oversight

The Avesta Housing Management Corporation Did Not Properly Follow HUD Rules and Regulations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-03.

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

                                                                      Issue Date
                                                                          September 3, 2010
                                                                      
                                                                      Audit Report Number
                                                                      2010 BO 1008




TO:               Philip W. Holmes, Director of the Office of Housing, 1FHMLAT


FROM:            John A. Dvorak, Regional Inspector General for Audit, (Boston) Region, 1AGA

SUBJECT: The Avesta Housing Management Corporation Did Not Properly Follow HUD
         Rules and Regulations



                                            HIGHLIGHTS

    What We Audited and Why

                   We audited the Avesta Housing Management Corporation (Avesta), located in
                   Portland, ME, in response to a request from the U.S. Department of Housing and
                   Urban Development’s (HUD) Manchester, NH, Office of Housing field office.
                   The request came after the completion of an Office of Inspector General (OIG)
                   audit1 of the Orchard Court project. Avesta was the previous manager of Orchard
                   Court and is the current manager of 30 other HUD projects.

                   Our overall audit objective was to review Avesta’s management of the other HUD
                   projects and determine whether HUD funds were used in accordance with the
                   regulatory agreement and HUD requirements. Specifically, we wanted to
                   determine whether (1) Avesta complied with HUD procurement policies and
                   procedures, (2) services provided by Avesta under identity-of-interest contracts
                   were reasonable and adequately supported, and (3) Avesta’s method of cost
                   allocation was adequate and supported.




1
    Audit report dated November 6, 2008, Report No.2009-BO-1002.
What We Found


         The audit showed that Avesta did not always comply with HUD regulations. Our
         audit identified several specific deficiencies that need to be addressed. The audit
         also showed Avesta maintained its properties in good condition, REAC scores
         have been high, and it’s management reviews conducted by Maine State Housing
         and Rural Development have been excellent. Also, the vacancy rates at its
         properties have been around 1% with collection rates at 99%.

         However, Avesta did not comply with HUD procurement procedures because it
         could not furnish documentation to substantiate that it solicited bids and/or
         obtained cost estimates when procuring ongoing services and construction
         contracts. In addition, it had not established written procurement policies.
         Procurements totaling more than $2.6 million covering a 3-year period were
         unsupported.

         Additionally, Avesta could not demonstrate that the identity-of-interest services it
         provided to the HUD projects it managed were not in excess of costs that would
         be incurred in arms-length transactions. Therefore, there was no assurance that
         the HUD projects incurred an appropriate or reasonable cost for these services.
         The cost of the services for maintenance, janitorial, and resident service fees
         totaling more than $1.6 million over a 3-year period was considered unsupported.

         Lastly, Avesta failed to comply with HUD requirements to ensure that the
         allocation of the time spent by its property managers working with HUD projects
         was adequately supported. As a result, there was no assurance that the property
         manager salaries were allocated equably among the 30 HUD and 30 non-HUD
         projects managed by it. Avesta also did not properly ensure the reasonableness of
         costs for accounting/bookkeeping services. Costs of more than $796,000
         covering a 3-year period were unsupported.


What We Recommend


         We recommend that the Director of Multifamily Housing in the HUD
         Manchester, NH, field office require Avesta to comply with all terms and
         conditions of its management certifications and HUD requirements for soliciting
         written or verbal cost estimates and maintaining documentation supporting the
         basis for contract awards. In addition, Avesta should provide an independent cost
         analysis for each procurement citied in this report to ensure that more than $2.6
         million was reasonable and supportable. For any amounts not reasonable or
         supportable, it should reimburse the HUD projects from non-Federal funds.



                                           2
           We also recommend that the Director require Avesta to ensure compliance with
           the requirements for the (1) cost for services provided under arms-length
           transactions not exceeding the amount ordinarily paid for such services, (2)
           disbursements to HUD projects being reasonable and adequately supported, and
           (3) supervisory salary costs attributable to administrative duties being properly
           absorbed by management fees. The Director should also require Avesta to provide
           acceptable documentation in support of the more than $1.6 million charged for
           maintenance, janitorial, and resident service coordinator fees and determine
           whether the costs were reasonable. For fees not considered reasonable, HUD
           should ask Avesta to reimburse the HUD projects from non-Federal funds.

           Lastly, we recommend that the Director require Avesta to provide documentation
           in support of the distribution of $470,358 in property manager salaries to the
           HUD projects. For any costs not supported, reimburse the HUD projects from
           non federal funds. In addition, we recommend that the Director require Avesta to
           provide documentation to determine if $325,832 in accounting/bookkeeping
           service costs were at or below market rate. For any service costs that exceeded
           the market rate, Avesta should reimburse the HUD projects from non-Federal
           funds.

           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 the auditee the draft report on July 7, 2010 and requested a response
           by July 21, 2010. The exit conference was delayed at the request of the auditee
           and was eventually held on July 26, 2010. We received the auditee’s response on
           July 30, 2010. The auditee did not agree with the conclusions and
           recommendations in the findings.

           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix B of this report. The auditee also provided
           some attachments with its response and those are not included in the report, but
           are available upon request. Although these attachments are not exhibited in the
           report, most of these items were either reviewed during OIG’s field work or were
           addressed in our evaluation of the auditee’s written response.




                                            3
                              TABLE OF CONTENTS

Background and Objective                                                                   5

Results of Audit
        Finding 1: Avesta Failed To Follow HUD Procurement Procedures                      6
        Finding 2: Avesta Did Not Adequately Support the Costs for Identity-of-Interest   11
                   Services
        Finding 3: Avesta Did Not Comply With HUD Requirements for Allocating and         15
                    Ensuring the Reasonableness of Project Costs


Scope and Methodology                                                                     18

Internal Controls                                                                         20

Appendixes
   A.   Schedule of Questioned Costs                                                      22
   B.   Auditee Comments and OIG’s Evaluation                                             23
   C.   Criteria                                                                          69
   D.   Procurements Below $10,000                                                        72
   E.   HUD Project Types Managed by Avesta Housing                                       74
   F.   Schedule of Maintenance, Janitorial, and Resident Service Coordinator Fees        75
   G.   Property Manager Salaries                                                         76
   H.   Accounting/Bookkeeping Service and Other Administrative Expenses                  77




                                               4
                          BACKGROUND AND OBJECTIVE

The Avesta Housing Management Corporation2 (Avesta) was founded in 1974. Over three
decades, Avesta Housing has grown into the largest nonprofit housing agency in Maine. Avesta
Housing maintains administrative headquarters at 307 Cumberland Avenue, Portland, ME, with a
full-time and part-time staff of 65 employees. Avesta Housing is led by a board of directors,
consisting of 14 members whose membership is drawn from a variety of banking, business,
public, community, social service, and housing organizations. Avesta has developed more than
1,700 units of affordable housing for itself and other entities. Avesta has an assisted living
program that operates within the Maine Department of Health and Human Services long term
care programs.

Avesta’s portfolio of 30 U.S. Department of Housing and Urban Development (HUD)-affiliated
and 30 Non-HUD-affiliated projects includes a variety of conventional as well as State and
federally assisted family and elderly housing. Avesta manages about 1,668 units of housing
including its own properties and properties owned by others. Seven of the HUD-affiliated
projects are under HUD 202/Project Rental Assistance Contracts (PRAC). The remaining 23
HUD-affiliated projects receive Section 8 housing assistance payments and Avesta manages
these projects for the project owners. Avesta provides maintenance, janitorial or resident service
coordinator services under identity-of-interest contracts for 29 of the 30 HUD projects it
manages.

The primary objective of the audit was to review the management of HUD projects by Avesta
and determine whether HUD funds were used in accordance with the regulatory agreement and
HUD requirements. Specifically, we wanted to determine whether (1) Avesta complied with
HUD procurement policies and procedures, (2) services provided by Avesta under identity-of-
interest contracts were reasonable and adequately supported, and (3) Avesta’s method of cost
allocation was adequate and supported.




2
    Also formerly known as York Cumberland Housing Management Corporation

                                                     5
                                 RESULTS OF AUDIT


Finding 1: Avesta Failed To Follow HUD Procurement Procedures
Avesta’s procurement practices did not always comply with HUD regulations. Specifically,
Avesta could not provide documentation to substantiate that it solicited bids and/or obtained cost
estimates when procuring ongoing services and construction contracts. In addition, it had not
established written procurement policies. As a result, there was a lack of assurance that the
procurement process was fair and equitable and that more than $2.6 million spent represented the
most favorable prices that could have been obtained. These deficiencies occurred because
Avesta did not follow HUD procurement regulations and its chief executive officer (president)
did not adequately monitor the performance of its former director of maintenance, who was
responsible for procurement activity.



 $2,462,770 Paid for Services
 Was Unsupported


               Avesta did not follow HUD procurement policy that requires it to (1) solicit
               written cost estimates from at least three contractors or suppliers for any contract
               for ongoing supplies or services which are expected to exceed $10,000 per year
               and (2) retain documentation of all bids as part of the projects records.

               More than $300,000 charged from January 1, 2007, to December 31, 2009, to the
               HUD projects for ongoing services was unsupported. (See exhibit 1) Avesta
               procured services from two separate snow removal/grounds care companies and a
               landscaping company that provided services exceeding $10,000 each year over a
               three year period for seven HUD projects. However, before awarding the contracts
               to these companies, Avesta failed to demonstrate that it obtained competitive bids or
               written cost estimates.

