commitment and activity information is
                    reported in HUD’s information system.




                                            18
Finding 5: The Department's Financial Management System Did Not
           Comply With HUD Requirements
The Department’s financial management system did not account for more than $991,000 in
HOME receipts, did not support the allocability of more than $301,000 in disbursements, and
allowed the use of more than $151,000 for ineligible expenditures. In addition, the Department
did not deposit in its bank account more than $137,000 in HOME receipts and failed to disburse
funds in a timely manner. These deficiencies occurred because the Department did not develop
and implement adequate policies and procedures to ensure compliance with HUD financial
requirements and lacked sufficient capacity to administer its HOME funds. As a result, HUD
lacked assurance that funds were adequately accounted for, safeguarded, and used for authorized
purposes.



 Inaccurate Accounting Records



              HUD requires participating jurisdictions to maintain fiscal controls and
              accounting procedures sufficient to permit the preparation of reports and the
              tracing of funds to a level of expenditures adequate to establish that such funds
              have not been used in violation of the restrictions and prohibitions of applicable
              statutes.

              The Department’s accounting records were not accurate, current, and complete.
              The accounting records did not reflect complete financial information on HOME
              activities. For example, its accounting records did not include obligations of more
              than $13 million in HOME grants awarded, more than $1.26 million in accounts
              receivable, and $900,000 in disbursements. The accounting records also
              contained several instances of incorrect ending balances, issued checks recorded
              as void, and transactions recorded with the incorrect amount or account. In
              addition, the Department’s financial management system did not permit the
              adequate tracing of program receipts and expenditures.

              The expenditures shown in the Department’s accounting records for the fiscal
              year ending June 30, 2009, did not agree with amounts reflected in HUD’s
              information system.




                                               19
                                                            HUD’s
                                                         information
                Activity type           Check register      system         Difference
          Home-buyer                     $3,719,346       $4,589,875      $(870,529)
          Homeowner                        $927,560       $1,031,362      $(103,802)
          CHDOs                          $2,603,437       $2,620,766       $(17,329)
          Administration                 $2,519,821       $2,487,586         $32,235
          Sale-rehab/new construction    $2,618,865       $1,902,876       $715,989

          The Department did not explain the discrepancies and could not account for
          $991,660 drawn from HUD for various HOME activities.

          Department officials admitted deficiencies in its HOME accounting records and
          attributed it to recent problems with the new accounting software and the lack of
          personnel. This condition was reported in a 2003 OIG audit report; however, the
          deficiency continued to exist. After almost 7 years, the Department continued to
          have problems with the accuracy and completeness of its accounting records.


Unsupported Program
Disbursements

          Regulations at 24 CFR 92.207 and 92.508(a) allow disbursements for reasonable
          expenditures associated with the administration and planning of the HOME
          program that are supported with records that enable HUD to determine that
          HOME requirements were met.

          The Department did not provide documentation supporting the reasonableness,
          allowability, and allocation of more than $301,000 charged to the HOME
          program, associated with administrative expenses. It did not track its employees’
          time by program activity or implement a cost allocation plan to distribute payroll
          costs among HUD and local programs. Between July 2008 and January 2010, it
          charged the full salary of at least seven employees to the HOME program
          although they performed additional functions not related to the program. The
          Department did not allocate payroll costs totaling more than $268,900 based on
          the time spent by these employees on each of its programs. A similar deficiency
          was identified with another $32,749 in administrative costs associated with office
          equipment and advances made to employees. Therefore, HUD lacked assurance
          of the reasonableness, allowability, and allocability of more than $301,000 in
          administrative costs charged to the HOME program.




                                             20
    Ineligible Program
    Disbursements


                 Regulations at 2 CFR Part 225 (Appendix A) provide that a cost is allocable to a
                 particular cost objective if the goods or services involved are chargeable or
                 assignable to such cost objective in accordance with relative benefits received.

                 The Department allowed the disbursement of more than $151,000 in HOME
                 funds for administrative services that did not provide the intended benefits or
                 were not related to the HOME program. On January 16, 2008, it awarded two
                 contracts totaling $192,000 to develop a computerized Web-based system to be
                 use for HOME program administration. Although the Department disbursed more
                 than $148,000 (78 percent) of the contracted amount, the new system was not
                 implemented. According to a contractor, the implementation of the new system
                 did not take place because the Department did not have the required infrastructure
                 and hardware needed for the operation of the new computerized system.
                 Therefore, the $148,850 in administrative costs was not an allocable expense
                 since the disbursement of funds did not result in benefits for the administration of
                 the HOME program.

