Issue Date
September 23, 1996
Audit Case Number
96-FW-219-1003
TO: Ann Kissier
Director, Multifamily Housing Division, 6HHM
FROM: D. Michael Beard
District Inspector General for Audit, 6AGA
SUBJECT: Little Flower Estates
Project Number 064-35026
Ponchatoula, Louisiana
We performed an audit of Little Flower Estates for the period January 1992 through October
1994. The objective of our audit was to determine whether expenditures and disbursements
complied with the terms and conditions of the Regulatory Agreement and other HUD
requirements. Because of serious problems found at the property, we also reviewed the New
Orleans Multifamily Housing Division to determine if it adequately monitored the project.
While the project was in a non-surplus cash position, the owner/management agent improperly
spent $284,786 of project funds. Further, HUD did not take appropriate action to detect and
prevent the improperly spent funds.
Within 60 days, please furnish this office, for each recommendation in this report, a status on:
(1) corrective action taken, (2) the proposed corrective action and the date to be completed, or
(3) why action is not considered necessary. Also, please furnish us copies of any correspondence
or directives issued related to the audit.
If you or you staff have any questions, please contact Frank Baca, Assistant District Inspector
General for Audit, at (817) 885-5551.
Management Memorandum
(THIS PAGE LEFT BLANK INTENTIONALLY)
96-FW-219-1003 Page ii
Executive Summary
We performed an audit of Little Flower Estates. The purpose of the audit was to determine
whether expenditures and disbursements complied with the terms and conditions of the
Regulatory Agreement and other HUD requirements. The review disclosed the owner/
management agent disregarded the Regulatory Agreement and HUD requirements and
diverted $284,786 of Project funds. The $284,786 includes $243,555 in ineligible and
$41,230 in unsupported or unreasonable costs. This occurred during a period when the
project was in a non-surplus cash position. Because of serious problems found at the
property, we also reviewed the New Orleans Multifamily Housing Division to determine if
it adequately monitored the project. We found HUD did not take appropriate action to
detect and prevent the improperly spent funds.
During the audit review period, and while the project was
Owner Made Unapproved
in a non-surplus cash position, the owner withdrew
Withdrawals and Loan
$102,021 in project funds in the form of loan repayments
Repayments
and owner advances. The owner did not have written HUD
approval to repay or withdraw the funds. Further, the
owner made and repaid loans to third parties in the project's
name and without HUD authorization. The repayments
totaled $25,765.
The owner paid himself from project funds for other
Owner Charged
ineligible, unsupported, or unreasonable expenses. For
Numerous Ineligible and
example, the owner paid himself a "construction
Unsupported Costs to
supervision fee" of $70 per day or $49,414 during the
Project
review period. The owner could not provide us with
documentation supporting the need, duties, and
accomplishments of his services as a construction
supervisor.
Other costs the owner charged to the project should have
been included in the management agent fee, or were
otherwise ineligible, unsupported, or unreasonable. These
costs included travel ($24,707), health benefits ($7,460),
unreasonable office rent ($16,200), rent for an off-site
office ($4,400), rent for a launderette facility ($10,075),
telephone ($2,700), bookkeeping ($12,163), consulting
($8,029), bank charges ($2,293), and other miscellaneous
charges ($19,559).
Page iii 96-FW-219-1003
Executive Summary
The New Orleans Multifamily Housing Division
Field Office Did Not
(Multifamily) needs to strengthen its monitoring of owners
Effectively Monitor
and management agents. Multifamily staff did not always
Project Expenditures
require the owner to submit audited financial statements or
monthly accounting reports. In addition, Multifamily did
not question many suspect payments appearing in financial
records. Although Multifamily questioned some potential
deficiencies, it did not take effective action to ensure the
owner corrected the deficiencies. As a result the improper
owner/agent activities went unnoticed or unresolved. Also,
Multifamily's inadequate monitoring may jeopardize its
ability to recover funds or take action against the
owner/agent.
We are recommending the Multifamily Housing Division
Report Recommendations
require the owner to immediately cease the improper
activities. Further, Multifamily should take action to
recover the diverted funds and recover any improper
payments the owner/agent made subsequent to our audit
period. Multifamily should also take administrative
sanctions and other appropriate remedies against the owner
to protect HUD's interest.
In addition, we are recommending the field office take
action to ensure owners' submit financial reports.
Multifamily staff should review the reports to detect and
prevent improper expenditures and take effective action to
correct deficiencies noted.
OIG sent a draft of Finding 1 to the owner on January 26,
Owner Disagrees with
1996. The owner responded to the draft finding in a letter
Finding; HUD Agrees to
dated March 4, 1996, strongly disagreeing with the finding
Take Action
(Appendix D). At an exit conference held on April 17,
1996, to discuss Finding 1 results, the owner maintained his
strong disagreement. HUD Multifamily officials at the exit
conference supported OIG's position.
We provided the Multifamily Housing Division with the a
draft of Finding 2 on April 9, 1996. At an exit conference
held on April 18, 1996, Multifamily officials agreed with
the finding and said corrective action would be taken.
Multifamily provided a written response on August 27,
1996 (Appendix E).
96-FW-219-1003 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1 Owner Improperly Spent $284,000 in
Project Funds 3
2 Multifamily Division Needs to Improve Its
Oversight of Project Management 13
Internal Controls 19
Appendices
A Schedule of Questioned Costs 21
B Questioned Amounts by Cost Category 23
C Schedule of Ineligible and Questioned
Disbursements Supporting Finding 1 25
D Owner Comments (regarding Finding 1) 37
E Multifamily Division Comments (regarding
Finding 2) 41
Page v 96-FW-219-1003
Table of Contents
F Distribution 43
Abbreviations
FHA Federal Housing Administration
HUD U. S. Department of Housing and Urban Development
OIG Office of Inspector General
96-FW-219-1003 Page vi
Introduction
Little Flower Estates, FHA Project 064-35026, is a 50-unit apartment complex located in
Ponchatoula, Louisiana. Mr. Michael R. Ragusa owns and manages the project. HUD
insured the mortgage of Little Flower Estates under Section 221(d)(3) of the National
Housing Act. HUD endorsed the $622,100 loan on November 18, 1971. All 50 units receive
Section 8 subsidies from HUD under a Housing Assistance Payments (HAP) contract.
Mr. Michael R. Ragusa signed the Regulatory Agreement on September 30, 1969, along
with Mr. Joseph R. Ragusa and Mr. Sam V. Mannino. Mr. Michael R. Ragusa acquired
the remaining 36.111 percent ownership interest from The Estate of Samuel V. Mannino,
Sr. on December 3, 1993, to become sole owner of Little Flower Estates.
The owner has kept current on the mortgage; hence, the project is not in default. However,
for our review period the project was in a non-surplus cash position. The Regulatory
Agreement prohibits any owner distributions, including repayment of owner advances,
when the property is in a non-surplus cash position.
The purpose of our audit was to determine whether project
Audit Objectives
expenditures and disbursements complied with the terms
and conditions of the Regulatory Agreement and other
HUD requirements. Because of serious problems found at
the property, we performed a limited reviewed of the New
Orleans Multifamily Housing Division to determine if it
adequately monitored the project.