               In addition, there was no evidence that Avesta solicited verbal cost estimates for
               $2,074,597 charged to the HUD projects for ongoing services provided by 30
               companies. (See Appendix D). HUD handbooks require verbal or written bids for
               supplies or services not to exceed $5,000 but are silent on requirements for
               purchases between $5,000 and $10,000. Consequently, HUD Manchester, New
               Hampshire field office dictates that for any contract for ongoing supplies or services
               estimated to cost less than $10,000 per year, Avesta should solicit verbal cost
               estimates and make a record of any verbal estimates obtained. Therefore, we
               determined that the charges below $10,000 in any given year for the 30 companies
               totaling $2,074,597 were unsupported.

                                                 6
                                        EXHIBIT 1


     Project         Service            2007 Costs    2008 Costs     2009 Costs Total Costs
 Baron Place     Snow removal &         $18,131.63    $21,763.29     $19,754.96 $59,649.88
                 grounds care
 Foxwell I       Snow removal &          27,883.50      31,849.50      31,093.00      90,826.00
                 grounds care
 Golden Park     Snow removal &          19,653.63      21,473.96      19,725.98      60,853.57
                 grounds care
 Orchard Terrace Snow removal &          17,091.00      20,537.00      19,925.10      57,553.10
                 grounds care
 New Marblehead Landscaping              10,618.08      12,134.61      12,683.00      35,435.69
 No
 New Marblehead Landscaping              13,200.58      13,699.61      12,243.00      39,143.19
 Manor
 Unity Gardens   Landscaping             13,819.38      15,399.96      15,491.81      44,711.15

 Total                                 $120,397.80 $136,857.93 $130,916.85 $388,172.58



Economically and Socially
Disadvantaged Firms Did Not
Have an Opportunity to
Participate in the Procurement
Process


            Supplies and services must be competitively bid not only to achieve the lowest
            reasonable construction cost, but also to provide increased fair access to the
            economic opportunities created through a project. The certification agreement
            between the project owners and management agent stipulates that the agent agrees to
            provide minorities, women, and socially and economically disadvantaged firms
            equal opportunity to participate in the project’s procurement and contracting
            activities. Of the 30 HUD properties, 19 are regulated by certification agreements.


Six Construction Procurements
Reviewed Had Deficiencies

            We reviewed ten of Avesta’s construction procurements costing $309,355. For six
            of the ten, we identified at least one violation of HUD procurement regulations as
            follows:


                                             7
            Company              Project               Work            Costs       Deficiencies
          Royal Glass      Pinewood Apts          Window repl.       $ 59,960      3
          Patriots Mech.   Blackstone 1 & 2       Wt. heater repl.     14,925      2
          Harold Brooks    Foxwell I              Roofing              35,800      1
          Harold Brooks    Maple Grove            Roofing               9,850      3
          Harold Brooks    Baron Place            Siding               31,600      2
          Harold Brooks    Foxwell II             Siding               33,700      2
                                                                     $185,835


           Deficiency Explanation:

               1. Contract awarded to highest bidder without justification. Avesta
                  awarded a contract for roofing work at the Foxwell I project to a contractor
                  that was not the lowest bidder. Avesta’s president stated that its former
                  director of maintenance did not feel comfortable after checking references
                  and observing prior work of the contractor that submitted the lowest bid.
                  However, Avesta did not furnish auditable documentation to substantiate its
                  claims.

               2. Contracts awarded with inadequate competition for three procurements. The
                  evidence showed that only two written cost estimates were obtained for the
                  replacement of water heaters at the Blackstone project. In addition, only two
                  written cost estimates were obtained for siding/reshingling work at the Baron
                  Place project and the Foxwell II project. In accordance with HUD
                  regulations, a management agent (Avesta) is required to maintain written
                  cost estimates for contracts in excess of $10,000 or evidence that verbal
                  estimates were received from at least three contractors.

               3. Contract awarded without competition. There was no evidence that Avesta
                  solicited bids before awarding a contract for the installation of Harvey
                  windows at its Pinewood Apartments project. Avesta stated that due to
                  certain circumstances, bidding was not required for this procurement.
                  Again, Avesta did not furnish auditable documentation to substantiate its
                  claims. We were provided only one estimate for roofing work at Maple
                  Grove. Avesta could not locate all of the paperwork related to this
                  procurement.


Avesta Did Not Maintain
Written Procurement Policies
and Procedures

           Avesta did not maintain written procurement policies and procedures. It stated
           that it followed HUD’s procurement regulations and planned to prepare its own

                                              8
             written procurement policies in the near future. An Avesta official furnished us a
             one-page draft of a procurement policy that Avesta began preparing during our
             audit.

             Avesta maintained only minimal procurement documentation for the procurement
             actions reviewed. Avesta’s president stated that, for the most part, his company
             followed the procurement requirements outlined in the HUD handbook. The
             president further stated that any inconsistencies in applying proper procurement
             procedures could be attributed to the company’s high turnover in chief financial
             officers and the former director of maintenance’s failure to maintain complete and
             organized procurement records. We contend that as the head of a company, a
             president is responsible for the performance of his staff. The president’s job
             description states that he is required to oversee all management functions,
             including managing his senior staff.



Conclusion


             Without the documentation to substantiate that an analysis of similar
             goods/services offered in the area was performed, HUD could not be certain
             whether the project received the goods/services at the lowest possible price. In
             addition, HUD had no assurances that the procurement process was fair and
             equitable. These deficiencies occurred because Avesta did not follow HUD
             procurement regulations and its president did not adequately monitor the
             performance of its former director of maintenance’s activities.


Recommendations

             We recommend that the Director of Multifamily Housing in the HUD
             Manchester, NH, field office

             1A. Require Avesta to ensure that $2,648,605 was reasonable and supported.
                 For any amounts not reasonable and supported, HUD should require Avesta
                 to reimburse the HUD projects from non-Federal funds.

             1B. Require Avesta to comply with all terms and conditions of its management
                 certifications and HUD rules and regulations that require soliciting written
                 or verbal cost estimates and maintaining documentation supporting the basis
                 for contract awards.




                                              9
1C. Require Avesta to establish a written procurement policy that follows Federal
    procurement regulations and provide training to its staff regarding the new
    policy.




                                10
                                 RESULTS OF AUDIT


Finding 2: Avesta Did Not Adequately Support the Costs for Identity-
of-Interest Services
Avesta could not demonstrate that its costs for maintenance, janitorial and resident service
coordinator services were not in excess of costs that would be incurred in arms-length
transactions, or that its costs for these services were charged correctly to the HUD projects. As a
result, there was no assurance that the costs charged to HUD projects for services totaling more
than $1.6 million were the most reasonable and economic prices and whether the HUD projects
incurred an equitable share of the costs. We attribute these deficiencies to Avesta’s
understanding that the fees were reasonable if based on hourly fees alone charged in the local
marketplace and the fees’ being consistent with the budgets approved by HUD. The hourly rate
was used to calculate a flat rate which was not compared to amounts charged in the local
marketplace.




 Hourly Rates of Services
 Charged to HUD Projects Were
 Not Adequately Supported


               Avesta executed three written identity-of-interest agreements for related
               maintenance, janitorial and resident service coordinator services with many
               owners of the HUD-affiliated projects that it manages. The maximum annual fee
               compensation under these agreements was a flat rate paid from the projects’
               operating accounts in monthly installments equal to one twelfth of the annual fee.
               This fee was based on what Avesta believed was reasonable and necessary to
               cover the needs of the project. The hourly rates used to calculate the annual
               contract fees were not adequately supported. The total charges to HUD projects
               for maintenance, janitorial and resident service fees were more than $1.6 million
               in fiscal years 2007, 2008, and 2009.

      Fiscal year        Maintenance          Janitorial      Resident services         Totals
         2007             $279,199            $114,110            $115,049             $508,358
         2008             $305,725             122,584             124,481             552,790
         2009              308,836             120,898             124,836             554,570
     Overall totals       $893,760            $357,592            $364,366            $1,615,718

               The regulatory agreement between the property owner and HUD requires that
               owners not pay out funds except for reasonable operating expenses. The

                                                11
           regulatory agreement further limits allowable costs for goods and services
           provided under arms-length transactions.

           Avesta compared its hourly rates to what other management companies in the
           State charged for their services. To justify its rates for maintenance technicians in
           fiscal year 2009, Avesta compared the maintenance fee assessed to its properties
           with those of four other local management companies. Avesta’s method of
           requesting hourly rates from the other management companies was not conducive
           to obtaining the most useful and reliable information. In addition, Avesta failed
           to obtain job descriptions to compare its scope of work with that of the four
           management companies to determine whether similar services were provided.

           Avesta compared the resident service coordinator fee assessed to its properties
           with only one other management company, and no comparisons were performed
           for janitorial services. Although Avesta charged a separate fee for janitorial
           services in addition to the maintenance fee it charged, many of the services
           outlined in Avesta’s janitorial service agreement were identical to the services
           reflected in its maintenance agreement. Further, Avesta’s maintenance
           technicians performed all janitorial duties.


The Basis for Time Charged to
HUD Projects Was
Unsupported


           The hours used by Avesta in calculating the total costs under its agreements were
           not adequately supported. Avesta did not track and charge the actual number of
           hours staff worked at the projects, but relied on its knowledge or past experience
           when assigning hours to the agreements. An organization cannot arbitrarily
           assign hours to a project; instead, the hours must be based on activity reports
           which represent a reasonable estimate of actual work performed during the period.