                 The Department also disbursed $2,158 in HOME funds for payroll costs of
                 employees that performed Section 8 inspections. Consequently, $2,158 is an
                 ineligible cost and must be reimbursed to the HOME program.

    Receipts Not Deposited in a
    Timely Manner

                 HUD regulations at 24 CFR 92.503 provide that program income, repayments,
                 and recaptured funds received be deposited into the participant jurisdictions’
                 HOME local account to carry out eligible activities. These receipts must be
                 reported in HUD’s information system and used before making additional HOME
                 withdrawals from HUD.

                 Contrary to HUD requirements, the Department did not deposit more than $137,000
                 in its bank account and did not report the proceeds in HUD’s information system.
                 Between January 2005 and December 2007, the Department received seven checks
                 totaling $137,684 associated with the reimbursement of previously funded HOME
                 activities.4 As of November 2009, it had not deposited the checks into its bank
                 account.




4
  The Department did not provide documentation that could show whether the receipts were program income,
repayments, or recaptured funds.

                                                      21
                     Check                                        Days elapsed up to
                    number         Amount          Issue date     November 30, 2009
                    3817536         $9,158        Jan. 2, 2005          1,793
                     27262          26,710        May 25, 2005          1,650
                      2970          34,363         July 4, 2005         1,610
                     367204         22,238        Feb. 27, 2006         1,372
                      2050           2,885        Apr. 19, 2007          956
                      79932         23,132        May 22, 2007           923
                     563582         19,198        Dec. 13, 2007          718
                      Total       $137,684

           A Department official informed us that instructions from supervisors, including
           HOME program directors, were to keep the received checks in the vault until the
           term for HUD deadlines for committing and expending HOME funds passed. The
           Department disregarded HUD requirements, did not report the receipts in HUD’s
           information system, and did not expend the proceeds before requesting additional
           grant funds from HUD.

           We examined 31 additional receipts (program income, repayments, and
           recaptured funds) totaling more than $1.4 million that were deposited into the
           Department’s bank account between July 1, 2008, and September 30, 2009. The
           Department’s records showed that it took between 6 and 1,718 days to deposit the
           proceeds into the bank account. Therefore, the Department did not deposit in a
           timely manner more than $1.4 in HOME receipts and failed to use the funds
           before making additional drawdowns from HUD. Appendix C contains the list of
           receipts reviewed.

High Cash Balance


           HUD requires that HOME funds in the participant jurisdiction’s local account be
           disbursed before additional grant funds are requested.

           Contrary to HUD requirements, the Department did not disburse HOME funds in
           a timely manner and consistently maintained a high cash balance in its bank
           account. The Department’s September 2009 bank statement reflected a cash
           balance of more than $3.6 million, and the Department maintained a monthly
           average balance of $2 million during the 15-month period ending September
           2009.




                                             22
    Lack of Controls and
    Procedures

                 The lack of program controls and procedures also contributed to the Department’s
                 improper administration of receipts that were not deposited in a timely manner.
                 Controls and procedures implemented by the Department were not sufficient and
                 adequate to provide HUD assurance that these receipts were properly tracked,
                 collected, deposited, reported, and used in accordance with HUD requirements.
                 For example, the Department did not maintain a system that permits the tracking
                 of HOME-assisted participants that may result in the payment of program income
                 or recaptured funds.5 The Department did not maintain sufficient records to
                 identify the source of the proceeds, the propriety of the amount, and the date on
                 which the proceeds were received. In addition, the Department’s written
                 procedures associated with the administration of receipts were general and did not
                 clearly establish responsibilities among the Department’s personnel to ensure a
                 proper segregation of duties. Management must revise and implement its controls
                 and procedures to permit the proper administration of these receipts.

    Insufficient Capacity


                 The Department administers nearly $50 million in HOME funds. It must commit
                 nearly $13 million by August 2010 and expend more than $7 million by
                 September 2010. In addition, the Department did not have sufficient personnel to
                 administer its HOME program. Its records showed that in October 2009, it was
                 administering the program with 33 employees. However, since January 2010, its
                 personnel had been reduced to 10 employees. Also, as discussed throughout the
5
 Recaptured funds and program income may result from the resale and recapture requirements imposed by HUD
and the Department to the participants to ensure affordability during predetermined periods depending on the
assistance amount provided.

