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
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)