Comparable Fees Obtained by
OIG Were Below the Agent’s
Fees

           We contacted four management companies in the State of Maine to obtain hourly
           rates for services provided by maintenance technicians, janitors, and resident
           service coordinators. In addition, we requested detailed job descriptions for the
           three job positions and requested explanations regarding how the management
           companies billed services to projects. All four of the management companies
           charged hourly rates below the rates charged by Avesta. The management
           companies maintained adequate control over where their staff spent their time.


                                            12
             The projects were billed based on documented hours recorded for work performed
             to complete work orders and work assignments.


Avesta Overcharged
Maintenance Supervisor
Salaries to HUD Projects


             A member of Avesta’s staff stated that the maintenance supervisor salaries were
             charged to HUD projects under the maintenance service agreements. However,
             HUD dictates that the salaries of the agent’s personnel performing supervisory
             tasks must be paid from management fees. The job description for an Avesta
             maintenance supervisor indicated that a supervisor was responsible for
             supervising maintenance technicians as well as performing duties similar to those
             of maintenance technicians. Therefore, if hours for specific work are not charged
             directly, only a prorated share of the salaries should have been charged to the
             project accounts, while tasks involving supervisory administrative responsibilities
             should have been absorbed by the management fees.

             Avesta justified its fees as reasonable because the fees were consistent with the
             budgets approved by HUD. However, budgets were estimates determined before
             the services were performed and did not qualify as a substitute for actual costs.



Conclusion


             The cost comparisons obtained were not adequate to show that the services
             provided by Avesta staff were reasonable and not in excess of costs that would be
             incurred in arms-length transactions. Avesta did not maintain sufficient
             documentation to show that services provided were reasonable and economical
             prices for the projects and that HUD projects did not incur a disproportionate cost
             for these services. Also, Avesta did not perform an evaluation of whether their
             fees were based on like services. The fees charged must be reasonable regardless
             of whether they are consistent with the budgets approved by HUD because
             budgets cannot be used as an approval of costs. Without documentation showing
             that the costs were reasonable, the cost of services totaling more than $1.6 million
             was unsupported.




                                              13
Recommendations



          We recommend that the Director of Multifamily Housing in the HUD
          Manchester, NH, field office

          2A. Require Avesta to comply with the terms and conditions of its regulatory
              agreements and HUD rules and regulations that require: that the cost for
              services provided under arms-length transactions do not exceed the amount
              ordinarily paid for the services; disbursements to HUD affiliated projects are
              reasonable and adequately supported; and supervisor salaries for
              administrative duties are properly absorbed by management fees. The
              Director should also direct Avesta to maintain documentation verifying these
              conditions.

          2B. Require Avesta to provide acceptable documentation in support of the
              $1,615,718 charged for maintenance, janitorial and resident service
              coordinator fees so that HUD can determine whether the costs were
              reasonable. For fees not considered reasonable, HUD should require Avesta
              to reimburse the HUD projects from non-Federal funds.

          2C. Direct the owners to obtain another source to provide these services if Avesta
              is not responsive and effective in resolving this finding.




                                          14
                                 RESULTS OF AUDIT


Finding 3: Avesta Did Not Comply With HUD Requirements for
Allocating and Ensuring the Reasonableness of Project Costs
Avesta failed to comply with applicable HUD requirements to ensure the appropriate allocation
of the time spent by its property managers working with HUD projects and did not ensure the
reasonableness of costs for accounting/bookkeeping services. Avesta’s property managers did
not maintain adequate records or reports showing hours worked by activity or project. Avesta
also did not follow HUD requirements for ensuring that costs of accounting/bookkeeping
services did not exceed the cost of procuring comparable services from independent vendors.
This deficiency occurred because Avesta did not understand what was specifically required to
meet HUD rules and regulations. As a result, there was no assurance that salaries of property
managers were allocated equably between the 30 HUD and 30 non-HUD projects managed by
Avesta and the cost of accounting/bookkeeping services were provided at a reasonable cost.
Therefore, the costs of $796,190 for salaries and services covering the period January 1, 2007, to
December 31, 2009, were unsupported.




 Property Manager Salaries of
 $470,358 Were Unsupported


               Documentation provided by Avesta to show where its property managers worked
               or spent their time was not adequate to meet HUD requirements. HUD requires
               that salaries and fringe benefits of personnel performing front-line duties be
               prorated among the properties served in proportion to actual time spent. In
               addition, Avesta’s allocation plan dictates that property manager salaries are to be
               charged to projects based on time spent at the respective property. Avesta did not
               prorate based on actual time spent and, therefore, the property manager salaries of
               $470,358 charged to the HUD projects from January 1, 2007, to December 31,
               2009, were unsupported

               As support for the property managers salaries, Avesta produced monthly reports
               showing accomplishments at one project for front-line duties in fiscal year 2008
               and a supervisor’s e-mail listing nine HUD properties and the hours spent per
               week at those properties as reported by property managers. Avesta contended that
               the combination of these two records constituted compliance with HUD
               regulations on cost allocation. The implication that the property managers charged
               the same number of hours every week on a particular project was not reasonable
               or practicable considering the nature of a property manager’s job duties. The
               hours devoted to tasks, such as completing the move-in process, completing

                                                15
           move-out inspections, marketing availability of apartments, and handling tenant
           complaints, would not be generally consistent and would vary from week to week.
           In addition, neither Avesta’s monthly reports nor the supervisor’s report identified
           the specific property manager(s) performing the work. A more effective method
           to ensure that HUD projects do not incur a disproportionate share of the costs
           would be to require property managers to record hours for work performed on
           weekly reports prepared for each project. Avesta agreed in principle that its cost
           allocation system for property managers could be improved.



Accounting and Bookkeeping
Services of $325,832 Were
Unsupported

           Avesta failed to maintain documentation required by HUD to ensure that
           accounting/bookkeeping services were at or below market rate. The
           accounting/bookkeeping services costs included accounting staff wages, benefits,
           worker’s compensation insurance, and payroll taxes; a portion of the accounting
           manager’s wages and payroll taxes, excluding benefits; and the cost of
           accounting software and property compliance software. HUD regulations dictate
           that costs to the project for centralized accounting and computer services provided
           by the management agent (Avesta) may not exceed the cost of procuring
           comparable services from an independent vendor. Each year, the management
           agent must determine whether these costs are at or below market rate and
           maintain such evidence on site. Avesta did not comply with HUD regulations for
           this requirement. Without the required documentation, the
           accounting/bookkeeping services of $325,832 charged to the HUD projects from
           January 1 2007, to December 31, 2009, were unsupported.

           There was difficulty in tracing the fiscal years 2007 and 2008 costs for
           accounting/bookkeeping services because the costs were combined with other
           expenses in an account titled “Other Administrative Expenses.” During the audit,
           Avesta’s chief financial officer reconciled some of the “Other Administrative
           Expenses” account and identified the accounting/bookkeeping services for seven
           HUD projects in fiscal year 2008. Excluding charges of the seven projects
           reconciled by the chief financial officer, the remaining $325,832 represented
           questioned costs for the 2007 and 2008 costs charged to the “Other
           Administrative Expenses” account.




                                            16
Conclusion


             Avesta failed to follow HUD rules and regulations regarding management costs it
             charged to HUD projects. During our audit period, costs for property managers
             and accounting/bookkeeping services charged to the projects’ operating accounts
             totaled $796,190. Because Avesta failed to follow HUD procedures, we could not
             determine whether these charges to HUD projects were correct and reasonable.
             Therefore, the costs of $796,190 for these services were considered unsupported.


Recommendations

             We recommend that the Director of Multifamily Housing in the HUD
             Manchester, NH, field office

             3A. Require Avesta to provide documentation in support of the distribution of
                 $470,358 in property manager salaries to the HUD projects. For any costs
                 not supported, Avesta should reimburse the HUD projects from non-Federal
                 funds.

             3B. Require Avesta to include a review of the reasonableness of $325,832 in
                 unsupported accounting/bookkeeping service costs in relation to the market
                 rate in the independent cost analysis in finding 1A and reimburse the HUD
                 projects from non-Federal funds for the costs of services that exceed market
                 rate.

             3C. Require Avesta to identify the costs for accounting/bookkeeping services in
                 2007 and the remaining costs for those services in 2008 that are attributable
                 to the administration of HUD projects.

             3D. Ensure that Avesta submits and follows an allocation method based on actual
                 time spent at each project that meets HUD’s approval.




                                             17
                        SCOPE AND METHODOLOGY


We performed an audit of the Avesta Housing Management Corporation. Our fieldwork was
completed at Avesta’s office located at 307 Cumberland Avenue, Portland, ME, from December
15, 2009, to April 29, 2010. Our audit generally covered the period January 2007 to December
2009 and was extended when necessary to meet our objective.