                                                      23
             report, the Department did not implement effective controls over its HOME
             program to ensure compliance with applicable regulations. Therefore, the
             significant amount of funds under the Department’s management, the restrictive
             HOME deadlines, the reduction in personnel, and the Department’s inability to
             comply with HUD requirements raise concern regarding the Department’s
             capacity to administer HOME funds in an economical, efficient, and effective
             manner and achieve program goals.


Conclusion


             Because the Department did not implement adequate controls and lacked
             sufficient capacity to administer the HOME program, it did not account for
             receipts, did not support the allocability of disbursements, allowed the use of
             funds for ineligible expenditures, and did not deposit and use proceeds in a timely
             manner. The lack of adequate oversight and capacity by the Department to ensure
             that HUD funds were managed in an economical, efficient, and effective manner
             is a major concern. Management must improve its internal controls to ensure that
             HUD requirements are met and it achieves HOME program goals.

Recommendations



             We recommend that the Director of the San Juan Office of Community Planning
             and Development

             5A.    Require the Department to submit all supporting documentation showing
                    the eligibility and propriety of $991,660 drawn from HUD or reimburse
                    the HOME program from non-Federal funds.

             5B.    Require the Department to submit supporting documentation showing the
                    allocability and allowability of $301,676 charged to the HOME program
                    for administrative costs or reimburse the program from non-Federal funds.

             5C.    Require the Department to reimburse the HOME program from non-
                    Federal funds $151,008 paid for administrative costs that did not provide
                    the intended benefits or were not related to the program.

             5D.    Require the Department to deposit into its bank account and put to better
                    use in accordance with HUD requirements receipts collected totaling
                    $137,684.




                                             24
5E.   Require the Department to update its accounting records and ensure that
      receipts and expenditures are properly accounted for, reconciled with
      HUD’s information system, and comply with HUD requirements.

5F.   Require the Department to develop and implement a financial
      management system that permits the tracing of HOME funds to a level
      which ensures that such funds have not been used in violation of the
      restrictions and prohibitions of applicable statutes and funds in the local
      account have been used before requesting additional grant funds.

5G.   Impose sanctions against the Department in accordance with 24 CFR
      92.551 for its continued deficient performance and disregard of HUD
      requirements, including changing the method of payment to a
      reimbursement basis, until it can demonstrate capacity, accountability and
      compliance with HUD requirements.

5H.   Increase monitoring of the Department’s performance in the
      administration of its HOME program.




                                25
                        SCOPE AND METHODOLOGY

The objectives of the audit were to determine whether the Department (1) reimbursed HOME
funds on terminated activities; (2) expended HOME funds within HUD-established timeframes;
(3) administered program income, repayments, and recaptured funds in accordance with HOME
requirements; (4) reported accurate and supported HOME commitments in HUD’s information
system; and (5) maintained its financial management system in compliance with HUD
requirements.

To accomplish our objectives, we

       Reviewed applicable HUD laws, regulations, and other HUD program requirements;

       Reviewed the Department’s controls and procedures as they related to our objectives;

       Interviewed HUD, Department, and contractor officials;

       Reviewed monitoring, internal review, and independent public accountant reports;

       Reviewed the Department’s files and records, including activity files and accounting
       records; and

       Traced information reported in HUD’s information system to the Department’s records,
       including accounting records and executed agreements.

The Department deposited into its bank account between July 1, 2008, and September 01, 2009,
more than $1.48 million associated with 31 receipts pertaining to program income, repayments,
and recaptured funds. We reviewed all these receipts to determine whether the Department
administered these proceeds in accordance with HOME requirements. In addition, we reviewed
CHDO loans the Department granted between January 2000 and December 2008 for which
HOME funds were disbursed. According to the Department’s records, it granted more than $1.9
million in loans associated with 17 activities. We reviewed all the activities to determine
whether the loan repayments were made consistent with the terms of the agreements. We also
reviewed three terminated activities with HOME disbursements totaling more than $2 million to
determine whether HOME funds were reimbursed to the treasury account.

