OFFICE OF AUDIT REGION 9 LOS ANGELES, CA Bay Vista Methodist Heights, San Diego, CA Multifamily Trust Fund Agreement 2013-LA-1003 MARCH 14, 2013 Issue Date: March 14, 2013 Audit Report Number: 2013-LA-1003 TO: Thomas W. Azumbrado, Acting Director, Los Angeles Multifamily Hub, 9AHMLAP FROM: Tanya E. Schulze, Regional Inspector General for Audit, Los Angeles Region, 9DGA SUBJECT: Bay Vista Methodist Heights, San Diego, CA, Violated Its Agreement With HUD When Administering Its Trust Funds Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), final results of our review of the Bay Vista Methodist Heights multifamily trust fund agreement. HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on recommended corrective actions. For each recommendation without a management decision, please respond and provide status reports in accordance with the HUD Handbook. Please furnish us copies of any correspondence or directives issued because of the audit. The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its publicly available reports on the OIG Web site. Accordingly, this report will be posted at http://www.hudoig.gov. If you have any questions or comments about this report, please do not hesitate to call me at 213-534-2471. March 14, 2013 Bay Vista Methodist Heights, San Diego, CA, Violated Its Agreement With HUD When Administering Its Trust Funds Highlights Audit Report 2013-LA-1003 What We Audited and Why What We Found We audited Bay Vista Methodist Bay Vista violated its trust fund agreement with HUD. Heights, San Diego, CA, to determine Specifically, it used more than $5 million in trust funds the full extent of the misuse of its trust without HUD’s approval for ineligible operating funds. We selected Bay Vista for expenses. In addition, Bay Vista could not support review based on a referral from the more than $1 million in expenditures on draw requests Office of Multifamily Housing, stating that were approved by HUD. that Bay Vista violated its trust fund agreement with the U.S. Department of Housing and Urban Development (HUD) because the former chief financial officer transferred more than $3 million in restricted funds into Bay Vista’s operating account to meet general operating expenses rather than to develop, purchase, construct, preserve, and rehabilitate affordable housing. What We Recommend We recommend that the Acting Director of HUD’s Los Angeles Office of Multifamily Housing require Bay Vista to (1) repay more than $5 million to the trust fund from non-Federal funds; (2) support an additional $1 million or repay the trust; (3) replace the management agent with a non-identity- of-interest agent; and (4) implement policies, procedures, and controls to restrict the use of trust funds to only allowable expenses and ensure that the trust funds are not commingled with other funds. TABLE OF CONTENTS Background and Objective 3 Results of Audit Finding: Bay Vista Violated Its Agreement With HUD When Administering Its Trust Funds 5 Scope and Methodology 9 Internal Controls 11 Appendixes A. Schedule of Questioned Costs 13 B. Auditee Comments and OIG’s Evaluation 14 C. Criteria 22 D. Summary of Payments From Bay Vista Operating Account 24 2 BACKGROUND AND OBJECTIVE Bay Vista Methodist Heights is a nonprofit organization that purchased and developed a 268-unit apartment complex located in San Diego, CA, in 1969. The apartment complex was subject to a deed of trust note insured under section 221(d)(3) of the National Housing Act, with a principal amount of more than $3.6 million and maturity date of January 1, 2010. Bay Vista sold the apartment complex to the Amerland Group, LLC, a California limited liability company, in July 2007. The sale involved a prepayment request to the U.S. Department of Housing and Urban Development (HUD), and as a condition of approval, HUD and Bay Vista entered into an agreement in February 2008, which required Bay Vista to deposit 75 percent of the net proceeds of the sale into a housing trust fund to be used to develop, preserve, construct, or rehabilitate affordable housing units with a production goal of 675 units. The property sold for $21.4 million, and approximately $14.8 million was deposited into the housing trust fund. Bay Vista purchased two properties with the trust funds: Hillside Park Apartments, located in Hemet, CA; and Estancia, located in Desert Hot Springs, CA. It also purchased Tierra del Rey using the non-trust-fund portion of the apartment complex proceeds but rehabilitated the property using trust funds. In addition, Bay Vista used trust funds for the predevelopment cost of Lisbon Road, a 3.7-acre plot of land it owns. Bay Vista’s management agent is GMP Development Group, a limited liability and identity-of- interest company that was established and owned by the four Bay Vista managers. Three of the managers were also a part of the Bay Vista board. Since its inception, GMP has had no management clients except Bay Vista. In July 2011, Bay Vista’s general counsel, current chief executive officer, and owner of GMP identified irregularities concerning the balance in the trust fund. The chief financial officer