To accomplish our audit objective, we

      Reviewed applicable Office of Management and Budget (OMB) circulars, HUD
       handbooks/guidebooks, regulatory agreements, project owner’s/management (Avesta)
       certifications, and previous participation certifications.
      Reviewed Avesta’s policies and procedures and held discussions with Avesta officials to
       gain an understanding of Avesta’s corporate structure, cost allocation, accounting
       controls, procurement practices, and monitoring policies.
      Reviewed independent public auditors’ reports and media articles related to Avesta and
       its staff.
      Evaluated the internal controls and conducted sufficient tests to determine whether
       controls were functioning as intended and reviewed computer controls to determine
       whether Avesta had proper controls over its outsourced information technology (IT)
       services.
      Reviewed Avesta’s organizational chart and job descriptions to determine the
       responsibilities of staff and whether job descriptions were consistent with the work under
       Federal programs. Also, we reviewed for any indications of overlap in job
       duties/responsibilities.
      Evaluated the Agent’s procurement practices by selecting for review 100% of the
       businesses providing ongoing services to HUD projects, after excluding utility
       companies, retail stores, and insurance companies. Also, reviewed the agent’s only three
       procurements related to IT services. During the audit phase, we evaluated construction
       procurements by selecting a nonrepresentative sample of seven construction checks from
       a universe of 30 construction checks larger than $3,000. The seven checks selected
       totaled $229,755. For those procurements, we reviewed invoices, written agreements,
       requests for proposals, and bids received.
      Interviewed Avesta’s staff and reviewed all contracts and other documentation
       maintained by Avesta for maintenance, janitorial, and resident service coordinator fees to
       determine whether the fees were reasonable, eligible, and adequately supported.
      Interviewed Avesta’s staff and reviewed all documentation maintained by Avesta for its
       cost allocation methodology for property manager salaries, accounting/bookkeeping
       services, and office/supplies expenses.
      Ensured that management fees were reasonable, calculated properly, and within HUD-
       approved limits. We also reviewed check registers to determine whether projects were
       charged for expenses that should have been absorbed by the management fees.


                                               18
      Reviewed cash receipts registers and check registers for any large or unusual
       transactions. For any expenses that warranted follow-up, we requested invoices or other
       supporting documentation.
      Reviewed financial statements to determine whether there were loans or transfers to
       individuals, related projects, or other businesses for projects in a non-surplus-cash
       position and reviewed for reductions in long-term loans and notes payable without HUD
       approval.
      Using the check registers covering the audit period, we scheduled itemized costs by date
       and check number for maintenance technicians, janitors, resident service coordinators,
       property managers, and accounting/bookkeeping services for all 30 HUD-affiliated
       projects. We totaled costs by fiscal year for each of the above categories of expenses.
      Selected for review a fair representation of management companies from a universe of 90
       HUD-affiliated management companies to ensure comparability of maintenance,
       janitorial and resident service fees. This universe was based on a comprehensive HUD
       portfolio of HUD-insured and HUD-subsidized projects located in the State of Maine.
       We identified a sample of four management companies for review based on a
       nonrepresentative sampling method due to the large universe. Three of the four
       management companies selected represented the companies managing the largest number
       of HUD-affiliated projects. To ensure that the sample included at least one management
       company located in close proximity to Avesta, we selected a company located in Portland
       ME. We selected that management company because the company manages the largest
       number of HUD-affiliated projects of any management company located in “Portland
       proper.”

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
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                              19
                              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
              objective:

                     Controls over procurement and contracting
                     Controls to ensure that fees and costs incurred under identity-of-interest
                      contracts are reasonable and adequately supported
                     Controls for implementing an effective system for allocation of salaries

              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:

                 Avesta did not adequately monitor its procurement and contracting process
                  (finding 1).


                                                20
   Avesta did not adequately support the costs or fees for identity-of-interest
    services (finding 2).
   Avesta failed to implement an effective system for allocation of salaries (finding
    3).




                                  21
                                     APPENDIXES

Appendix A

                   SCHEDULE OF QUESTIONED COSTS

The audit identified questioned costs of $5,060,513

 Recommendation                             Unsupported
        number                                       1/
        1A                                   $2,648,605
        2B                                   $1,615,718
        3A                                     $470,358
        3B                                     $325,832
       Total                                 $5,060,513


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 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.




                                               22
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1



Comment 2




Comment 3


Comment 4




                         23
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




Comment 7




Comment 8




Comment 9




                         24
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 10



Comment 11




Comment 12




Comment 13




                         25
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 14




Comment 15




                         26
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 16



Comment 17




Comment 17



Comment 18




Comment 18




Comment 19




                         27
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 20



Comment 20



Comment 21




Comment 22



Comment 23


Comment 24




                         28
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12

Comment 17

Comment 25

Comment 26



Comment 27




                         29
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12

Comment 28




Comment 12




Comment 12




Comment 29




                         30
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 29




Comment 27



Comment 28



Comment 27

Comment 16

Comment 29

Comment 30




                         31
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 31




Comment 32




Comment 32




                         32
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 12

Comment 16


Comment 12



                         33
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 15




Comment 12
Comment 16
Comment 27
Comment 33




Comment 17




                         34
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 16
Comment 25
Comment 34




                         35
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12

Comment 19




Comment 17




Comment 8
Comment 9
Comment 35

Comment 36




                         36
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 8
Comment 9

Comment 37

Comment 19



Comment 12
Comment 38




Comment 12




                         37
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 8
Comment 37


Comment 8
Comment 39



Comment 40



Comment 41




                         38
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 40




Comment 42




                         39
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 43




Comment 8




                         40
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 44




                         41
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 37
Comment 40




Comment 38




                         42
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 45

Comment 46




Comment 47




                         43
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 36
Comment 48



Comment 49




Comment 50




                         44
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 51




                         45
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 52




                         46
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 49




Comment 52




                         47
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 53


Comment 54




                         48
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 55




                         49
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         50
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         51
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         52
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         53
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         54
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         55
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         56
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         57
                          OIG Evaluation of Auditee Comments

Comment 1   OIG made the necessary changes or revisions to the draft report and clarifications
            were provided where necessary.

Comment 2   The draft was provided to ensure that the facts were presented correctly. OIG’s
            draft was based on information identified during the audit; however, necessary
            minor changes were made when warranted based on the additional information in
            the attached appendix from Avesta. In addition, many of the 68 items identified
            were repeatedly counted and were considered to be minor in nature, and certain
            information cited as not being factual was provided to OIG verbatim by Avesta’s
            chief financial officer and vice president of management during the audit.

Comment 3   The auditee’s comment that we are suggesting that the report was not a draft is
            misleading and is not an actuate portrayal of the facts and the events surrounding
            its transmittal. The e-mail transmitting the draft report clearly stated that it was a
            draft report provided for the exit conference, the report was clearly labeled as a
            draft report, and the accompanying letter stated that it was a discussion draft
            provided for comment and that it was subject to revision. On July 8, 2010, we
            instructed Avesta to disregard the copy previously provided because it did not
            contain the restrictive language for a discussion draft. The restrictive language
            for a discussion draft inadvertently had not been added before it was transmitted,
            and the omission was noted by us the following day. It was replaced with the
            version that clearly noted that it is a discussion draft and was made available for
            review and comment. No other changes were made except the adding of the
            restrictive language.

Comment 4   During the audit process, the status of the findings was discussed with the auditee
            as the findings were being developed. The findings were presented to Avesta
            based on the information it had provided, but its failure to provide all the
            procurement records requested by OIG impeded the OIG’s efforts to complete the
            work and confirm the full extent of the unsupported costs. However, the audit
            work on procurement was completed to prepare a draft finding outline but the
            amount of unsupported costs was not finalized. Also, Avesta was advised of the
            possibility that it would have to repay the costs if costs could not be supported.

Comment 5   There was no departure from generally accepted government auditing standards at
            any point during this audit. Regardless of the minor transposition errors found,
            which were adjusted as explained below, the presentation of the extent to which
            Avesta had failed to support certain expenditures because it did not follow HUD
            procurement regulations was accurate. The audit selection of procurements was
            conducted in two stages and focused on procurements paid from project funds.
            Following the standards, an initial sample was tested for compliance and
            unsupported costs were identified. Then a more extensive testing of additional
            procurements was performed to confirm the extent of the total unsupported costs.
            In these samples, were two procurements that were each completed in two stages,

                                              58
            and Avesta recognized these as separate procurements, but OIG recognized each
            procurement with two stages as one procurement in its analysis. The procurement
            transactions included in the report pertain to those selected by OIG in the audit
            phase of our review. However, OIG also reviewed three procurements in the
            survey stage and revised the report to include the sample initially tested.
            Therefore, a total of 10 procurement contracts were reviewed by OIG, excluding
            the procurements paid with non-HUD funding and the two procurements
            performed in separate stages. Also see comment 29.

Comment 6   We believe the report is balanced, fair, and objective to the extent to which
            Avesta was forthcoming with its responses and the information that it provided
            during and after the audit. There is uncertainty as to what proactive measures
            Avesta implemented, particularly because it disagreed with the majority of the
            conclusions throughout the audit and the findings and recommendations in the
            draft report and because of instances in which Avesta wavered or remained
            undecided on issues.

Comment 7   OIG revised the report to recognize and include some of Avesta’s
            accomplishments in the final report as indicated in the auditee comments.