To determine whether project expenditures and
Scope and Methodology
disbursements complied with the terms and conditions of
the Regulatory Agreement and other HUD requirements
we:
• Reviewed Regulatory Agreement and HUD Handbook
requirements for assisted projects. We also reviewed
the Renting and Managing Agreement between the
owner and project dated October 11, 1988.
• Examined project records and documentation for the
audit period, including financial statements, general
ledgers, check register, bank records (bank statements,
canceled checks, deposit slips), files of paid bills, and
supporting invoices.
Page 1 96-FW-219-1003
Introduction
• Reviewed monthly accounting reports obtained from
Multifamily.
• Interviewed the owner, his representatives, and project
staff.
To determine if the Multifamily Housing Division
adequately monitored the project we:
• Reviewed HUD Handbooks to determine Multifamily's
responsibilities relating to monitoring project
management.
• Examined documentation maintained by Multifamily,
including project financial reports, management
reviews, and physical inspection reports.
• Interviewed Multifamily staff.
The audit covered the period January 1, 1992, through
October 31, 1994. We did the field work between October
and December 1994. We conducted the audit in accordance
with generally accepted government auditing standards.
96-FW-219-1003 Page 2
Introduction
Owner Improperly Spent $284,000
in Project Funds
Contrary to the Regulatory Agreement, HUD requirements, and the Management
Agreement, the owner spent $284,786 in project funds for ineligible and questionable
expenses while the project was in a non-surplus cash position. These payments included:
owner withdrawals; loan repayments; payments to the owner for "construction
supervision" fees; owner health insurance costs; unreasonable office rent charges; rent
subsidies for a launderette; rent charges for a second office; ineligible and questionable
travel, bookkeeping, consulting, and telephone expenses; ineligible bank fees; and other
improper disbursements. The improper payments put the project at risk of default and
resulted in HUD paying inflated Section 8 rental subsidies to the owner. This occurred
because the owner disregarded HUD requirements.
The Regulatory Agreement states owners shall not without
Regulatory Agreement
the prior written approval of the Secretary:
Requirements
• Assign, transfer, dispose of, or encumber any personal
property of the project, including rents, or pay out any
funds except from surplus cash, except for reasonable
operating expenses and necessary repairs (paragraph 6(b));
• Incur any liability, direct or contingent, other than for
current operating expenses, exclusive of the
indebtedness secured by the mortgage and necessarily
incident to the execution and delivery thereof
(paragraph 6(i)); or
• Enter into any contract or contracts for supervisory or
managerial services (paragraph 6(k)).
Further, the Regulatory Agreement limits the amount of
surplus cash that the owner can withdraw in any 1 year to
6 percent of the initial investment ($6,620) (paragraph
6(e)). Surplus cash is any cash remaining after the payment
of all sums due or currently required to be paid under the
terms of any mortgage or note insured or held by the
Secretary (paragraph 13(f)).
Page 3 96-FW-219-1003
Finding 1
During the audit review period, and while the project was
Owner Improperly
in a non-surplus cash position, the owner withdrew
Withdrew $102,021 in
$102,021 in project funds in the form of loan repayments
Project Funds
and owner advances. The $102,021 included $97,645 in
ineligible and $4,376 in unsupported payments. The
ineligible amounts represent checks written directly to the
owner and affiliates, and amounts charged to the project for
materials used to renovate the owner's house. The
unsupported amount represents materials that the owner
claims to have used to renovate his personal residence but
could not locate the related invoices.
The Regulatory Agreement specifies that owners shall not,
without prior written approval of HUD pay out any funds
except for reasonable operating expenses and necessary
repairs. Further, the owner can not make, or receive and
retain, any distribution of assets or any income of any kind
of the project except surplus cash (as defined in the
Regulatory Agreement).
HUD Handbook 4370.2 REV-1, Financial Operations and
Accounting Procedures for Insured Multifamily Projects,
paragraph 2-11(A) states that repayment of owner advances
when the project is in a non-surplus cash position will
subject the owner to criminal and civil monetary actions.
Contrary to the Regulatory Agreement, the owner, without
Owner Improperly
written authorization, borrowed money in the project's
Borrowed and Repaid
name. The owner repaid the borrowed amounts using
Funds
project funds, again without HUD's written approval. The
amount of the repayments totaled $25,765. Of this amount,
the owner repaid his mother $14,481, and a business
associate $3,517. HUD staff said they were aware of the
loans but believed the owner took out the loans in his name.
HUD staff state they never gave approval to the owner for
the loans or subsequent repayment of the loans. Although
HUD staff may not have had a problem approving the
loans, the owner never asked for approval. According to
the Regulatory Agreement, the owner cannot without the
prior written approval of HUD incur any liability, direct or
contingent, other than for current operating expenses.
Because the owner did not have approval for the loans, the
96-FW-219-1003 Page 4
Finding 1
subsequent repayment of such loans is an ineligible use of
project funds.
In addition to the management agent fee, the owner paid
Owner Paid Himself
himself $49,414 from project funds for "construction
$49,414 in Construction
supervisor fees," violating the Regulatory Agreement and
Supervision Fees
HUD requirements. The owner paid himself these fees
continuously throughout the review period based on a flat
rate of $70 per day. The owner stated that he used his
expertise in construction in providing services to the
project. However, he could not provide us with
documentation supporting the need, duties, and
accomplishments of his services as a construction
supervisor. Further, the owner did not have written
approval from HUD for this fee.
According to the Regulatory Agreement, the owner cannot
without the prior written approval of HUD, enter into any
contract(s) for supervisory or managerial services.
Additionally, HUD Handbook 4381.5 REV-1, Paragraph 2-
13(B) states the "agent must absorb the costs of supervising
and overseeing project operations."
The owner used project funds to pay his health insurance
Project Paid $7,460 for
($7,460). The owner stated he believes he was an employee
Owner's Health Insurance
of the project since he was the "construction supervisor,"
and therefore the project should pay for his health
insurance. However, the owner was not a project employee
and, as stated above, the construction supervision fees were
ineligible costs. Therefore, the owner's health insurance is
not an eligible project expenditure.
The owner owns a building adjacent to the property. This
Charges for Office Rent
building houses the project office and a launderette. The
Appear Unreasonable
owner purchased the building from a relative for $15,000 in
1988. According to the owner and HUD documents, this
building is not part of the project. In 1992 the owner
charged the project $400 per month for office space rental,
and $500 per month for 1993 and 1994. During the audit
period, the office space rental charges amounted to
$16,200. The rent charges appear to be inflated considering
the owner purchased the entire building for $15,000 in 1988
and has charged the project $16,200 in rent for use of half
Page 5 96-FW-219-1003
Finding 1
the building during the 34 months under review. HUD
should require the owner to support the reasonableness of
the rent charges.
The owner rents the launderette to an unrelated individual
Owner Subsidized
for $175 per month. Using project funds, the owner pays
Launderette
himself the difference between the higher office rent and
the $175 charged for the launderette. This difference
totaled $10,075 for the audit period. The owner justifies
this subsidy for the launderette by claiming HUD forces
him to have a launderette. HUD staff were unaware of the
owner charging the project rent or the launderette subsidy.
