oversight

Schuylkill County HA, Pottsville, PA

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-04-09.

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

                                       U.S. Department of Housing and Urban Development
                                                          Wanamaker Building, Suite 1005
                                                                    100 Penn Square East
                                                             Philadelphia, PA 19107-3380

                                                      District Inspector General for Audit


April 9, 1996

                                                   Audit Related Memorandum
                                                   No. 96-PH-209-1814



MEMORANDUM FOR:       Malinda Roberts, Acting Director, Office of
                        Public Housing, 3APH



FROM:       Edward F. Momorella, District Inspector General
              for Audit, Mid-Atlantic, 3AGA

SUBJECT:      Schuylkill County Housing Authority
              Property Acquisition and Proposed Disposition of the
              Female Grammar School Building
              Pottsville, PA

On the advice of Headquarters, your office requested we review the
transactions covering the Female Grammar School Building, property
acquisition by the Authority.

We reviewed the information provided by your staff, and performed
a survey of the Authority's purchase and proposed disposition of
the Female Grammar School Building.

The purpose of the     survey was to: (1) determine if the purchase of
the building was       an arm's length transaction, and whether the
Authority's former     Executive Director and Board prudently evaluated
the purchase, and      (2) evaluate the appraisals and property value
assigned.

We interviewed the current Executive Director, Board Members, and
property appraisers. We reviewed Authority files and performed a
deed search of Schuylkill County records.

Our survey disclosed that:

        -      The Authority purchased the Female Grammar School
               Building for the purpose of consolidating and relocating
               their administrative offices, maintenance warehouse, and
               Section 8 offices to a central downtown location.

        -      Appraisal   reports   and   property     records       support        the
          Authority's purchase price of $100,000. No evidence was
          found to indicate that the purchase was other than an
          arm's length transaction.

                                                              2


     -    The former Executive Director acted independently in the
          purchase and planned rehabilitation of the property.
     -    A professional estimate of rehabilitation costs,
          necessary to prepare the building for occupancy, was not
          performed prior to purchase. Rehabilitation costs were
          estimated by the former Executive Director. There was no
          documentation to support his rehabilitation estimate of
          the building.

     -    Oversight by the Board of Commissioners was minimal. The
          Commissioners accepted the former Executive Director's
          proposal and estimate of rehabilitation costs without
          challenge.

     -    Contractor bids for rehabilitation work disclosed that
          rehabilitation and occupancy of the building was
          prohibitive.

     -    Attempts to dispose of the property, to date, have failed
          to realize the Authority's original purchase price.
          Action on the disposition of the property has been
          suspended pending direction from your office.

Based on our review we have concluded that the former Executive
Director did not act in the best interest of the Authority.
Purchasing the building without first obtaining a professional
estimate of rehabilitation costs to determine the feasibility to
convert the building to office space, within the comprehensive
grant budget, represents significant mismanagement. The absence of
oversight by the Board of Commissioners in our opinion contributed
to, rather than prevented, mismanagement.        As a result, the
Authority is now in a position to incur a substantial loss in the
disposition of the property.

Accordingly, the following course of action is recommended:

     1.   The property be readvertised for bid in an attempt to
          realize a higher sales price.

     2.   The Department recover any shortfall, between the
          disposition price and the purchase price, from Authority
          Section 8 administrative fee funds, and restore the funds
          to the Comprehensive Grant Program.
     3

     3.   Advise the Authority that rehabilitation cost estimates
          will be prepared and reviewed prior to approval of future
          property acquisitions.

If you have any questions concerning our survey, please contact
Irving I. Guss, Assistant District Inspector General for Audit at
(215) 656-3401.

Attachment - Distribution
cc:   OSWALD
      CIANCI

3AGA:GUSS:AMP:04/05/96
 Correspondence
 Code             3AGA
 Concurrence      GUSS
 Date
                                                  Attachment


DISTRIBUTION

State Coordinator, 3AS
Internal Control & Audit Resolution Staff, 3AFI
Acting Director, Office of Public Housing, 3APH
Assistant Director in Charge, US GAO, 820 1st St., NE Union
  Plaza, Bldg 2, Suite 150, Washington, DC 20002
                       REPORT NAME:      Schuylkill County Housing Authority
                                         Property Acquisition and Proposed
                                         Disposition of the Female Grammar School Building
                                         Pottsville, PA
                       REPORT NO:        96-PH-209-1814
                       ISSUE DATE:       April 9, 1996




                      REGIONAL OFFICE (NON-OIG)
State Coordinator, Karen Miller, 3AS                                                         1

Internal Control & Audit Resolution Staff, 3AFI                                              1

Acting Director, Office of Public Housing, 3APH                                              1

                             HEADQUARTERS (OIG)
Director, Planning and Administration, GAP (Room 8180)                                       1

Director, Quality Assurance and Audit Follow-up Staff, GAP                                   1
 (Room 8180)

Central Files, (Room 8254)                                                                   2

Semi-Annual Report Coordinator (Room 8254)                                                   1

                       DISTRIBUTION OUTSIDE HUD

Assistant Director in Charge, US GAO, 820 1st St. NE Union                                   1
Plaza, Bldg. 2, Suite 150, Washington, DC 20002                                              9
Attn: Mr. Cliff Fowler

From:
Edward F. Momorella, DIGA, Mid-Atlantic
Wanamaker Building, Suite 1005
100 Penn Square East
Philadelphia, PA 19107-3380