was asked to provide accurate reports of trust fund withdrawals; however, questions were not adequately answered, and inaccurate reports were provided to the officers of Bay Vista. The chief financial officer was placed on administrative leave in September 2011 and later dismissed from Bay Vista. In August 2011, Bay Vista’s independent auditor, who prepared the fiscal year end 2008 to 2010 financial statements, was hired as chief financial officer. He began to reconcile the balance of the trust fund and discovered unauthorized transfers to the Bay Vista operating account as well as unauthorized expenditures. He also determined that Bay Vista, Lisbon Road, and the Estancia properties were operating at a net loss and could not be sustained by the net operating profits at Hillside Park and Tierra del Rey, resulting in a significant cash shortfall of approximately $2.7 million. His audit results were shared with an independent accounting firm that Bay Vista retained to determine the application of withdrawals from the trust account between February 2008 and August 2011. The firm determined that more than $3.3 million was withdrawn from the trust account and used toward operating expenses and not for the requested purpose. Shortly thereafter, the chief executive officer and treasurer resigned. The HUD Los Angeles Office of Multifamily Housing was notified of these deficiencies. Bay Vista volunteered to recapitalize $3.3 million to the trust fund. It also referred the matter to the 3 Office of Audit for review. Bay Vista plans to recover the unauthorized trust fund withdrawals and recapitalize the trust account by pursuing its insurance policies. During our review, Bay Vista’s Estancia property fell under a receivership and is in foreclosure status. In addition, its Lisbon Road property is still raw land, and Bay Vista is attempting to sell it or locate a joint contributor to assist in developing the land due to the lack of excess cash to develop the property. As of the most recent HUD approved draw request, dated June 2012, the trust account had a remaining balance of $316,404 of the original $14.8 million, despite the acquisition of only 432 affordable housing units including the Estancia’s 120 units and the Lisbon Road property. With the absence of the Estancia units, Bay Vista was able to meet only 312 of its 675-unit good faith production goal, or 46 percent. The objective of this review was to determine the full extent of the misuse of its trust funds. 4 RESULTS OF AUDIT Finding: Bay Vista Violated Its Agreement With HUD When Administering Its Trust Funds Bay Vista violated its agreement with HUD when administering its trust funds. It used more than $5 million in trust funds without HUD’s approval for ineligible operating expenses. In addition, it could not support more than $1 million in expenditures and spent $14,250 on ineligible items included on draw requests that were approved by HUD. This condition occurred because Bay Vista failed to exercise proper supervision and oversight of its trust accounts and lacked adequate policies, procedures, and controls to monitor and limit the use of its trust funds. As a result, funds were not disbursed and used to promote the development of additional affordable housing for qualified, low-income persons. Trust Funds Were Inappropriately Used for Operating Expenses Bay Vista inappropriately transferred more than $5 million of its trust funds into an operating account to be used for operating expenses that were not originally approved by HUD. Paragraph E, section 2, of the trust fund agreement required HUD approval before Bay Vista withdrew trust funds (see appendix C). Although Bay Vista did request and obtain HUD’s approval to draw $11.3 million in trust funds for the intended acquisition of Devonshire, Casa del Sol, Vista Gardens, the Palms of La Mesa, and Plaza del Sol Apartments, it did not ultimately acquire these properties. Instead, it withdrew and transferred more than $5 million1 of these funds to its Bay Vista operating account through multiple fund transfers. Bay Vista spent its trust funds on inappropriate operating expenses without HUD’s knowledge or approval. Therefore, more than $5 million in expenses are ineligible and should be repaid. Trust Fund Submission Requests Were Unsupported and Ineligible When Bay Vista submitted its trust fund submission requests to HUD, it only provided a spreadsheet with descriptions of expenses. Some of the descriptions listed were not detailed enough or appeared misleading, resulting in HUD believing that the expenses were trust fund eligible and approving the requests. 1 Because Bay Vista did not provide the accounting firm it hired with a complete set of records, it identified only $3.3 million in inappropriate transfers (see Background and Objective), an understatement of almost $2 million. 