Further, there is no documentation in the files indicating
that the owner received HUD approval to pay the
launderette subsidy. Other than providing the owner
additional income, there is no reason or justification for the
subsidy.
The owner paid an identity-of-interest company $4,400 for
Rent Payments Made to
"office rent" for an office located in Natalbany, Louisiana.
an Identity-of-Interest
The owner did not have HUD's written approval for these
Company
payments. There is no evidence to support the necessity of
this office. As discussed above, the owner already has an
office adjacent to the project; therefore, these payments are
ineligible.
The owner reimbursed himself $24,707 from project funds
Owner Reimbursed
for travel expenses that should have been paid from his
Himself $24,707 for
management fee. Much of the travel expenses related to
Ineligible Travel Costs
mileage to and from the project. For example, in
September 1992 the owner reimbursed himself $601 for
travel expenses. According to supporting documentation,
the owner traveled 2,186 miles during the month at a
reimbursement rate of $.275 per mile. The documentation
indicates the owner traveled the miles for purpose of
construction supervision, office supervision, and site
inspection. Other reimbursed travel expenses did not have
a stated purpose. These expenses should have been paid
from the management fee and not from project funds.
The Regulatory Agreement states owners shall not without
the prior written approval of the Commissioner pay out any
funds except from "surplus cash," except for reasonable
operating expenses and necessary repairs. Further, HUD
96-FW-219-1003 Page 6
Finding 1
Handbook 4381.5 REV-1, Paragraph 2-14(A) states the
management fee must pay for salaries, fringe benefits,
office expenses, fees, and contract costs incurred in
supervising project personnel, and monitoring project
operations by visiting the project.
The Renting and Managing Agreement states all salaries for
Owner Charged
management personnel, including the bookkeeper (but not
Questionable
the auditing accountant) will be paid by the agent out of the
Bookkeeping Expenses
management agent fee. The owner violated this agreement
by charging the project $9,163 for bookkeeping expenses.
Also, the owner paid another $3,000 to an accountant for
compilation of annual financial statements. This amount
appears to be unreasonable considering the accountant did
not audit financial statements.
The owner spent $8,055 for ineligible and questionable
Owner Improperly
consulting fees. Of this amount, the owner made payments
Charged Consultant Fees
totaling $6,200 for consulting work involving advice on
to the Project
how to apply for grants to obtain security fencing, and the
advisability of enlarging the project to 100 units and the
possible syndication thereof. These expenses are neither
operating expenses nor necessary repairs and therefore,
can't be paid from project funds. Also, the owner's records
disclosed payments of $1,830 to a law firm that do not
appear to be eligible expenses.
The owner paid himself $60 per month in project funds for
Owner Paid Himself
telephone expenses ($2,700). According to the owner, the
$2,700 for Arbitrary
reimbursements represent charges in addition to the project
Telephone Costs
telephone, such as the phone at the Natalbany office. The
owner could not justify the reasonableness of the $60 per
month reimbursement. Any reimbursement to the owner
should be for actual expenses, not an arbitrarily set fee.
Additionally, the owner would have to document why the
phone charges are project expenses and not management
agent expenses. HUD Handbook Figure 2-4 lists overhead
expenses such as supplies and equipment, transportation
and phone calls to projects, office space, data processing,
etc. as examples of costs paid from the management fee.
The owner incurred and paid $2,293 in mortgage late fees
Project Paid for Ineligible
and non-sufficient fund charges. These expenditures do not
Bank Charges
Page 7 96-FW-219-1003
Finding 1
constitute reasonable operating expenses and should not be charged to the project.
In addition to the above ineligible and unsupported
Project Incurred $19,500
payments, the owner improperly disbursed $19,559 in
in Other Questionable
project funds for various expenses. The $19,559 included
Costs
$3,735 for ineligible and $15,824 for unsupported purposes.
The ineligible payments include purchase and repairs to a
copy machine located at the Natalbany office ($1,994),
flowers for a wedding ($145), and flowers for a church
function ($249). The owner, also, reimbursed himself from
project funds for personal items. For instance, the owner
issued a check to himself for $536.51 for reimbursement of
office expenses1. The supporting receipts show the
purchase of such items as aspirin ($42.38), juice ($28.57),
bubble gum ($24.87), taper candles ($9.81), and other
items. Ineligible expenses accounted for $477.51 of the
$536.51 reimbursement. In addition, the owner could not
provide support for checks totaling $15,824 that appeared
to be for questionable items.
The owner's improper use of project funds has had adverse
effects on both HUD and the project residents. As stated
previously, all 50 units are subsidized through the Section
8 Program. The amount of project expenses determines the
Section 8 subsidy. The improper expenses have resulted in
HUD paying inflated rental subsidies to the owner2. The
owner has jeopardized the financial position of the project
by using project funds for ineligible purposes.
Auditee Comments In general, the auditee denies any wrongdoing and attempts
to portray himself as a victim of "administrative
persecution." The owner regards OIG's contention of
improperly spent funds as "... simply a partial truth--most of
1
Check number 2980, dated August 7, 1992.
2
Based on available records, we estimate that the inclusion of ineligible costs in budgets may have resulted in the owner
receiving inflated rental income of about $116,000 for 1992 and 1993.
96-FW-219-1003 Page 8
Finding 1
the items quoted were spent in conformity with the
regulatory and management agreements for reasonable
operating expenses and necessary repairs, no liability was
incurred other than for current operating expenses and no
contracts or agreements for supervisory services were
entered into without the suggestion and approval of the
project's loan servicer."
The owner states:
• Withdrawal and loan repayments. During the review
period, he deposited $111,821 into the bank account.
Further, HUD was aware of borrowing and repayments
and received the project's detailed general ledger which
reflected every transaction in detail.
• Construction supervision fees. The project's loan
servicer told him to use this category since the project
"...had to practically be rebuilt from lack of
maintenance and funds prior to the current managing
agent's tenure."
• Office rent. The costs are supported. "Just because the
owner received this property as a bargain from his
family, does not preclude him from receiving rent."
• Subsidized launderette. "In order to clean up the project
it was necessary to stop tenants from placing washers
and dryers in the units since they do not have hookups,
therefore it was necessary to contract for a washateria
service to operate one on the site, since the site would
not produce enough revenue to justify the washateria,
the project had to subsidize the washateria by way of
rent."
• Bookkeeping/accounting services. Have been accepted
since 1969 by HUD as an allowable project expense.
The owner has reported such expenses under the HUD
chart of accounts #6351. The owner and managing
agent consider the consulting expenses as ordinary and
necessary expenses of the project. The project paid
such fees in other years without being questioned by
HUD.
Page 9 96-FW-219-1003
Finding 1
• Legal fees. "...were all incurred in tenant evictions or
other direct project legal expenses."
The owner said he would not attempt to rebut each check or
invoice as this would "...bog this project down in more
administrative paperwork and thus lose sight of our
recovery from HUD for abusive 'administrative persecution'
among other things."