The Department drew down from HUD between July 1, 2008, and September 01, 2009, more
than $31 million in HOME funds. We selected and reviewed all 2002 HOME funds withdrawn
between July and September 2009; resulting in 10 withdrawals totaling more than $1.86 million.
We also reviewed withdrawals greater than or equal to $50,000 made during September 2009,
which resulted in 22 additional withdrawals totaling more than $1.76 million. We reviewed
selected withdrawals to determine whether the Department expended grant funds in accordance
with HUD requirements.



                                              26
HUD’s information system reflected that the Department committed more than $20 million in
HOME funds between July 1, 2008, and September 30, 2009. We selected for review a sample
of commitments equal to or greater than $50,000, which resulted in more than $14.99 million in
commitments associated with 36 activities. We reviewed these activities to determine whether
the commitments reported to HUD were accurate and supported.

The Department’s records reflected that it disbursed between July 1, 2008, and September 1,
2009, more than $2.95 million for planning and administrative costs. We selected for review 47
disbursements totaling more than $1.92 million based on the vendor’s name and/or purpose of
the payment. We also reviewed 12 additional disbursements totaling $470,459 that were made
before July 1, 2008, or after September 1, 2009. We reviewed the expenditures and the related
supporting documents to determine whether the payments met HOME requirements, including
allowability and allocability of the costs.

To achieve our audit objectives, we relied in part on computer-processed data contained in the
Department’s database and HUD’s information system. Although we did not perform a detailed
assessment of the reliability of the data, we performed a minimal level of testing and found the
data adequate for our purposes. The results of the audit apply only to the items selected and
cannot be projected to the universe or population.

The audit generally covered the period July 1, 2008, through September 3, 2009, and we
extended the period as needed to accomplish our objectives. We conducted our fieldwork from
October 2009 through March 2010 at the Department’s offices in San Juan, PR.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                               27
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:

       Program operations,
       Relevance and reliability of information,
       Compliance with applicable laws and regulations, and
       Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls


              We determined that the following internal controls were relevant to our audit
              objectives:

                  Program operations - Controls over program operations include policies and
                  procedures that the audited entity has implemented to provide reasonable
                  assurance that a program meets its objectives, while considering cost
                  effectiveness and efficiency.

                  Relevance and reliability of information - Controls over the relevance and
                  reliability of information include policies, procedures, and practices that
                  officials of the audited entity have implemented to provide themselves with
                  reasonable assurance that operational and financial information they use for
                  decision making and reporting externally is relevant and reliable and fairly
                  disclosed in reports.

                  Compliance with applicable laws and regulations and provisions of contracts
                  or grant agreements - Controls over compliance include policies and
                  procedures that the audited entity has implemented to provide reasonable
                  assurance that program implementation is in accordance with laws,
                  regulations, and provisions of contracts or grant agreements.

                  Safeguarding of assets and resources - Controls over the safeguarding of
                  assets and resources include policies and procedures that the audited entity has
                  implemented to reasonably prevent or promptly detect unauthorized
                  acquisition, use, or disposition of assets and resources.

                                               28
           We assessed the relevant controls identified above.

           A significant weakness exists if management controls do not provide reasonable
           assurance that the process for planning, organizing, directing, and controlling
           program operations will meet the organization’s objectives.

Significant Weaknesses


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

               The Department failed to ensure that HOME activities met program objectives
               and did not reimburse funds to its treasury account because it did not develop
               and implement adequate procedures and controls to ensure compliance with
               HUD requirements (see finding 1).

               The Department did not develop and implement adequate controls and
               procedures to ensure that HOME funds were disbursed for eligible activities
               within HUD’s established timeframes (see finding 2).

               The Department did not establish and implement adequate controls and
               procedures to enforce HUD requirements and the terms of the loan
               agreements it had with borrowers (see finding 3).

               The Department did not develop and implement controls and procedures to
               ensure that accurate information on HOME activities was reported to HUD
               (see finding 4).

               The Department did not develop and implement a financial management
               system that complied with HUD requirements (see finding 5).