5 However, after reviewing the source documentation, we determined that of the eight HUD-approved trust fund draw requests sampled, five included more than $1 million in unsupported and $14,250 in ineligible expenses (see chart below for details). Four of the eight requests were prepared when the former chief financial officer was still employed at Bay Vista and responsible for managing financial transactions, while one request was prepared after the former chief financial officer was dismissed. Of the more than $1 million in unsupported expenses, $18,599 was requested after the former chief financial officer was dismissed from Bay Vista. This amount represented the salaries of the managers that were not supported by timesheets or other documentation and was based on an estimate rather than the actual number of hours worked. The other unsupported amounts were related to legal and consulting, management and development costs, senior housing project development, payroll personnel, and other unsupported expenses such as payments to the former treasurer. We requested the backup documentation for these items from the chief executive officer; however, she was unable to provide them due to a lack of documentation or lack of knowledge of where the documentation might be located. The ineligible expenses charged were operating in nature and should not have been charged to the trust. They consisted of time spent studying for a broker’s exam, preparing and revising a conflict-of- interest policy, and drafting the property management agreement between GMP and Bay Vista (see paragraph C, Section 4 of the trust fund agreement in appendix C). Ineligible and unsupported expenses from drawn requests Type of Expense Request #4 & #7 Request #11 Request #14 Request #17 Total Ineligible expenses $ 11,550 $ 2,700 $ - $ - $ 14,250 Ineligible Total $ 11,550 $ 2,700 $ - $ - $ 14,250 Unsupported legal/consulting $ - $ 77,571 $ 396,000 $ 18,599 $ 492,170 Unsupported management/ development costs $ 42,000 $ 66,000 $ - $ - $ 108,000 Unsupported senior housing project development $ - $ - $ 113,069 $ - $ 113,069 Unsupported payroll personnel $ - $ - $ 233,013 $ - $ 233,013 Unsupported other $ - $ 108,500 $ 1,500 $ - $ 110,000 Unsupported Totals $ 42,000 $ 252,071 $ 743,582 $ 18,599 $ 1,056,252 Bay Vista Lacked Proper Policies, Procedures, and Supervision To Prevent Overspending of Trust Funds The profits earned from Hillside Park and Tierra del Rey Apartments were not sufficient to independently maintain the operations at the Estancia and Lisbon Road properties, which were operating at a net deficit. In addition, Bay Vista was unable to financially support excessive GMP and Bay Vista managers’ salaries, GMP owner distributions, GMP’s management fees, unreimbursed personnel expenses on Bay Vista credit cards, its administrative office costs, and other operating related costs without drawing money from the trust funds (see appendix D). 6 This occurred because Bay Vista did not have proper policies and procedures in place to monitor and limit the use of its trust funds. Since then and as part of its plan to recapitalize the HUD trust account, Bay Vista had drafted procedures to prevent the recurrence of unauthorized trust fund withdrawals; however, the procedures had not been fully implemented. Further, Bay Vista did not exercise proper supervision and oversight of the uses of its trust accounts, which according to the three managers, was largely the responsibility of the former chief financial officer. The former chief executive officer admitted that he was lax in supervising the former chief financial officer because he “trusted the guy.” The current chief executive officer stated that she and the former chief financial officer were basically running Bay Vista and that the former chief executive officer and treasurer were not always in the office and relied heavily on the two managers to acquire properties and handle the financial aspects of the organization. Conclusion Bay Vista did not fully comply with the terms of its trust fund agreement with HUD and was unable to meet its production goal of 675 units. It misused more than $5 million in trust funds without HUD’s approval for ineligible operating expenses. In addition, it could not support more than $1 million in expenditures and spent $14,250 on ineligible items that were included on draw requests approved by HUD. As a result, funds were not disbursed and used to promote the development of additional affordable housing for qualified, low-income persons. Recommendations We recommend that the Acting Director of HUD’s Los Angeles Office of Multifamily Housing require Bay Vista to 1A. Repay the $5,178,293, transferred without proper HUD approval and used for ineligible expenses, to the trust fund from non-Federal funds. 1B. Provide support showing the eligibility and reasonableness of the $1,056,252 in trust funds disbursed or repay the trust fund from non- Federal funds. 1C. Repay $14,250 in ineligible expenses to the trust fund from non-Federal funds. 1D. Replace GMP Development Group as Bay Vista’s management agent with a non-identity-of-interest agent. 7 1E. Implement proper policies, procedures, and controls to restrict the use of trust funds to only allowable non-operating-type expenses and ensure that the trust funds are not commingled with Bay Vista’s and its properties’ operating funds. 