The owner disagrees with the OIG's computation of inflated
rent. To the contrary, the owner feels that the project has
been delayed a rent increase, and therefore, the owner has
been damaged "$20,000 per year plus the costs that he has
incurred to deal with and answer this "administrative
persecution."
In conclusion, the owner disagrees with "with every
assumption and recommendation" that the OIG made."
OIG Evaluation of The owner did not provide any explanations or evidence to
Auditee Comments significantly change our conclusions. We acknowledge the
owner made contributions to the project. Nevertheless, to
protect HUD's and the tenants' interests, the Regulatory
Agreement prohibits repayments for those contributions,
without HUD approval, when the project is in a non-surplus
cash position. HUD program staff deny they approved the
above practices, and the owner could not provide us with
anything in writing to show HUD approval. His response
does not explain how the office rent is reasonable. We still
do not understand why the project should be subsidizing the
launderette. The Renting and Management Agreement
signed by the owner, not HUD, deems bookkeeping as a
management agent expense, not a project expense. The
owner did not submit any evidence why the consultant fees
should be considered reasonable operating expenses or for
necessary repairs. With respect to the legal fees, we did
question items based upon the attorney's statement of
account supplied by the owner. The owner must supply
additional information to prove the following line items are
direct project legal expenses: "closing cost, Genesee Road"
($1,254.50); "review of abstracts to land and response to
Kipp at HUD" ($400); "office visit re: HUD ltr to
96-FW-219-1003 Page 10
Finding 1
Southeast Bank, Mannino" ($150); and "preparation of will
for mother" ($25). The owner did not supply any
information determining how the above expenses relate to
the project.
Overall, the owner argues that because HUD did not
enforce the Regulatory Agreement in the past, the owner
should be allowed to violate the Regulatory Agreement
indefinitely without consequence. The owner freely entered
into the Regulatory Agreement with the government.
Without HUD, the owner probably would not have this
project. According to information supplied by the owner,
the government provided $847,969 of the $1,076,039
(78.80%) funds deposited into the bank account during the
2-year period ending December 1994. Yet when the
government requires adherence to the terms of the
Regulatory Agreement, the owner argues he should not
have to comply. The owner views any attempt by the
government to try to ensure compliance and safeguard the
taxpayers against loss as "administrative persecution."
Recommendations We recommend the New Orleans Office:
1A. Require the owner to immediately cease the
improper activities described in this finding and
adhere to the Regulatory Agreement, HUD
requirements, and the Management Agreement;
1B. Take action to recover $243,556 of improperly
expended funds;
1C. Obtain documentation or justification for the
$40,730 in unsupported expenditures and recover
from the owner costs you determine to be
unallowable;
1D. Review project costs subsequent to October 31,
1994, and recover amounts that you determine are
ineligible or unsupported;
Page 11 96-FW-219-1003
Finding 1
1E. If the owner does not repay HUD for the improper
diversion of property funds, take appropriate civil
action and HUD prescribed remedies; and
1F. Because of the serious violations of the Regulatory
Agreement and disregard of HUD requirements,
take appropriate administrative action through
sanctions to protect HUD's interest.
96-FW-219-1003 Page 12
Finding 2
Multifamily Division Needs to Improve Its
Oversight of Project Management
The Multifamily Housing Division (Multifamily) needs to take proactive measures to ensure
that owners/management agents adhere to the Regulatory Agreement and HUD
requirements. During the course of our review, we noted two troubling conditions with
Multifamily's monitoring of Little Flower Estates (Little Flower). First, clear indications
of violations of the Regulatory Agreement and HUD requirements went unnoticed or
unquestioned. Second, when Multifamily did question possible deficiencies, it did not
pursue and correct the noted deficiencies. As a result, the program deficiencies discussed
in Finding 1 went undiscovered or unresolved. Also, Multifamily may have impeded its
ability to recover diverted funds.
HUD Handbooks 4350.1 REV-1 "Multifamily Asset
Multifamily's
Management and Project Servicing," and HUD Handbook
Responsibilities
4370.1 REV-2 "Reviewing Annual and Monthly Financial
Reports" provide guidance to field offices on how to
oversee multifamily projects.
• Section 3-4 of Handbook 4350.1 REV-1 requires
mortgagors to submit to HUD annual audited financial
statements. Chapter 2 of 4370.1 REV-2 provides HUD
staff with detailed instructions on reviewing annual
statements.
• Section 1-4 of 4370.1 REV-2 lists four "Goals of
Financial Analysis":
1. Financial health of project. To provide stability,
rents must be set at sufficient levels. The Asset
Management staff's objective is to keep rent
increases to necessary amounts and to minimize the
impact of the increase on lower-income residents.
2. Protect the FHA insurance fund. Asset
Management staff can help protect the FHA fund by
monitoring the project's physical and financial status
and providing solutions to current and anticipated
physical and financial problems.
Page 13 96-FW-219-1003
Finding 2
3. Ensure that rental revenue and rental subsidies are
used properly. Asset Management staff should
review financial statements carefully to identify
instances where funds have been diverted
improperly or are not being used in compliance with
previous agreements.
4. Compliance with Regulatory Agreement and
subsidy contracts. Compliance is essential to
providing decent, safe, and affordable housing to all
eligible tenants and maintaining a financially sound
project with the ability to sustain future operations.
Asset Management staff can help by reviewing the
auditor's Report on Compliance for reported
deficiencies and performing tests on the financial
statements.
Multifamily did not notice or question possible violations of
Violations Went
the Regulatory Agreement and HUD requirements.
Unnoticed or
Unquestioned
Unaudited financial statements. Little Flower submitted
unaudited financial statements for calendar years 1991 and
1992. Multifamily's files do not indicate that the owner was
informed of the deficiencies or that Little Flower submitted
audited financial statements. Unaudited financial
statements do not provide HUD with reasonable assurance
regarding the accuracy or completeness of what is being
reported. The Regulatory Agreement and HUD Handbook
4350.1 REV-1 require that the owner submit audited
financial statements within 60 days of year end.3 According
to HUD Handbook 4370.1 REV-2 Paragraph 2-5, HUD's
review of the annual financial statements includes ensuring
the statements contain an auditor's opinion in proper form.
Multifamily did require Little Flower to submit audited
financial statements for 1993. After receiving an extension,
Little Flower submitted unaudited financial statements for
1993. On May 9, 1994, Multifamily informed the owner to
contract the auditing services to an Independent Public
Accountant. Further, the letter states "if project funds were
used to pay for this compiled report, we direct you to
reimburse the project the total cost of the compiled report."
3
Paragraph 9(e).
96-FW-219-1003 Page 14
Finding 2
The audited financial statements are dated September 28,
1994.
Questionable transactions. The 1991 and 1992 unaudited,
and the 1993 audited financial statements disclosed
violations of the Regulatory Agreement and other apparent
questionable transactions:
Although the Regulatory Agreement Paragraph 6(i) does
not allow the owner to incur any liability except for current
operating expenses without prior HUD approval, the 1991
and 1992 financial statements disclosed that Little Flower
had notes payable to the owner and others of $73,624 and
$99,507, respectively. The financial statements also
showed the notes payable earned $497 in interest for 1991
and $4,128 for 1992. According to an asset manager,
Multifamily never approved any loans to Little Flower or
the subsequent repayments of the loans. Further, the 1993
cash flow statement and related notes to financial
statements disclosed that the project spent $22,145 to repay
long-term debt to related parties. Multifamily did not
question the repayments of related-party notes while the
Project was in a non-surplus cash position.