Comment 8   The finding questions whether the fees were reasonable, and Avesta has not
            provided information to show they were reasonable. Even in the example
            provided in the auditee comments showing a comparison of total costs, adequate
            support is not provided to ensure reasonability. It does not provide comparative
            information at a detailed level to show the hours of work or the type of work
            performed by other similar projects that would support that Avesta’s fees were
            reasonable. The amount of the fees charged to the project should be in proportion
            to the work performed, but Avesta has been unable to adequately justify the hours
            or work performed at HUD projects. Also, the cost comparison of 12 individual
            projects considers all operating costs, whereas our review focused on specific
            costs or fees. In addition, Avesta failed to provide the names of the projects in its
            analysis, and the analysis did not take into consideration variables such as
            location, age of property, new construction or rehabilitation, and number of units
            and should not be used as a benchmark for establishing the cost of delivering
            these services.

Comment 9   The reasonableness finding was not based on the lack of documentation as stated
            in the auditee’s comments. We questioned the reasonableness of these services
            because (as noted in the draft report) both the hourly rates and number of hours
            used by Avesta to calculate the annual contract costs were not supported. It did
            not provide the basis for the hourly rates and whether they were reasonable based
            on service provided through the open market or provide evidence of the hours that
            would normally be needed to perform these services. As a result, the
            reasonableness of the contract costs is uncertain. Avesta’s statement that the
            report emphasizes form over substance is misleading.


                                             59
Comment 10 The audit showed that Avesta did not follow HUD requirements in administering
           HUD-funded projects. The comment that the basis for the report is totally reliant
           on HUD’s Management Agent Handbook 4381.5 is inaccurate. The basis for the
           finding was explained and supported, was based on the criteria documented in
           appendixes C and E, and shows that OIG relied on applicable HUD requirements
           and the Management Agent Handbook 4381.5, which demonstrates practices that
           follow HUD requirements. These are the same requirements followed by other
           management agents throughout HUD’s servicing area. In addition, the term
           “agenda” is also an inaccurate portrayal of what is involved under the standards in
           auditing. There are objectives of the audit, and those were fully explained in the
           background. Also, the information contained in the report is documented and
           based on the information provided and presented to us by Avesta staff and is not a
           misrepresentation of any fact or misconstrued statements. The audit report only
           states the conditions that were found.

Comment 11 We did not revise the report. We informed Avesta at the start of the exit
           conference that OIG’s response to the HUD field office comments were contained
           in the written PowerPoint presentation provided to them. The changes were the
           supplemental information explained and discussed at the exit conference.
           Therefore, Avesta was afforded an opportunity to comment during the exit
           conference on the supplemental information. In addition, none of the information
           that was added affected the accuracy of or changed the information in the body of
           the report that Avesta commented on. These changes are the additional schedules
           of information provided by Avesta and shown in appendixes of the audit report.

Comment 12 We have added the details regarding the projects associated with the criteria and
           the unsupported costs to this report. All 30 HUD-affiliated projects in Avesta’s
           portfolio are subject to HUD regulations and requirements in one form or another.
           The number of projects covered by HUD regulations and requirements are in
           appendix E. Specific information on the unsupported maintenance, janitorial and
           resident service coordinator fees came from Avesta and is included in appendix F.
           A breakdown of property manager salaries came from Avesta and is in appendix
           G, and accounting/bookkeeping services also came from Avesta and are in
           appendix H. This additional information does not affect any conclusions that
           were reached in the audit.

Comment 13 There was no questionable independence during the audit in appearance or in fact,
           and to indicate that the OIG relied exclusively and extensively on HUD is
           inaccurate; and the expression of such displays an inappropriate understanding of
           the auditing standards that were followed. The standards require that
           communicating the audit results to the auditee and to responsible HUD program
           staff be a continuous process throughout the audit. Communicating the results
           permits timely revision of the findings and draft audit report based on comments
           and documentation provided by the auditee, and as appropriate, HUD is also made
           aware of the results and may comment on regulatory aspect of the conditions
           identified, but in this case, none were offered. However, it should be noted that

                                             60
              Avesta failed to provide adequate documentation during the audit showing a lack
              of compliance and this was discussed with Avesta. Our analysis and the results
              presented were an independent analysis of Avesta practices, and the report
              identified those practices that were inconsistent with HUD requirements. The
              results and conditions communicated throughout the audit were presented to both
              Avesta and HUD; and there was never any consulting exclusively and extensively
              with HUD or reliance on HUD to clarify and interpret different HUD regulatory
              requirements during the audit. When presented with the draft audit report, HUD
              only requested that supplemental information be added, as stated in comments 11
              and 12, and had no comments on OIG’s interpretation of HUD requirements as
              presented in the draft report. While OIG works with HUD, OIG does not work
              for HUD. The Inspector General works independently of the HUD Secretary and
              reports to Congress.

Comment 14 The background section clearly defines HUD projects for the purposes of the
           audit. HUD regulations and requirements in one form or another apply to all 30
           HUD-affiliated projects in Avesta’s portfolio. Also see comment 12.

Comment 15 Paragraph one accurately reflected the information in the report specifically that
           Avesta did not always comply with HUD requirements. During the audit, Avesta
           was given the opportunity to address the lack of compliance but did not provide
           documentation to support procurements of ongoing services, and documentation
           in support of the construction procurements was incomplete. There were no
           mischaracterizations in the draft report of any documentation presented by Avesta
           pertaining to its procurement practices. Also, there is no information in appendix
           C to indicate that OIG acknowledged that unsigned bids, if accepted, create a
           valid and binding agreement between parties. In addition, we have no
           recollection of any nonspecific references to inapplicable OMB cost circulars at
           the exit interview. Although HUD regulations may not specifically state that bids
           must be signed, it is considered prudent practice that important documents contain
           a proper signature to ensure the validity of such documents. An unsigned
           document can be easily manipulated by other parties or created to give the
           appearance of compliance. We removed the citation in the report regarding
           Avesta’s failure to maintain signed documents, but we recommend that in the
           future, Avesta ensures bids are signed to substantiate the validity of the bids.

Comment 16 The passing of the former director of maintenance was very unfortunate.
           However, any organization must ensure that its staff maintains organized,
           complete, and traceable records to allow the organization to continue to function
           properly and operate in an orderly manner when events such as deaths, injuries,
           retirements, and terminations occur. This issue also indicates that Avesta needs to
           implement additional internal controls regarding procurement activities.

Comment 17 Avesta did not provide OIG with its own written procurement policies during the
           audit. This fact was conveyed to OIG by Avesta’s vice president of management.
           Later, the vice president provided OIG a one-page draft of procurement

                                             61
              regulations, which could not adequately address the compliance aspects of HUD
              requirements. Also, although Avesta may have directed its staff to follow HUD’s
              Management Agent Handbook and other supplementary guidance, it did not have
              the associated internal controls to ensure that staff followed the handbook or
              guidance as evidenced by the lack of documentation to show compliance with
              HUD requirements. Further, written policies and procedures beyond the
              regulations and handbooks would allow Avesta to specify how they want
              employees to comply with the rules, who is responsible for specific requirements,
              and the documentation it finds acceptable.

Comment 18 We cannot address whether Avesta charged its properties less than other
           companies since we did not audit other companies to make such a comparison.
           Contrary to Avesta’s statement, OIG is not specifically questioning the value of
           services received. In addition, Avesta did not comply with its allocation plan or
           federal regulations which states that property manager salaries are to be charged
           to projects for time spent at the property.

Comment 19 Recommendation 1A in finding 1 will allow HUD to determine whether the
           amounts paid for services were reasonable. If the independent analysis indicates
           Avesta charged more services than what was reasonable, only the excess amounts
           will be required to be repaid.

Comment 20 See comments 9 and 18.

Comment 21 The information is included in this final report and was not included in the draft
           because Avesta had not yet provided its comments.

Comment 22 As indicated through the body of the report, as well as in the background section,
           Avesta Housing Management Corporation was the main focus. The background
           section provides necessary details pertaining to the organization’s overall
           structure and is normally provided for the background section of the report. OIG
           generally includes this type of information for any large company or corporation
           subject to an OIG audit. Also, see comment 2.

Comment 23 There is no assertion regarding the resident service coordinator in this section.
           Also, the draft report did not address the eligibility of the resident service
           coordinator services or whether they were automatically eligible project expenses.

Comment 24 All are considered identity-of-interest contracts because Avesta is providing these
           services to the projects that it manages.

Comment 25 The report is accurate and reflects the conditions found. Also, we contend that a
           chief executive officer of any organization is entrusted with the direction and
           administration of that organization’s policies and procedures. Therefore, as the
           head of the company, the chief executive officer is required to oversee all


                                              62
              management functions and is ultimately responsible for the performance of the
              organization’s staff.

Comment 26 Contrary to Avesta’s implication, OIG is unaware of any display of disrespect on
           the part of HUD.

Comment 27 There are no mischaracterizations in the report, only the presentation of the
           conditions found. Also, HUD procurement regulations apply to all 30 HUD
           projects managed by Avesta (see appendix E). With the exception of the three
           storm-related procurements that would be excluded from our selection because
           the procurements were not funded with HUD money, all sample procurements
           were paid from project funds. Also, there were two procurements that were each
           completed in two stages, and Avesta recognized these as separate procurements,
           but OIG recognized each procurement with two stages as one procurement in its
           analysis. The procurement transactions included in the report pertain to those
           selected by OIG in the audit phase of our review. However, OIG also reviewed
           three procurements in the survey stage and added the results of those reviews to
           the report. Therefore, a total of 10 procurement contracts were reviewed by OIG,
           excluding the three storm-related procurements and the two procurements
           performed in separate stages. Although the HUD field office may have approved
           of the purchases, HUD was not aware of the specific procurement methods
           followed by Avesta or its noncompliance with HUD requirements. Although the
           HUD criteria does not address requirements for procurements between $5,000 and
           $10,000, the Manchester, NH, HUD field office dictates that the procurement
           standards requiring oral bids for contracts under $5,000 would also apply for
           contracts between $5,000 and $10,000. We clarified the report on the criteria.