8 SCOPE AND METHODOLOGY We conducted our onsite work at the Bay Vista administrative office located in San Diego, CA, between May and December 2012. Our audit period generally covered the period July 2009 to August 2011. We expanded our scope as necessary. To accomplish our objective, we • Reviewed the HUD and Bay Vista trust agreement. • Reviewed the GMP and Bay Vista administrative management agreement. • Reviewed Bay Vista’s trust, operating, and property operating bank accounts and corresponding general ledger entries. • Reviewed GMP’s payroll and members’ distribution accounts. • Reviewed Paychex reports, internally maintained reports, and contract labor charges to Bay Vista. • Reviewed management and administrative fee charges to Bay Vista. • Interviewed current and former managers and staff. • Interviewed the independent accounting firm that performed a review of the trust accounts. • Interviewed HUD staff. • Reviewed Bay Vista’s fiscal yearend 2008 through 2010 financial statement audit reports. • Reviewed trust fund submission requests, expenses, and supporting documentation. • Reviewed board meeting minutes, resolutions, and the list of Bay Vista’s board members. From a universe of 19 trust fund submission requests, we reviewed a nonstatistical sample of 8 requests totaling more than $3.5 million. HUD approved the drawdowns, which included expenses related to the administration of various properties, rehabilitation of Tierra del Rey, legal expenses for Estancia, and a loan modification bid to preserve the Lisbon Road property. Of the eight requests, five were selected because they occurred when the former chief financial officer was still heavily involved in managing the financial transactions at Bay Vista. We selected three additional requests that occurred after the former chief financial officer was 9 dismissed to determine whether changes were made in retaining supporting documentation for expenses after the former chief financial officer’s dismissal. We chose this approach since testing 100 percent of the population would not have been feasible. Therefore, the sampling results apply only to the items tested and cannot be projected to the universe or population. We performed an extensive analysis of the trust fund deposits into the Bay Vista operating account since the trust funds were commingled with other sources of funds. We reviewed more than $11 million by tracing the deposits from Bay Vista’s various trust accounts, property operating accounts, other Bay Vista accounts, reimbursement for credit card charges, refund of escrow fees for properties not purchased, and nontrust proceeds from the sale of the Bay Vista apartments, as well as other deposits from which the sources of funds were not identifiable. Due to the number and complexity of transactions between the Bay Vista and GMP accounts, we were able to review only $6.9 million of the $11 million in payments from the Bay Vista operating account. We targeted larger payments made to one source. 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. 10 INTERNAL CONTROLS Internal control is a process adopted by those charged with governance and management, designed to provide reasonable assurance about the achievement of the organization’s mission, goals, and objectives with regard to • Effectiveness and efficiency of operations, • Reliability of financial reporting, and • Compliance with applicable laws and regulations. Internal controls comprise the plans, policies, methods, and procedures used to meet the organization’s mission, goals, and objectives. Internal controls 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: • Effectiveness and efficiency of program operations – Policies and procedures intended to ensure that trust funds are used for eligible purposes. • Reliability of financial information – Implementation of policies and procedures to reasonably ensure that relevant and reliable information is obtained to adequately support program expenditures. • Compliance with applicable laws and regulations – Implementation of policies and procedures to ensure that trust fund activities comply with applicable HUD rules and requirements. We assessed the relevant controls identified above. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, the reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or efficiency of operations, (2) misstatements in financial or performance information, or (3) violations of laws and regulations on a timely basis. 11 Significant Deficiency Based on our review, we believe that the following item is a significant deficiency: • Bay Vista did not have adequate controls and proper oversight to reasonably ensure that its trust funds were used for eligible purposes (finding). 12 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS Recommendation Ineligible 1/ Unsupported 2/ number 1A $5,178,293 1B $1,056,252 1C $14,250 Total $5,192,543 $1,056,252 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or Federal, State, or local policies or regulations. 