The 1991 and 1992 financial statements disclosed
questionable costs on a page entitled "Compensation of
Officers or Owners." The 1993 financial statements
disclosed similar questionable costs in the Schedule of
Findings and Questioned Costs as "unauthorized
distributions to partner and related parties":
Transaction Category 1991 1992 1993
Construction supervision $16,730 $18,410 $19,387
Office rent $6,875 $8,125 $12,300
Expense allowed $14,445 $13,540
Travel $14,140
Principal and interest $35,762
These payments were in addition to management fees paid
the owner. An asset manager said Multifamily never
Page 15 96-FW-219-1003
Finding 2
approved the construction supervision fee or payments for
office rent. In fact, the asset manager was not aware that
Little Flower paid office rent. The files do not indicate that
Multifamily ever questioned the appropriateness of these
payments. A review of 1992 and 1993 transactions found
most of the above items to be ineligible or unsupported (see
Finding 1). The review period did not include 1991.
According to an asset manager, Multifamily does not
involve itself with a project unless it hears from the tenants
or the mortgage company. Another asset manager said
Multifamily questioned some of the payments to the owner
in their latest review. On May 3, 1994, Multifamily
reported the results of its Management Review of Little
Flower. The review noted 45 findings. Finding 12
questioned many payments to the owner between January
and March 1994. According to correspondence dated
April 25, 1995, the finding remains open pending OIG's
report. An asset manager said the owner never sent
paperwork addressing the payments. As a result,
Multifamily was unable to declare the payments ineligible.
Multifamily did request and receive some Monthly
Accounting Reports (MARs) for the project. Based on
these reports, Multifamily questioned some of Little
Flower's expenditures. The owner's response on
September 19, 1994, indicates that many of the questioned
payments are ineligible. For example, the owner states that
one check for $2,500 was an "advance"4 and another check
went to pay consultant fees for "the advisability of
enlarging the project to 100 units, and the possible
syndication thereof." Both of the above purposes are
clearly ineligible uses of project funds, and Multifamily
should have taken appropriate measures to have the funds
repaid to the project and ensure that such payments do not
occur in the future. Further, this correspondence reveals
that the owner is charging Little Flower for office rent, a
construction supervision fee, telephone, and travel.
According to an asset manager, Multifamily has not
received any MARs since December 1994 even though it
has not instructed the owner to stop submitting MARs.
4
The owner's correspondence states that the "advance" was repaid to the project. However, the fact that the "advance" was
repaid does not excuse the violation of the Regulatory Agreement.
96-FW-219-1003 Page 16
Finding 2
Multifamily referred Little Flower for OIG review and may
Multifamily Inaction
have waited for the results before acting. However,
Could Hinder Corrective
Multifamily's silence when the owner provides information
Action
indicating that ineligible or questionable expenditures could
give the owner the false impression that Multifamily
approves of the payments. This could also hinder
Multifamily's ability to require the owner to pay back the
funds or other sanctions.
Based upon a cursory file review, it appears Multifamily
ensured the owner corrected physical discrepancies.
Multifamily should use this same efficiency in correcting
financial discrepancies.
Auditee Comments and In its written response to the draft finding, Multifamily said
OIG Evaluation it was taking action to correct reported deficiencies. They
now have sufficient staff to ensure files are complete, and
also have available contractors to assist them. In addition,
they are entering financial statement data into an automated
system, and are implementing procedures to ensure timely
review and follow-up of possible violations. The response
also stated Multifamily is exploring the possibility of
converting one of the asset managers to a financial analyst,
whose primary function would be to review financial
statements.
Multifamily appears to be taking effective action to address
concerns reported in this finding.
Recommendations We recommend the New Orleans Office ensure:
2A. Project owners submit required information,
including audited financial statement, and Monthly
Accounting Reports, when appropriate and take
appropriate administrative action through sanctions,
if warranted and
2B. Multifamily staff review financial statements in
accordance with HUD handbook requirements, and
question and resolve indications of noncompliance.
Page 17 96-FW-219-1003
Internal Controls
In planning and performing our audit, we considered internal controls relating to the
operation of Little Flower Estates. We also considered internal controls relating to the
Multifamily Housing Division's monitoring of the project.
Internal controls consist of the plan of organization and methods and procedures adopted
by management to ensure that resource use is consistent with laws, regulations, and
policies; that resources are safeguarded against waste, loss, and misuse; and that reliable
data is obtained, maintained, and fairly disclosed in reports.
We determined that a review of Little Flower Estates'
Relevant Internal
internal controls was not relevant to accomplishing our
Controls
audit objectives and accordingly did not review them. We
concluded this due to the small size of the operation, and
because the owner was the management agent and could
override controls.
Our review of the Multifamily Housing Division was
limited to Little Flower Estates, and HUD requirements for
obtaining and reviewing financial reports as stated in HUD
Handbooks 4350.1 REV-1, and 4370.1 REV-2. We
assessed Multifamily's controls over obtaining and
reviewing financial reports from the project and following
up on identified deficiencies.
As discussed in Finding 2, Multifamily Housing Division
Significant Weakness
needs to strengthen its controls over its review of financial
reports and follow-up of identified deficiencies.
96-FW-219-1003 Page 18
Internal Controls
(THIS PAGE LEFT BLANK INTENTIONALLY)
Page 19 96-FW-219-1003
Appendix A
Schedule of Questioned Costs
Recommendation
Number Ineligible 1 Unsupported 2
1B $243,556
1C $40,730
1
Costs clearly not allowed by law, contract, HUD, or local agency policies or regulations.
2
Costs not clearly eligible but which warrant being considered (e.g., lack of satisfactory documentation to support
the eligibility of the cost, etc.).
96-FW-219-1003 Page 20
Appendix A
(THIS PAGE LEFT BLANK INTENTIONALLY)
Page 21 96-FW-219-1003
Appendix B
Questioned Amounts by Cost Category
Category Ineligible Unsupported Total Amount
Amount 1/ Amount2/
Owner withdrawals $ 97,644.42 $ 4,376.29 $102,020.71
Loan Repayments 25,764.70 25,764.70
Construction supervision 49,414.00 49,414.00
fee
Health Benefits 7,460.37 7,460.37
Office rent - project 16,200.00 16,200.00
Launderette rent 10,075.00 10,075.00
Office rent - Natalbany 4,400.00 4,400.00
Travel 24,706.76 24,706.76
Bookkeeping 9,162.50 3,000.00 12,162.50
Consulting 6,200.00 1,829.50 8,029.50
Telephone reimbursement 2,700.00 2,700.00
Late fees/ NSF charges 2,293.10 2,293.10
Miscellaneous 3,734.70 15,824.55 19,559.25
TOTALS $243,555.55 $41,230.34 $284,785.89
1/ Costs clearly not allowed by law, contract, HUD, or local agency policies or regulations.