                                            29
                   FOLLOW-UP ON PRIOR AUDITS


Puerto Rico Department of
Housing State HOME
Investment Partnerships
Program – Audit Report 2003-
AT-1006


           OIG issued an audit report on July 30, 2003, on the Department’s administration
           of the HOME program. The objectives were to assess the Department’s progress
           in correcting deficiencies identified in HUD’s monitoring report, dated August 31,
           2001, and review selected projects to determine whether they were carried out in
           accordance with HOME requirements. Among the deficiencies found, the
           Department’s accounting system was inadequate and did not properly account for
           or report on HOME activities. Consequently, the HOME grants were unauditable.
           The Department also incurred $29,313 for ineligible costs not allocable to the
           HOME program and additional costs totaling more than $2.2 million for ineligible
           and unsupported costs associated with development activities.

           Among other recommendations, OIG recommended that HUD

              Suspend disbursements of HOME funds for any further HOME awards,
              pursuant to 24 CFR 92.551, until it could demonstrate accountability and
              compliance for all HOME grants.

              Require an independent audit of the HOME program annually until all grants
              were properly accounted for or recovered.

              Establish and implement policies and procedures for its HOME program to
              ensure compliance with 24 CFR Part 92 and other HUD requirements. At a
              minimum, the policies and procedures should ensure that (1) fiscal controls
              and accounting procedures were sufficient to permit the tracing of funds to a
              level which ensured that such funds were not used in violation of the
              restrictions and prohibition of applicable statutes, (2) HOME funds were used
              in accordance with all program requirements and written agreements, and (3)
              appropriate action was taken when performance problems arose.

           All audit recommendations included in the report were closed between May 2004
           and December 2005. However, similar deficiencies were found during this
           second audit as discussed throughout this report.




                                           30
                                    APPENDIXES

Appendix A

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


      Recommendation                                                     Funds to be put
          number                Ineligible 1/        Unsupported 2/      to better use 3/
            1A                   $2,003,356
            1B                                                             $1,843,682
            2A                    1,432,323
            3A                                                               1,269,032
            3B                                                                  82,295
            4A                                                                 292,434
            5A                                          $991,660
            5B                                           301,676
            5C                      151,008
            5D                                                                137,684
           Total                 $3,586,687            $1,293,336          $3,625,127


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. In this
     instance, if the Department implements recommendation 1B, funds improperly
     committed for activities that were terminated will be available for other eligible activities
     consistent with HOME requirements. By implementing recommendations 3A, 3B, 4A,
     and 5D, the Department will ensure that HUD requirements and agreements are followed
     and that funds are put to better use for the benefit of HOME program participants.



                                                31
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         32
Ref to OIG Evaluation   Auditee Comments




Comment 3




Comment 4




                         33
                         OIG Evaluation of Auditee Comments

Comment 1   The Department stated that the projects that went into default were beyond its
            control and that it should not be required to reimburse HOME funds.

            The Department is responsible for managing the day to day operations of the
            HOME program, ensuring that HOME funds were used in accordance with all
            program requirements and written agreements, and taking appropriate action
            when performance problems arose. We therefore maintain our recommendation
            that HUD require the Department to repay more than $2 million for ineligible
            expenditures associated with terminated activities.

Comment 2   The Department indicated that it believes that $1.4 million in HOME funds were
            drawn to fund eligible activities. However, it did not provide us additional
            support that could demonstrate that HOME funds were expended within 15 days
            and before the September 30, 2009, expenditure deadline.

Comment 3   The Department stated it will provide further information to HUD with respect to
            the circumstances of CHDO loans, and any necessary reprogramming of HOME
            funds.

            The Department will need to provide documentation to establish why the CHDOs
            did not repay the loans or whether the Department had waived the loan
            repayments because of impediments reasonably beyond the control of the
            borrower. We therefore did not modify the report finding and recommendations.

Comment 4   The Department believes that some of the specific findings were based on
            incorrect information reviewed.

            The findings were supported by source documents and accounting records the
            Department provided during the review, which demonstrated that its financial
            management system did not comply with HUD requirements. Accordingly, we did
            not modify the report findings and recommendations.