2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when we cannot determine eligibility at the time of the audit. Unsupported costs require a decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of departmental policies and procedures. 13 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 2 Comment 1 * Names redacted for privacy reasons 2 The auditee provided a cover letter to its response (page 1) that it requested not be included as part of its response. 14 Comment 2 * Names redacted for privacy reasons 15 Comment 2 Comment 3 Comment 4 * Names redacted for privacy reasons 16 Comment 5 Comment 5 Comment 6 * Names redacted for privacy reasons 17 Comment 6 Comment 7 18 Comment 8 19 OIG Evaluation of Auditee Comments Comment 1 We agree that Bay Vista attempted to meet its “good faith” 675 unit production goal. However, only 432 affordable housing units were purchased by June of 2012, and due to the sale of Estancia (December 2012), Bay Vista’s production goal decreased to 312 since it was unable to maintain such units. To add clarification, we added “good faith” to the Background and Objectives section of our report. Comment 2 Although we cannot speak for the HUD LA Multifamily HUB office, we did note that paragraph E, section 2 of the trust fund agreement outlines procedures HUD intended to implement to aid in the disbursement of trust funds. Please see Appendix C of the audit report for details. Comment 3 Although we cannot speak for the HUD LA Multifamily HUB office, it is our understanding that Bay Vista previously had a contentious relationship with HUD. However, Bay Vista could still have developed internal procedures and controls even if there were issues dealing with HUD. In addition, when the new director was installed in January of 2009 and problems with the HUD LA Multifamily HUB office were alleviated, Bay Vista still did not establish adequate operating procedures and controls to prevent further misspending of trust fund monies. Bay Vista cited the former chief financial officer as the cause for all the inappropriate transfers; however, he was not put on administrative leave until September 2011. Bay Vista had ample time to establish operating procedures prior to September 2011 to address its internal control weaknesses. Comment 4 Our report cited that Bay Vista lacked proper policies, procedures, and supervision to prevent overspending of its trust accounts. We did not state that Bay Vista had no policies, procedures, and supervision. We agree that Bay Vista had procedures to prepare its trust fund submissions and internal procedures to draw down the funds; however, it lacked the policies, procedures, and supervision to control how the funds were spent once they have been drawn down from the trust account – as noted by Bay Vista’s acknowledgement in the breakdown of procedures. Comment 5 We acknowledge Bay Vista’s assertion that the withdrawals were not authorized by Bay Vista but were completed by the former chief financial officer. However, it was Bay Vista’s responsibility to ensure the trust funds were used in accordance with the agreement, including ensuring appropriate procedures and controls were in place to prevent misuse of the funds. Comment 6 We agree that Bay Vista attempted to purchase Devonshire, Casa del Sol, Vista Gardens, the Palms of La Mesa, and Plaza del Sol apartments and have stated in the report that Bay Vista intended to purchase such properties. Our report did not 20 question the fact that Bay Vista attempted to purchase these properties but did question how the funds were actually used. Comment 7 We disagree. Five of the eight requests that we selected and reviewed were prepared when the former chief financial officer was employed at Bay Vista and the remaining three requests reviewed were prepared after the former chief financial officer was dismissed. We did not review all of the submission requests from when the former chief financial officer was employed at Bay Vista. Comment 8 We amended our report to state that Bay Vista volunteered to recapitalize its trust. 21 Appendix C CRITERIA 1. Housing Trust Fund Agreement Paragraph C, Section 4 Use of Trust Account for Affordable Housing Units: The owner may use the trust account for any expenses related to the predevelopment, acquisition, development, preservation, construction and/or rehabilitation of units intended to be developed as Affordable Housing Units, regardless of whether such Affordable Housing Units are developed or the related transactions closes so long as the owner has proceeded in good faith. Such expenses may include, but shall not be limited to the following: a) Predevelopment and development costs b) Application fees, loan fees and discounts c) Appraisal, consultant, legal, architectural, and engineering fees d) Reasonable administrative and office overhead and expenses e) Reasonable insurance costs f) Fees for consultants assisting in evaluating affordable housing opportunities g) Corporate filing fees, franchise, business, and other related taxes h) Trustee fees and other fees related to administration of the Trust Account i) Costs associated with investigations of the owner and/or the property being conducted by HUD’s Office of Inspector General 2. Housing Trust Fund Agreement Paragraph E, Section 2 Disbursement of funds - Using the trust fund authorization form or similar form approved by the parties to this agreement, HUD shall instruct the Depository Bank to disburse funds from the Trust Account only upon and in accordance with a written request, along with supporting documentation, from the owner, which has been approved by HUD, Los Angeles Hub Director. The owner shall make such a request at least 30 days prior to the date such disbursement is desired. 