2/ Costs not clearly eligible or ineligible but which warrant being contested (e.g., lack of satisfactory
documentation to support the eligibility of the cost, etc.).
96-FW-219-1003 Page 22
Appendix B
(THIS PAGE LEFT BLANK INTENTIONALLY)
Page 23 96-FW-219-1003
Appendix C
Schedule of Ineligible and Questioned
Disbursements Supporting Finding 1
Legend: BS - Bank statement
DM - Debit memo
WO - Withdrawal order
WT - Wire transfer
NTF - Note to file
DS - Deposit slip
NSF - Non-sufficient funds
OD - overdraft
Material chg - See section in Finding 1 entitled "Owner Improperly Withdrew
$102,021 in Project Funds"
Owner Advances
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2956 06/11/92 $1,434.03 $1,434.03
2818 08/03/92 2,965.70 2,965.70
3056 09/28/92 1,500.00 1,500.00
3073 10/01/92 2,970.00 2,970.00
114 10/15/92 2,120.00 2,120.00
121 10/21/92 2,000.00 2,000.00
3114 11/02/92 3,600.00 3,600.00
3176 12/01/92 1,200.00 1,200.00
3239 12/31/92 4,003.33 4,003.33
3241 12/31/92 11,807.30 11,807.30
3411 02/09/93 5,277.81 5,277.81
BS 02/11/93 1,000.00 1,000.00
3452 03/09/93 2,105.61 2,105.61
3465 04/01/93 4,000.00 4,000.00
3587 05/23/93 5,420.00 5,420.00
3602 06/01/93 2,000.00 2,000.00
DM 07/30/93 3,200.00 3,200.00
DM 07/30/93 5,000.00 5,000.00
WO 09/14/93 2,500.00 2,500.00
WT 12/09/93 4,000.00 4,000.00
BS 01/21/94 1,800.00 1,800.00
1061 05/03/94 1,223.94 1,223.94
1157 06/03/94 1,220.82 1,220.82
1183 06/06/94 1,000.00 1,000.00
1225 07/01/94 3,500.00 3,500.00
1393 08/31/94 628.00 628.00
96-FW-219-1003 Page 24
Appendix C
1466 10/03/94 2,200.00 2,200.00
1546 10/06/94 2,200.00 2,200.00
NTF 09/30/92 Material chg 15,767.88
NTF 09/30/92 Material chg 1,038.15
NTF 09/30/92 Material chg 800.00
NTF 09/30/92 Material chg 1,832.50
NTF 09/30/92 Material chg 705.64
Total Owner Advances $97,644.42 $4,376.29
Loan Repayments
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2857 05/03/92 $689.58 $689.58
2907 06/01/92 689.58 689.58
2728 07/02/92 689.58 689.58
2804 08/03/92 689.58 689.58
3014 09/02/92 689.58 689.58
118 10/15/92 689.58 689.58
3108 11/02/92 689.58 689.58
3214 12/18/92 689.58 689.58
3245 01/05/93 689.58 689.58
3343 02/09/93 689.58 689.58
3417 03/01/93 689.58 689.58
3480 04/01/93 689.58 689.58
3535 05/01/93 689.59 689.59
3603 06/01/93 689.59 689.59
3656 07/01/93 689.59 689.59
3731 08/05/93 689.59 689.59
3836 09/13/93 689.59 689.59
3892 10/07/93 689.58 689.58
3984 11/30/93 689.58 689.58
4020 12/01/93 689.58 689.58
4054 01/01/94 689.58 689.58
2479 01/06/92 763.49 763.49
2481 01/06/92 439.58 439.58
2527 02/05/92 763.49 763.49
2528 02/05/92 439.58 439.58
2582 03/02/92 439.58 439.58
2586 03/04/92 763.49 763.49
2630 03/18/92 151.36 151.36
2653 04/01/92 763.49 763.49
2655 04/01/92 439.58 439.58
2852 05/02/92 439.58 439.58
Page 25 96-FW-219-1003
Appendix C
2856 05/03/92 763.49 763.49
2901 06/01/92 763.49 763.49
2899 06/02/92 439.58 439.58
2727 07/02/92 439.58 439.58
2729 07/02/92 439.58 763.49
2761 07/08/92 248.02 248.02
2801 08/03/92 763.49 763.49
2803 08/03/92 439.58 439.58
2815 08/03/92 248.02 248.02
3012 09/02/92 763.49 763.49
3013 09/02/92 248.02 248.02
Total Amount of Loan Repayments $25,764.70
Construction Supervision Fees
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
3253 01/05/92 $1,470.00 $1,470.00
2625 03/17/92 6,090.00 6,090.00
2657 04/01/92 1,540.00 1,540.00
2722 05/01/92 1,470.00 1,470.00
3069 09/30/92 1,540.00 1,540.00
3110 11/02/92 1,470.00 1,470.00
3178 12/01/92 1,610.00 1,610.00
3353 02/01/93 1,400.00 1,400.00
3420 03/01/93 1,610.00 1,610.00
3575 05/01/93 3,010.00 3,010.00
3606 06/01/93 1,540.00 1,540.00
3660 07/01/93 1,540.00 1,540.00
3709 08/01/93 1,570.00 1,570.00
3788 09/01/93 1,540.00 1,540.00
3848 10/01/93 1,470.00 1,470.00
3860 10/01/93 1,087.00 1,087.00
3937 11/01/93 1,540.00 1,540.00
3986 11/30/93 1,610.00 1,610.00
4056 01/01/94 1,610.00 1,610.00
4103 01/31/94 1,470.00 1,470.00
4107 01/31/94 1,187.00 1,187.00
4153 02/28/94 1,400.00 1,400.00
4269 04/04/94 1,470.00 1,470.00
1048 05/02/94 1,540.00 1,540.00
1133 06/02/94 1,540.00 1,540.00
1224 07/01/94 1,470.00 1,470.00
96-FW-219-1003 Page 26
Appendix C
1302 08/02/94 1,540.00 1,540.00
1310 08/02/94 70.00 70.00
1391 08/31/94 1,540.00 1,540.00
1513 10/05/94 1,470.00 1,470.00
Total Construction Supervision Fees $49,414.00
Health Insurance
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2477 01/06/92 $ 992.11 $ 301.49
2539 02/05/92 992.11 301.49
2596 03/04/92 992.11 301.49
2651 04/01/92 992.11 301.49
2853 05/03/92 992.11 301.49
2912 06/03/92 1,008.54 307.28
2975 07/02/92 1,008.54 307.28
2799 08/03/92 1,136.48 307.28
3042 09/09/92 1,232.79 535.08
3308 01/12/93 575.00 186.00
3344 02/01/93 698.00 186.00
3440 03/03/93 698.00 186.00
3474 04/01/93 698.00 186.00
3550 05/05/93 514.00 186.00
3601 06/01/93 515.00 186.00
3655 07/01/93 754.00 186.00
3724 08/05/93 634.00 186.00
3800 09/07/93 634.00 186.00
3870 10/05/93 634.00 186.00
3964 11/10/93 634.00 186.00
4011 12/02/93 915.00 208.00
4053 01/01/94 806.00 208.00
4120 02/03/94 806.00 208.00
4155 02/28/94 806.00 208.00
4255 04/04/94 806.00 208.00
1053 05/03/94 812.00 235.00
1127 06/02/94 852.00 235.00
1212 07/01/94 832.00 235.00
1295 08/02/94 544.00 235.00
1377 08/31/94 736.00 235.00
1467 10/17/94 736.00 235.00
Total for Health Insurance $7,460.37
Page 27 96-FW-219-1003