Comment 28 OIG did not take into consideration the value of the services provided as we did
           not make such a determination. This is why we recommended that Avesta
           evaluate the costs of such services, which will provide evidence of whether or not
           these services are unsupported.

Comment 29 We have revised the report to show that the $10,000 threshold for procurements is
           on a per project basis. All payments for the year made by a project to a specific
           vendor are recognized as one procurement.

Comment 30 Changes were made, accordingly.

Comment 31 Although HUD approved the withdrawal of replacement reserve funds, there is no
           evidence that HUD was aware of Avesta’s contracting activities and would only
           be aware if Avesta had provided HUD the specific details of its contracting
           activities.

Comment 32 Since Avesta failed to solicit bids for the services; there was a lack of opportunity
           for economically and socially disadvantaged firms to participate in the bidding
           process. By simply bidding out jobs as required, economically and socially

                                               63
              disadvantaged groups have greater access to opportunities. We want to
              emphasize that it did not appear to be Avesta’s intention to exclude or prevent, in
              any way, the economically and socially disadvantaged from bidding. This
              deficiency occurred because of the lack of compliance. With regard to the
              economically and socially disadvantaged firms, we are not making reference to
              the construction contracts but are referring to the contracts for services that were
              not solicited for bid. A total of 19 of the 30 HUD projects are required by the
              management certification to consider the economically and socially disadvantaged
              firms under the procurement process.

Comment 33 Our review showed that project funds were used to make these repairs. With
           regard to Avesta’s claims that the source of funds used to make repairs were from
           a bank and not HUD is unsupported. Avesta did not furnish auditable
           documentation to substantiate its claims. Avesta manages 23 projects that receive
           federal rental assistance payments, and therefore these projects follow HUD
           procurement guidelines.

Comment 34 We did not acknowledge the facility manager’s untimely death because we did
           not believe it was relevant. Had he not had an untimely death, the records still
           would not have been properly documented. In an April 15, 2010, discussion
           between OIG and Avesta’s chief executive officer, the chief executive officer
           stated emphatically that the former director of maintenance who handled
           procurement was deficient in maintaining procurement records, adding that the
           records were often incomplete and disorganized. During an April 29, 2010,
           discussion with OIG, the chief executive officer made a similar remark, stating
           that the former director of maintenance failed to maintain complete and organized
           procurement records.

Comment 35 As explained in the draft report, Avesta’s method for analyzing rates from the
           other management companies was not conducive to obtaining the most useful and
           reliable information. Avesta provided OIG the maintenance hourly rates used by
           four separate management agents in fiscal year 2009, but only two of these rates
           were comparable to the maintenance rates charged by Avesta. In addition,
           Avesta’s written requests for comparable rates from other management companies
           gave the appearance that Avesta was canvassing or soliciting for rates. For
           example, a typical request for information, presented as an open-ended question,
           reads as follows: “I like to test the waters each year in an attempt to make sure
           our charges are reasonable. We currently bill out $34.50/hour for maintenance
           time. What do you each bill out for maintenance technicians at your properties?”
           Later, Avesta agreed that this was not the best approach. In addition, Avesta
           failed to request job descriptions to compare its scope of work with that of the
           four management companies to determine whether similar services were
           provided.




                                               64
Comment 36 OIG did not state anywhere in the report that time sheets are the only basis for
           keeping track of where property managers are spending their time. We recognize
           that time sheets are acceptable but are not the only method that can be followed.

Comment 37 Avesta stated that its fees were reasonable based on a consistency with budgets
           approved by HUD. However, a budget is simply a forecast, and year end reports
           must reflect an after-the-fact determination of the actual activity of each
           employee. HUD approves the figures in the budget, but does not approve actual
           expenses. OIG also determined that Avesta could not support its budget figures.
           We were informed by Avesta’s chief financial officer and vice president of
           management that Avesta’s budgets were based on per-unit costs in accordance
           with the local HUD field office’s request. OIG requested that Avesta’s chief
           financial officer provide documentation to substantiate that fiscal year 2008
           accounting/bookkeeping salaries for the seven 202/PRAC projects were allocated
           on a per-unit cost basis. However, Avesta’s chief financial officer was unable to
           substantiate that the budgeted salaries were allocated on a per-unit basis.

Comment 38 The criteria applicable to the findings are included in Appendix C.

Comment 39 In a January 28, 2010, written response to the HUD Manchester field office,
           Avesta’s vice president of management stated that hourly fees charged were based
           on Avesta’s belief that the fees were reasonable and necessary.

Comment 40 OIG did consider the actual hours worked. We recognize that Avesta’s contracts
           are based on two components, namely hourly rates and the number of hours. As
           we stated in the report, the hourly rates and the number of hours used to calculate
           the contract fees in these contracts were not adequately supported. The hours
           used by Avesta to support its contracts were based on past experience or
           judgment. The past experience and judgment used did not include activity reports
           for all employees. The federal regulations are specific on what is needed to
           support an allocation method. Therefore, we characterize the number of hours
           Avesta used to support its contracts as arbitrary. Avesta should have had a system
           in place to track the actual hours property managers spent at the projects. An
           allocation method must represent a reasonable estimate of the actual work
           performed by the employee during the period.

Comment 41 Avesta’s assertion that there were very few suppliers for resident service
           coordinator fees from which valid comparisons may be drawn is disputable
           because in the following year, Avesta increased its selection of suppliers of
           resident service coordinator fees threefold.

Comment 42 HUD stated that lump sum contracts are allowable as long as management agents
           use competitive bidding, but Avesta’s contracts for maintenance technicians,
           janitors, and resident service coordinators did not meet this requirement because
           contracts were not competitively bid.


                                              65
Comment 43 We disagree with Avesta and its independent auditor. Based on our objective, it
           was unnecessary for OIG to perform as detailed a review as described by Avesta.
           Our objective, as explained in the background and to Avesta on April 29, 2010,
           required us to perform a limited review similar in some ways to what Avesta had
           failed to carry out. OIG never intended to perform as detailed an analysis as
           described by the independent accountant. In addition to obtaining hourly rates,
           OIG evaluated job descriptions and documented examples of how other
           management companies bill services to its projects. We evaluated and compared
           hourly rates and job descriptions between Avesta and the four management
           companies contacted by OIG.

Comment 44 The statement made that salaries of maintenance supervisors are paid under
           maintenance technician’s contracts was made by Avesta’s vice president of
           management during a discussion with OIG on January 6, 2010. Based on his
           written job description, the maintenance supervisor splits his time between
           supervisory responsibilities and duties similar to those described in the
           maintenance technician contracts. Under these conditions, it becomes apparent
           that a prorated share of the supervisor’s salary should be charged to the project
           accounts, while the remaining salaries should be absorbed by management fees.
           Therefore, the statement made by the Avesta’s vice president is not accurate.

Comment 45 OIG had the authority to review all of Avesta’s projects because the manner in
           which Avesta accounted for and allocated its costs made it a necessary audit step.
           OIG stated that because Avesta failed to comply with HUD requirements for
           allocating and ensuring the reasonableness of project costs, there was no
           assurance that salaries for property managers were allocated equably between the
           30 HUD and 30 non-HUD projects managed by Avesta and the
           accounting/bookkeeping services were provided at a reasonable cost.

Comment 46 The term “OMB Circular A-122” is not used frequently because the circular has
           been replaced by 2 CFR 230, which applies to all nonprofits conducting business
           with the government through grants, agreements, or contracts. OIG’s
           criteria/justifications for its conclusions are also found in paragraphs 6.37(c) and
           6.38(a) of HUD Handbook 4381.5 (see appendix C). OIG had previously
           discussed the basis of its conclusion with Avesta management.

Comment 47 Avesta failed to comply with applicable HUD requirements to ensure the
           appropriate allocation of the time spent by its property managers working with
           HUD projects and did not ensure the reasonableness of costs for
           accounting/bookkeeping services. Avesta’s property managers did not maintain
           adequate records or reports showing hours worked by activity or project. Avesta
           also did not follow HUD requirements for ensuring that the costs of
           accounting/bookkeeping services did not exceed the costs of procuring
           comparable services from independent vendors.



                                              66
Comment 48 Based on our review, the premise that the monthly reports and the e-mail
           substantiate that Avesta is adequately tracking and charging actual hours worked
           at projects is incorrect. Neither the monthly reports nor the supervisor’s e-mail
           identified the names of the property managers performing the work or the projects
           where the work was performed. In addition, we could find no correlation between
           the hours shown on the time sheet and any payroll period(s). No auditable or
           supporting documentation was provided by Avesta to substantiate that Avesta
           adjusted time allocations across properties and modified timesheets. During the
           audit, OIG discussed Avesta’s failure to adequately support allocation of property
           manager salaries, and OIG provided Avesta more than sufficient time to provide
           support.