                                            34
Appendix C

    LIST OF REPAYMENTS, RECAPTURED FUNDS, AND
        PROGRAM INCOME RECEIPTS REVIEWED

                                                                    Days elapsed
                                                                 between check date
         Check amount     Check date        Deposit date          and deposit date
           $20,000.00       July 6, 2004     Mar. 20, 2009             1,718
             37,472.76     Feb. 16, 2005      Sept. 4, 2009            1,661
             23,151.66      Feb. 3, 2005     Feb. 18, 2009             1,476
             24,979.65     Jan. 31, 2005      Feb. 9, 2009             1,470
              23,334.64    Mar. 11, 2005        Mar. 20, 2009          1,470
              24,715.26     May 2, 2005         Feb. 26, 2009          1,396
              30,467.96     May 9, 2005         Feb. 18, 2009          1,381
              54,766.67    May 24, 2005          Mar. 4, 2009          1,380
              54,266.67    May 24, 2005          Mar. 4, 2009          1,380
              20,000.00    Sept. 7, 2005        Feb. 26, 2009          1,268
               3,953.62   Nov. 30, 2005         Mar. 20, 2009          1,206
                  89.00     Dec. 2, 2005        Mar. 20, 2009          1,204
              24,482.12    Nov. 2, 2005          Feb. 9, 2009          1,195
              35,228.35    Oct. 28, 2005        Dec. 29, 2008          1,158
              82,295.38    Feb. 12, 2007        Aug. 13, 2009           913
              14,781.25   Sept. 11, 2007         Feb. 9, 2009           517
               1,450.00   Apr. 28, 2008          Oct. 21, 2008          176
              12,814.80   Oct. 10, 2008          Feb. 11, 2009          124
              18,975.02   June 12, 2008         Sept. 15, 2008           95
              27,722.45   Nov. 25, 2008         Dec. 29, 2008            34
             193,482.00   Mar. 13, 2009           Apr. 1, 2009           19
              16,556.50   Oct. 17, 2008          Nov. 5, 2008            19
               8,736.19     Oct. 2, 2008        Oct. 21, 2008           19
             225,779.00   May 21, 2009           June 4, 2009           14
             322,470.00   Nov. 25, 2008          Dec. 9, 2008           14
              39,511.42   Feb. 27, 2009         Mar. 10, 2009           11
              17,162.04   Dec. 18, 2008         Dec. 29, 2008           11
              39,070.67    Jan. 26, 2009         Feb. 3, 2009           8
             29,314.87      Feb. 6, 2009        Feb. 12, 2009            6
             28,822.97     Jan. 23, 2009        Jan. 29, 2009            6
             24,826.80     Oct. 15, 2008        Oct. 21, 2008            6
         $1,480,679.72




                                           35
Appendix D

                      LIST OF OVERDUE CHDO LOANS


    Activity                         Agreement   Agreement      Disbursed      Loan due        Days
    number       Project name         number      amount         amount           date       overdue*
      3404   Alturas de San Rafael    00-1202      $101,340       $101,340   Jan. 27, 2003     2530
      5986   Villas de Ceiba          2003-389       73,847         28,500   Jan. 31, 2005     1795
             Colinas de Bello
      7341                           2005-414         280,546      182,758   Nov. 4, 2006     1153
             Monte
      7342   OBRAS                   2005-464         229,444      163,594 Nov. 21, 2006      1136
      7121   Estancias de la Costa   2005-413          64,100       64,100 Nov. 4, 2007       788
             Municipality of
      9224                           2008-227          43,363       24,300   Nov. 4, 2007      788
             Villalba
             Municipality of
      9227                           2008-251          21,500       14,300   Nov. 4, 2007      788
             Jayuya
      8925   Hogar La Piedad II      2008-255           9,400        6,450 Nov. 15, 2007       777
             Villas del Peregrino
      8926                           2008-254          37,000       12,500 Nov. 15, 2007       777
             III
      7913   Esperanza Village        2005-525         19,150        7,660 Dec. 12, 2007       750
      8225   Gardenia Apartments      2007-545        191,585       45,950 Jan. 25, 2008       706
      9633   Estancias de la Costa    2007-889         92,600       84,600 Apr. 4, 2008        636
      6053   Villas del Paraiso II    2003-391        151,718      134,662 June 10, 2008       569
      7605   Villas del Paraiso II   2005-1035         17,055       15,050 June 10, 2008       569
             Aires de Manantial
     10909 and Aires de la           2009-196         124,800      124,800 Sept. 10, 2008      477
             Colina
     10913 Torre de Añasco           2009-077         141,768      140,568   July 28, 2009     156
             Colinas de Bello
      7341                           2009-652         220,150      117,900 Nov. 25, 2009       36
             Monte
                        Total                     $1,819,366    $1,269,032
  *
    As of December 31, 2009




                                                 36