Appendix C
Rent
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2474 01/06/91 $800.00 $ 800.00
2475 01/06/92 450.00 $ 450.00 (1)
2531 02/05/92 400.00 400.00
2532 02/05/92 225.00 225.00 (1)
2579 03/02/92 685.00 225.00 (1) 400.00
2658 04/01/92 685.00 225.00 (1) 400.00
2721 05/01/92 625.00 225.00 (1) 400.00
2902 06/02/92 625.00 225.00 (1) 400.00
2730 07/02/92 685.00 225.00 (1) 400.00
2805 08/03/92 625.00 225.00 (1) 400.00
2999 09/01/92 625.00 225.00 (1) 400.00
3071 10/01/92 625.00 225.00 (1) 400.00
3111 11/02/92 625.00 225.00 (1) 400.00
3175 12/02/92 625.00 225.00 (1) 400.00
3246 01/05/93 825.00 325.00 (1) 500.00
3359 02/01/93 500.00 500.00
3360 02/01/93 325.00 325.00 (1)
3421 03/01/93 500.00 500.00
3422 03/01/93 325.00 325.00 (1)
3432 03/01/93 600.00 600.00 (2)
3489 04/01/93 200.00 200.00 (2)
3528 04/23/93 825.00 325.00 (1) 500.00
3540 05/01/93 825.00 325.00 (1) 500.00
3541 05/01/93 200.00 200.00 (2)
3609 06/01/93 825.00 325.00 (1) 500.00
3610 06/01/93 200.00 200.00 (2)
3654 07/01/93 825.00 325.00 (1) 500.00
3662 07/01/93 200.00 200.00 (2)
3711 08/01/93 825.00 325.00 (1) 500.00
3712 08/01/93 200.00 200.00 (2)
3786 09/01/93 825.00 325.00 (1) 500.00
3791 09/01/93 200.00 200.00 (2)
3844 10/01/93 825.00 325.00 (1) 500.00
3850 10/01/93 200.00 200.00 (2)
3934 11/01/93 825.00 325.00 (1) 500.00
3935 11/01/93 200.00 200.00 (2)
3988 11/30/93 825.00 325.00 (1) 500.00
4027 12/01/93 200.00 200.00 (2)
4058 01/01/94 825.00 325.00 (1) 500.00
96-FW-219-1003 Page 28
Appendix C
4066 01/04/94 200.00 200.00 (2)
4109 01/31/94 825.00 325.00 (1) 500.00
4110 01/31/94 200.00 200.00 (2)
4151 02/28/94 825.00 325.00 (1) 500.00
4152 02/28/94 200.00 200.00 (2)
4272 04/04/94 825.00 325.00 (1) 500.00
4273 04/04/94 200.00 200.00 (2)
1046 05/02/94 825.00 325.00 (1) 500.00
1060 05/03/94 200.00 200.00 (2)
1129 06/02/94 200.00 200.00 (2)
1131 06/02/94 825.00 325.00 (1) 500.00
1220 07/01/94 200.00 200.00 (2)
1222 07/01/94 825.00 325.00 (1) 500.00
1301 08/02/94 825.00 325.00 (1) 500.00
1334 08/02/94 200.00 200.00 (2)
1384 08/31/94 200.00 200.00 (2)
1390 08/31/94 825.00 325.00 (1) 500.00
1509 10/05/94 200.00 200.00 (2)
1512 10/05/94 825.00 325.00 (1) 500.00
Total Spent on Rent
Project office $16,200.00
Launderette $10,075.00 (1)
Natalbany office 4,400.00 (2)
Travel
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2512 01/27/92 $577.04 $577.04
2521 01/29/92 867.14 765.88
2575 02/29/92 551.93 551.93
2627 03/17/92 400.00 400.00
2648 03/31/92 570.51 570.51
2701 04/20/92 300.00 300.00
2704 04/24/92 100.00 100.00
2715 04/30/92 209.65 209.65
2884 05/18/92 10.95 10.95
2893 05/29/92 568.43 568.43
2972 06/30/92 620.68 620.68
2795 07/31/92 654.76 562.65
2991 08/21/92 700.00 350.00
3064 09/30/92 601.15 601.15
3118 10/31/92 746.66 746.66
3168 11/30/92 762.03 762.03
Page 29 96-FW-219-1003
Appendix C
3238 12/23/92 757.00 757.00
3357 02/01/93 774.16 774.16
3408 02/09/93 131.47 131.47
3412 02/09/93 161.74 161.74
3428 03/01/93 821.43 821.43
3487 04/01/93 929.78 929.78
3530 04/30/93 500.00 500.00
3544 05/01/93 432.58 432.58
3590 05/23/93 918.40 862.68
3623 06/01/9 334.00 34.00
3653 06/23/93 886.56 886.56
3706 07/15/93 800.00 800.00
3769 08/20/93 267.59 267.59
3774 08/20/93 838.00 838.00
3790 09/01/93 120.00 120.00
3835 09/13/93 560.00 560.00
3840 09/20/93 506.31 506.31
3893 10/07/93 264.64 264.64
3938 11/01/93 920.00 920.00
3930 10/25/93 506.31 506.31
4007 11/30/93 947.00 947.00
4048 12/23/93 348.39 348.39
4060 01/04/94 1,012.00 1,012.00
4173 02/28/94 210.00 210.00
4271 04/04/94 695.24 695.24
1264 07/08/94 932.61 932.61
1304 08/02/94 685.00 685.00
1510 10/05/94 892.40 892.40
4044 12/13/93 212.31 212.31
Total Travel $24,706.76
Bookkeeping
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2573 02/21/92 $ 500.00 $ 500.00
2633 03/18/92 600.00 600.00
2678 04/07/92 452.34 300.00
2851 05/03/92 300.00 300.00
2885 05/20/92 500.00 500.00
2953 06/11/92 300.00 300.00
2779 07/16/92 300.00 300.00
2820 08/07/92 300.00 300.00
3017 09/03/92 300.00 300.00
96-FW-219-1003 Page 30
Appendix C
120 10/21/92 300.00 300.00
3153 11/11/92 475.00 300.00
3204 12/14/92 300.00 300.00
3247 01/05/93 300.00 300.00
3361 02/01/93 500.00 300.00
3418 03/01/93 300.00 300.00
3491 04/01/93 475.00 475.00
3543 05/01/93 300.00 300.00
3604 06/01/93 405.22 387.50
3666 07/01/93 700.00 700.00
3736 08/05/93 300.00 300.00
3784 09/01/93 400.00 400.00
3887 10/07/93 300.00 300.00
3950 11/03/93 300.00 300.00
4029 12/02/93 300.00 300.00
1364 08/29/94 500.00 500.00
154 10/13/94 3,000.00 3,000.00
Total Bookkeeping $9,162.50 $3,000.00
Consultant Fees
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
3230 12/22/92 $1,825.00 $1,850.00
3376 02/09/93 925.00 925.00
3466 04/01/93 925.00 925.00
3715 08/03/93 1,000.00 1,000.00
3953 11/04/93 250.00 250.00
3952 11/04/93 250.00 250.00
1108 05/05/94 1,000.00 1,000.00
3413 02/25/93 1,829.501 1,829.50
3481 04/01/93 "
3837 09/13/93 "
Total Consultant Fees $6,200.00 $1,829.50
Telephone Expense
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2529 02/05/92 $720.00 720.00
2530 02/05/92 120.00 120.00
1
The $1,829.50 relates to checks 3413, 3481, and 3837. The owner made payments on account to the attorney, some for
costs that we are not questioning. The $1,829.50 in questioned costs are not specifically tied to any particular check(s).