Comment 49 There are no exaggerations in the report. HUD states that salary and fringe
           benefit costs may be prorated among projects but only for the amount of time
           actually spent performing front-line duties for that project and not by the number
           of units in the project. Also, OIG was never provided specific documentation
           establishing that properties were being undercharged for property manager
           services. Also, as noted in recommendation 3A of the report, OIG requested that
           Avesta provide documentation in support of the distribution of property manager
           salaries to the HUD projects. We did not elect to conduct our own analysis of
           property manager costs but planned on making this a recommendation in the
           report. Based on the statement, it is clear that Avesta has misinterpreted finding
           3. Avesta’s implication that OIG is specifically questioning Avesta’s practice of
           allocating accounting and bookkeeping costs on a per-unit basis is incorrect. We
           recognize this is not a front line duty and HUD approved this practice.

Comment 50 During a discussion with Avesta staff on April 29, 2010, Avesta’s vice president
           of management stated that Avesta’s cost allocation system for property managers
           could be improved. The vice president further stated that Avesta recently began
           asking its property managers, maintenance technicians, janitors, and resident
           service coordinators to document the hours they work by project on the
           timesheets.

Comment 51 Finding 3 states the following: “HUD regulations also dictate that costs to the
           project for centralized accounting and computer services provided by the
           management agent (Avesta) may not exceed the cost of procuring comparable
           services from an independent vendor. Each year, the management agent must
           determine whether these costs are at or below market rate and maintain such
           evidence on site.” Avesta did not comply with HUD regulations for this
           requirement. We were informed by Avesta’s chief financial officer on April 29,
           2010, that Avesta failed to conform to this requirement.

Comment 52 The audit found that Avesta had been instructed by the HUD Manchester field
           office to break out specific costs, including accounting and bookkeeping charges,
           consolidated in the “other administrative costs” account, but Avesta failed to fully
           comply with these instructions.

                                              67
Comment 53 A properly promulgated handbook (or other guidance) is enforceable to the same
           extent as rules promulgated under the Administrative Procedures Act (APA) with
           notice and public comment, provided that it properly interprets a statute or
           regulations, or it is imposed upon a third party by contract or agreement.

Comment 54 OIG made minor changes to the report based on Avesta’s comments to further
           clarify the scope and methodology section of the draft report. However, OIG will
           not address each item in this section because, aside from the minor corrections,
           these items were already covered in previous comments.

Comment 55 Comments related to internal controls and appendixes of the report reflect the
           same arguments presented in the previous comments on the highlights and
           findings. Therefore, further comment is not necessary since it’s already covered
           in comments 1 through 54.




                                             68
Appendix C

                                         CRITERIA


Finding 1

HUD Handbook 4381.5, paragraph 6.50(a), provides that the agent is expected to solicit written
cost estimates from at least three contractors or suppliers for any contract for ongoing supplies or
services which are expected to exceed $10,000 per year or the threshold established by the HUD
Area Office with jurisdiction over the project. Paragraph 6.50(b) provides that for any contract
for ongoing supplies or services estimated to cost less than $5,000 per year, the agent should
solicit verbal or written cost estimates to ensure that the project obtains services, supplies, and
purchases at the lowest possible cost. The agent should make a record of any verbal estimates
obtained. In addition, paragraph 6.50(c) prescribes that documentation of all bids should be
retained as part of the project’s records for 3 years following the completion of the work.

Paragraph 11(g) of the management agreement/certification between the owner and management
agent provides that the agent agrees to provide minorities, women, and socially and
economically disadvantaged firms equal opportunity to participate in the project’s procurement
and contracting activities.

Paragraphs 4(a), (c), (e), and (f) of the management agreement/certification between the project
owner and management agent provide that the agent agrees to

               Ensure that all expenses of the project are reasonable in amount and necessary to
                the operations of the project.

               Obtain contracts, materials, supplies, and services on terms most advantageous to
                the project.

               Solicit verbal or written cost estimates and document the reasons for accepting
                other than the lowest bid.

               Provide that copies of such documentation will be maintained and made available
                during normal business hours.




                                                69
Finding 2

Paragraph 6b of the regulatory agreement between the property owner and HUD provides that
the owners shall not pay out any funds except for reasonable operating expenses.

Section 9(b) of the regulatory agreement limits allowable costs for goods and services provided
under arms-length transactions. This requirement states that payment for services, supplies, or
materials shall not exceed the amount ordinarily paid for such services, supplies, or materials in
the area where the services are rendered or the supplies or materials furnished.

HUD Handbook 4381.5, paragraph 6.39(c), dictates that the salaries of the agent’s supervisory
personnel must be paid from management fees.

Paragraph 6.37(c) of HUD Handbook 4381.5 provides that salaries and fringe benefits of
personnel performing front-line duties are prorated among the properties served in proportion to
actual use.

Title 2 of the Code of Federal Regulations, Cost Principles for Non-Profit Organizations,
Appendix B of Part 230, Sections [(m)(1)( 2)(a)(b)(c)] state, in part, the following: Salaries and
wages will be based on documented payrolls and the distribution of salaries and wages must be
supported by employee activity reports, which reflect the distribution of activity of each
employee. The reports must be maintained for all staff members and must account for the total
activity for which employees are compensated. The reports must be signed by the individual
employee, or by a responsible supervisory official having firsthand knowledge of the activities
performed by the employee, that the distribution of activity represents a reasonable estimate of
the actual work performed by the employee during the periods covered by the reports.


Finding 3

Paragraph 6.38(a) of HUD Handbook 4381.5 dictates that costs to the project for centralized
accounting and computer services provided by agents not exceed the cost of procuring
comparable services from an independent vendor. Each year, agents must determine that these
costs are at or below market rate and maintain such evidence on site.

Paragraph 6.37(c) of HUD Handbook 4381.5 provides that salaries and fringe benefits of
personnel performing front-line duties are prorated among the properties served in proportion to
actual use.

Paragraph 3 of the regulatory agreement between the property owner and HUD provides that the
owners shall not pay out any funds except for reasonable operating expenses.

Title 2 of the Code of Federal Regulations, Cost Principles for Non-Profit Organizations,
Appendix B of Part 230, Sections [(m)(1)( 2)(a)(b)(c)] state, in part, the following: Salaries and
wages will be based on documented payrolls and the distribution of salaries and wages must be
supported by employee activity reports, which reflect the distribution of activity of each

                                                70
employee. The reports must be maintained for all staff members and must account for the total
activity for which employees are compensated. The reports must be signed by the individual
employee, or by a responsible supervisory official having firsthand knowledge of the activities
performed by the employee, that the distribution of activity represents a reasonable estimate of
the actual work performed by the employee during the periods covered by the reports.




                                               71
Appendix D

                    PROCUREMENTS BELOW $10,000


                                 Costs for 3-year       Number of projects serviced
         Type of service             period
Cleaning and janitorial                     $ 8,265                 13
Maintenance                                  14,792                  1
Fire protection                              10,256                 6
First septic treatment company                8,920                  7
Second septic treatment                       9,505                 1
company
Grounds work                                    8,400               1
First elevator service company                  7,060               1
Second elevator service                         8,357               2
company
Trash removal                               10,996                  2
Smoke alarm and safety                       6,946                  20
equipment
First landscaping company                   11,806                   1
Alarms and sprinklers                       15,367                  24
Security                                    12,029                   6
Third elevator service company               7,245                   1
Second landscaping company                  25,105                   1
Water treatment                             15,217                   3
Subtotal                                  $180,266




                                           72
Appendix D

                     PROCUREMENTS BELOW $10,000


                                         Costs for 3-year   Number of projects
            Type of service                  period             serviced
Elderly care                                    $ 30,221           1
Extermination                                      31,822          23
Carpet & flooring replacement                     195,438          24
First snow removal/grounds care                   140,590          10
company
Painting                                          71,694           25
Appliances                                        45,625           17
Independent public accounting services           383,095           27
Plumbing                                          35,039           18
First landscaping company                         59,647            3
Second snow removal/grounds care                 296,043           15
company
Care of building environmental system            484,909           25
Second landscaping company                         4,230            1
First trash removal company                       82,016           21
Second trash removal company                      33,962           12
Subtotal                                         180,266
Total                                         $2,074,597




                                            73
Appendix E

   HUD PROJECT TYPES MANAGED BY AVESTA HOUSING


Project
                                               Federal
                         HUD      9839           Rent       2 CFR     HUD Regulatory
                        4381.5 Certification   Subsidy     Part 230     Agreement
Little Falls Landing     Yes       Yes          PRAC          Yes     Capital Advance
Unity Gardens            Yes       Yes          PRAC          Yes     Capital Advance
Baron Place              Yes       Yes          PRAC          Yes     Capital Advance
Foxwell II               Yes       Yes           202/8        Yes       Direct Loan
Jordan Bay Place         Yes       Yes          PRAC          Yes     Capital Advance
Elwell Farms             Yes       Yes          PRAC          Yes     Capital Advance
Five Graham Street       Yes       Yes          PRAC          Yes     Capital Advance
Blackstone I & II        Yes        No         8/NC/SR       Yes            No
Foxwell I                Yes        No         8/NC/SR        Yes           No
Mary Ann Manor           Yes        No         8/NC/SR        Yes           No
New Marblehead
Manor                    Yes        No         8/NC/SR       Yes            No
New Marblehead North     Yes        Yes        Section 8     Yes            No
Golden Park Village      Yes        No         23/8 + 8      Yes            No
                                                NC/SR
Applewood Apartments     Yes        Yes        Section 8     Yes            No
Avignon Apartments       Yes        No         8 NC/SR       Yes            No
Brookhollow
Apartments               Yes        Yes        Section 8     Yes            No
Hill Street Terrace      Yes        No           23/8        Yes            No
Kallock Terrace          Yes        Yes        Section 8     Yes            No
Livermore Terrace        Yes        No           23/8        Yes            No
Maple Grove Terrace      Yes        No         8/NC/SR       Yes            No
Orchard Terrace          Yes        Yes        Section 8     Yes            No
Pinebluff Apartments     Yes        Yes        Section 8     Yes            No
Pinewood Apartments      Yes        No         8/NC/SR       Yes            No
Prescott Heights         Yes        Yes        Section 8     Yes            No
Pumkinville
Apartments               Yes        Yes        Section 8     Yes            No
Ridgewood Apartments     Yes        Yes        Section 8     Yes            No
Stonecrest Apartments    Yes        Yes        Section 8     Yes            No
Sunnyside Apartments     Yes        Yes        Section 8     Yes            No
Wayside Apartments       Yes        No         8/NC/SR       Yes            No
Woodsedge Apartments     Yes        Yes        Section 8     Yes            No