3. Housing Trust Fund Agreement Paragraph F, Section 1 Default - a) The owner’s failure to use the trust account in accordance with the terms of this agreement or to make materially false statements to HUD concerning the use of the trust amount, shall constitute a default under this agreement. HUD shall provide the owner with written notice of any default under this agreement and a reasonable opportunity of not less than 30 days to cure or explain the alleged default. 22 b) On the termination of this agreement, HUD Secretary’s finding that the owner did not act in good faith. 4. Housing Trust Fund Agreement Paragraph F, Section 2 Remedies - If the owner fails to cure any default of the trust agreement occurring during the term of the agreement, the trust agreement may be terminated by HUD. Upon termination or expiration of this trust, any funds remaining shall be disbursed to a tax exempt corporation selected by the owner and approved by HUD, to be used to acquire, develop, preserve, construct, and or rehabilitation affordable housing units. 5. Use Agreement Paragraph 9, Section c The books and records, documents and other papers relating to the financial condition of the project shall at all times be maintained in accordance with Generally Accepted Accounting Principles which can be subjected to an audit performed in accordance with Generally Accepted Auditing Standards and shall be subject to examination and inspection at any reasonable time by the Secretary or his duly authorized agents. The Owner shall keep copies of all written contracts or other instruments that affect the Project, all or any of which may be subject to inspection and examination by the Secretary or his agents. 23 Appendix D SUMMARY OF PAYMENTS FROM BAY VISTA OPERATING ACCOUNT Type of expense Amount Deposited into payroll account but no supporting documentation explaining the transfer of $ 1,609,500 funds Managers’ (including three managers who received double pay) and office staff’s salaries and $ 915,611 health benefits for the period June 20, 2010, to July 16, 2011 Trust fund LLC deposits – used to pay for operating expenses of properties, salaries, and $ 608,000 management fees to GMP Paychex – salaries for three managers between February 1, 2009, and July 31, 2011 $ 461,756 Union Bank 4355 – payroll and management distributions $ 50,000 Chase 6708 – deposited into payroll account $ 50,000 TDR 7412 (operating fund) – GMP’s management fees, contract labor, other operating $ 440,318 expenses, and manager distributions (including additional transfers to payroll account) HSP 7180 (operating fund) – GMP’s management fees, contract labor, other operating $ 650,915 expenses, and manager distributions (including additional transfers to payroll account) Estancia 8315 (petty cash fund) – GMP’s management fees, contract labor, other operating $ 777,928 expenses, and manager distributions (including additional transfers to payroll account) Estancia 8505 (operating fund) – GMP’s management fees, contract labor, other operating $ 53,290 expenses (includes transfers to payroll account), and manager distributions Union Bank 8414 – Management fees charged for period July 2009 to February 2010 and $ 345,447 management distributions Management fees charged directly to Bay Vista operating account $ 132,778 Management fees, distributions, and salaries subtotal $ 6,095,545 Type of expense Bay Vista credit card 6902 – Bay Vista-issued credit card used for personal and business $ 100,060 expenses and not reimbursed Type of expense Security Business Bank – Lisbon property’s mortgage and interest $ 117,647 First Republic Bank – Hillside Park’s interest and mortgage payments $ 285,000 North Island Credit Union – Tierra del Rey’s interest and mortgage payments $ 135,303 54th Street LLC and PS Business Park – for lease on administrative building previously and $ 53,767 currently occupied by GMP and Bay Vista Lisbon 8612 $ 4,000 Orion – consulting payment of former chief financial officer’s assistant $ 115,595 Donations to St. Paul’s United Methodist Church and Summerbridge Charitable Donation $ 34,700 Deposited into 7701 for Internet, supplies, cable, phone charges, etc. $ 34,116 Stipends for board members $ 7,700 Other operating costs subtotal $ 787,828 Total $6,983,433 3 3 The total payments out of the Bay Vista operating account is not all inclusive of its expenses. 24
Bay Vista Methodist Heights, San Diego, CA, Violated Its Agreement With HUD When Administering Its Trust Funds
Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-03-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)