Page 31 96-FW-219-1003
Appendix C
2579 03/02/92 685.00 60.00
2658 04/01/92 685.00 60.00
2725 05/01/92 60.00 60.00
2903 06/01/92 60.00 60.00
2730 07/02/92 685.00 60.00
2806 08/03/92 60.00 60.00
3000 09/01/92 60.00 60.00
3072 10/01/92 60.00 60.00
3112 11/02/92 60.00 60.00
3179 12/01/92 60.00 60.00
3332 01/01/93 60.00 60.00
3358 02/01/93 60.00 60.00
3429 03/01/93 60.00 60.00
3488 04/01/93 60.00 60.00
3608 06/01/93 60.00 60.00
3661 07/01/93 60.00 60.00
3710 08/01/93 60.00 60.00
3789 09/01/93 60.00 60.00
3861 10/01/93 60.00 60.00
3949 11/01/93 60.00 60.00
3987 11/30/93 60.00 60.00
4057 01/01/94 60.00 60.00
4108 01/31/94 60.00 60.00
4166 02/28/94 60.00 60.00
4268 04/04/94 60.00 60.00
1047 05/02/94 60.00 60.00
1132 06/02/94 60.00 60.00
1223 07/01/94 60.00 60.00
1303 08/02/94 60.00 60.00
1392 08/31/94 60.00 60.00
1514 10/05/94 60.00 60.00
Total Telephone Expense $2,700.00
Late Fees and Bank Charges
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2507 01/01/92 $7,400.37 $ 81.87
2574 02/15/92 5,400.37 81.87
2588 03/02/92 5,326.89 81.87
BS 08/31/92 NSF Charges 36.00
BS 09/30/92 NSF Charges 108.00
3161 11/15/92 5,329.07 81.87
3227 12/15/92 5,329.07 81.87
96-FW-219-1003 Page 32
Appendix C
3243 01/05/93 5,818.14 46.54
3457 03/01/93 5,877.49 81.82
3526 04/15/93 5,823.74 28.07
3527 04/15/93 53.80 53.80
3597 05/15/93 5,877.57 81.90
3651 06/15/93 5,920.81 148.94
3697 07/15/93 5,885.35 143.48
3777 08/20/93 5,969.96 174.29
BS 09/30/93 NSF/OD fees 36.00
3845 10/01/93 135.67 135.67
4019 12/02/93 5,953.66 157.99
BS 12/31/93 OD Charges 144.00
1430 09/09/94 21.25 21.25
BS 09/30/94 OD Charges 486.00
Total Late Fees and Bank Charges $2,293.10
Other Questionable
Check No\ Check Ineligible Unsupported
Source Date Amount Amount Amount
2618 03/05/92 $337.45 $ 337.45
2677 04/06/92 450.00 450.00
2871 05/07/92 450.00 450.00
2884 05/18/92 221.60 200.00 10.64
2893 05/29/92 855.45 263.95 23.07
2778 07/13/92 164.75 117.50 40.25
2795 07/31/92 654.76 60.00 32.11
2988 08/21/92 9.24 9.24
2980 08/07/92 536.51 477.51
3153 11/11/92 475.00 25.00 150.00
4135 02/08/94 651.08 162.44
4252 04/04/94 298.73 290.00
1096 05/05/94 249.61 249.61
1097 05/05/94 215.00 215.00
1353 08/19/94 448.29 427.00
2502 01/10/92 94.71 94.71
2521 01/29/92 867.14 101.26
2584 03/02/92 300.00 300.00
2585 03/02/92 1,350.00 1,350.00
2600 03/05/92 216.05 216.05
2678 04/07/92 452.34 152.34
2680 04/08/92 1,000.00 1,000.00
2945 06/08/92 200.00 200.00
2968 06/29/92 532.31 532.31
Page 33 96-FW-219-1003
Appendix C
2740 07/07/92 1,054.00 1,054.00
2991 08/21/92 700.00 350.00
3005 08/31/92 496.61 496.61
3050 09/09/92 237.62 237.62
3065 09/30/92 259.64 259.64
122 10/23/92 500.00 500.00
123 10/26/92 122.08 122.08
3102 10/30/92 200.00 200.00
DS 11/06/92 Withdrawal 74.00
3160 11/23/92 664.75 664.75
3170 11/30/92 387.00 387.00
3181 12/01/92 765.00 765.00
3203 12/14/92 200.00 200.00
3202 12/14/92 400.00 400.00
3215 12/18/92 200.00 200.00
3361 02/01/93 500.00 200.00
3590 05/23/93 918.40 55.72
3622 06/01/93 1,400.00 1,400.00
4089 01/11/94 217.09 217.09
4125 02/07/94 100.00 100.00
4133 02/08/94 686.29 686.29
4168 02/28/94 1,133.94 1,133.94
4193 03/08/94 290.07 290.07
1062 05/03/94 1,190.00 1,190.00
1388 08/31/94 438.00 438.00
Total Other Expenses $3,734.70 $15,824.55
96-FW-219-1003 Page 34
Appendix C
(THIS PAGE LEFT BLANK INTENTIONALLY)
Page 35 96-FW-219-1003
Appendix D
Owner Comments (regarding Finding 1)
Pages 37 - 40
96-FW-219-1003 Page 36
Appendix E
Multifamily Division Comments (regarding
Finding 2)
Pages 41 - 42
Page 37 96-FW-219-1003
Appendix F
Distribution
Secretary's Representative, 6AS
State Coordinator
Comptroller, 6AF
Director, Housing, 6AH
Director, Accounting, 6AAF
Kizzier, New Orleans (4)
Assistant to the Secretary for Field Management, SC (Room 7106)
Assistant to the Deputy Secretary for Field Management, SC (Room 7106)
Housing ALO, HFM (Room 2108) (5)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10166) (2)
Deputy Chief Financial Officer for Operations, F (Room 10166) (2)
Associate Director, US GAO, 820 1st St. NE Union Plaza,
Bldg. 2, Suite 150, Washington, DC 20002
Attn: Jacquelyn Williams-Bridgers (2)
Auditee
96-FW-219-1003 Page 38
Little Flower Estates, Ponchatoula, LA
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-09-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)