                                          74
Appendix F

    MAINTENANCE, JANITORIAL, AND RSC FEES JANUARY 1,
               2007 TO DECEMBER 31, 2009


          Project                  Maintenance       Janitorial         RSC3           Totals
Little Falls Landing                 $31,330.00     $31,330.00     $25,414.94      $88,074.94
Unity Gardens                         37,231.95      19,188.05      19,188.05       75,608.05
Baron Place                           51,307.31      20,562.39      37,591.66      109,461.36
Foxwell II                            10,253.97       5,078.63      10,200.36       25,532.96
Jordan Bay Place                      38,839.11       9,039.31      16,719.05       64,597.47
Elwell Farms                          17,489.38      16,917.38      12,228.73       46,635.49
Five Graham Street                    67,279.29      19,179.05      19,517.39      105,975.73
Blackstone I & II                     39,623.96      11,405.96       9,619.96       60,649.88
Foxwell I                             79,525.36      29,822.00      37,115.00      146,462.36
Mary Ann Manor                         2,121.94         680.98           0.00        2,802.92
New Marblehead Manor                  19,881.36       9,940.64           0.00       29,822.00
New Marblehead North                  24,764.96       9,905.96      39,623.96       74,294.88
Golden Park Village                   50,422.64      15,351.94       7,694.63       73,469.21
Applewood Apartments                  19,812.04       4,953.04       5,837.05       30,602.13
Avignon Apartments                    11,730.80       2,725.72           0.00       14,456.52
Brookhollow Apartments                20,401.37       9,905.96      10,347.95       40,655.28
Hill Street Terrace                   26,220.67      10,789.97       9,333.96       46,344.60
Kallock Terrace                       39,623.96      10,191.96      10,061.95       59,877.87
Livermore Terrace                          0.00           0.00           0.00            0.00
Maple Grove Terrace                   19,881.36       4,970.36       9,634.64       34,486.36
Orchard Terrace                       39,623.96      19,812.04      10,347.95       69,783.95
Pinebluff Apartments                  39,623.96      19,760.05      10,347.95       69,731.96
Pinewood Apartments                    4,137.77         689.63          95.68        4,923.08
Prescott Heights                      29,640.00      19,760.05       9,879.95       59,280.00
Pumkinville Apartments                19,812.04       9,905.96      10,347.95       40,065.95
Ridgewood Apartments                  34,671.04      19,812.04      10,347.95       64,831.03
Stonecrest Apartments                 19,811.05       4,953.04      10,347.95       35,112.04
Sunnyside Apartments                  59,436.00       9,905.96      10,347.95       79,689.91
Wayside Apartments                    14,497.73       1,434.17       1,539.50       17,471.40
Woodsedge Apartments                  24,764.96       9,619.96      10,633.95       45,018.87
Total                               $893,759.94    $357,592.20    $364,366.06   $1,615,718.20




3
    Resident Service Coordinator

                                                  75
Appendix G

    PROPERTY MANAGER SALARIES JANUARY 1, 2007 TO
                DECEMBER 31, 2009



                        Fiscal Year      Fiscal Year       Fiscal Year
         Project           2007             2008              2009           Total
Little Falls Landing       $12,480.00        $9,234.00         $8,039.70    $29,753.70
Unity Gardens               11,440.00        12,740.00          8,843.67     33,023.67
Baron Place                 17,645.04        15,336.10         14,018.55     46,999.69
Foxwell II                   6,815.37          6,794.68         3,438.47     17,048.52
Jordan Bay Place             5,668.02          4,506.68         7,107.25     17,281.95
Elwell Farms                 9,360.00        11,620.92         10,886.87     31,867.79
Five Graham Street           6,101.37          6,222.68        12,307.68     24,631.73
Blackstone I & II                0.00              0.00             0.00          0.00
Foxwell I                        0.00              0.00             0.00          0.00
Mary Ann Manor                   0.00              0.00             0.00          0.00
New Marblehead Manor             0.00              0.00         8,039.04      8,039.04
New Marblehead North             0.00              0.00         8,039.04      8,039.04
Golden Park Village              0.00              0.00             0.00          0.00
Applewood Apartments         6,101.37          6,794.68         7,614.84     20,510.89
Avignon Apartments               0.00              0.00             0.00          0.00
Brookhollow
                                                5,650.68
Apartments                   6,101.37                          7,668.36      19,420.41
Hill Street Terrace              0.00               0.00           0.00           0.00
Kallock Terrace              6,101.37           6,794.68       7,672.44      20,568.49
Livermore Terrace                0.00               0.00       7,119.36       7,119.36
Maple Grove Terrace              0.00               0.00           0.00           0.00
Orchard Terrace              6,101.37           6,794.68      10,741.20      23,637.25
Pinebluff Apartments         6,101.37           6,794.68      11,422.32      24,318.37
Pinewood Apartments              0.00               0.00         731.37         731.37
Prescott Heights             7,626.63           8,493.32       9,518.76      25,638.71
Pumpkinville
Apartments                  6,101.37            6,794.68       6,818.28      19,714.33
Ridgewood Apartments        6,101.37            6,794.68       8,522.76      21,418.81
Stonecrest Apartments       6,101.37            6,794.68       5,113.56      18,009.61
Sunnyside Apartments        9,152.00           10,192.00      12,059.88      31,403.88
Wayside Apartments              0.00                0.00           0.00           0.00
Woodsedge Apartments        6,101.37            6,794.68       8,285.13      21,181.18
Totals                   $141,200.76         $145,148.50    $184,008.53    $470,357.89


                                        76
Appendix H

    ACCOUNTING BOOKKEEPING SERVICES AND OTHER
     ADMINISTRATIVE EXPENSES JANUARY 1, 2007 TO
                 DECEMBER 31, 2009


       Project           Fiscal Year     Fiscal Year     Fiscal Year
                             2007           2008            2009        Total
Little Falls Landing        $7,200.00            $0.00      $4,335.10    $11,535.10
Unity Gardens                 1,716.68            0.00       4,768.61      6,485.29
Baron Place                       0.00            0.00       8,390.31      8,390.31
Foxwell II                    4,638.37            0.00       2,115.16      6,753.53
Jordan Bay Place              3,807.00            0.00       3,215.41      7,022.41
Elwell Farms                 6,000.03             0.00       5,630.81     11,630.84
Five Graham Street            5,806.13            0.00       6,461.93     12,268.06
Blackstone I & II                 0.00            0.00         377.96        377.96
Foxwell I                         0.00            0.00         576.25        576.25
Mary Ann Manor                    0.00            0.00         120.00        120.00
New Marblehead Manor          3,050.63        3,397.32         400.00      6,847.95
New Marblehead North         3,050.63         3,397.32       4,362.96     10,810.91
Golden Park Village               0.00            0.00         756.96        756.96
Applewood Apartments         7,077.62         7,212.93       3,523.80     17,814.35
Avignon Apartments                0.00            9.17           0.00          9.17
Brookhollow Apartments       8,149.13         9,067.96       4,362.96     21,580.05
Hill Street Terrace               0.00            0.00         472.00        472.00
Kallock Terrace               9,878.88       10,992.32       4,362.96     25,234.16
Livermore Terrace                 0.00            0.00       1,300.77      1,300.77
Maple Grove Terrace               0.00            0.00         358.04        358.04
Orchard Terrace              11367.62        12,649.04       6,041.28     30,057.94
Pinebluff Apartments        10,203.38        11,353.68       5,202.12     26,759.18
Pinewood Apartments               0.00            0.00         383.00        383.00
Prescott Heights              8,891.63        9,893.96       4,362.96     23,148.55
Pumkinville Apartments       7,193.12         8,003.68       3,523.80     18,720.60
Ridgewood Apartments         8,370.12         9,313.68       4,362.96     22,046.76
Stonecrest Apartments        4,985.75         5,547.64       2,683.53     13,216.92
Sunnyside Apartments         8,680.87         9,659.32       4,362.96     22,703.15
Wayside Apartments              148.33            0.00          38.50        186.83
Woodsedge Apartments         7,076.63         7,874.68       3,313.92     18,265.23
Totals                   $127,292.55      $108,372.70      $90,167.02   $325,832.27




                                          77