U. S. Department of Housing and Urban Development Office of Inspector General for Audit, Midwest 77 West Jackson Boulevard, Room 2646 Chicago, Illinois 60604-3507 AUDIT RELATED MEMORANDUM 97-CH-184-1801 October 10, 1996 MEMORANDUM FOR: Joann Adams, Director, Public Housing Division, Michigan State Office FROM: Dale L. Chouteau, District Inspector General for Audit, Midwest SUBJECT: Hamtramck Housing Commission Hamtramck, Michigan We completed a review of the Hamtramck Housing Commission's plan to use Comprehensive Grant Program funds to construct a multi-purpose facility that includes a police station for th e City of Hamtramck. The review resulted from a citizen complaint to the HUD hotline. Ou r objective was to determine whether the use of Comprehensive Grant Program funds for th e construction of the facility and the police station was an eligible use of the funds according t o HUD's regulations. The Hamtramck Housing Commission operates two low-income housing projects. Th e Commission has an elderly development with 150 units and a family deve lopment with 300 units. Records related to the Commission are located at 12025 Dequindre Avenue, Hamtramck , Michigan. To achieve our objective, we reviewed the Commission's: Comprehensive Grant Progra m budgets for Fiscal Years 1993 and 1994; site acquisition documents; the architectural plans for the facility; the proposed lease agreement; and correspondence between the Commission an d HUD regarding the facility. We also interviewed the Commission's Executive Director an d appropriate HUD staff. We concluded that the portion of Comprehensive Grant funds planned to be used to construct a police station would not be an eligible use of the funds. We also determined that HUD lack s assurance the rest of the facility will adequately benefit the Commission's low income residents. Details for our conclusions are contained in the attached finding. Within 60 days, please provide us, for each recommendation made in this report, a status report on: (1) the corrective action taken; (2) the proposed corrective action and the date to b e completed; or (3) why action is considered unnecessary. Also please furnish us copies of an y correspondence or directives issued because of the audit. Should your staff have any questions, please have them contact me at (312) 353-7832. 97-CH-184-1801 Page 2 Finding Planned Use of Comprehensive Grant Funds Is Not Appropriate The Hamtramck Housing Commission inappropriately plans to use Comprehensive Gran t Program Funds of $1,803,000 to construct a multi-purpose facility that will include a residen t activity center and a police station for the City of Hamtramck. As planned, the facility will not be within close proximity of the Commission's projects and the portion of the funds used for the police station will not benefit the low income residents. Also, the Commission does not hav e commitments from social service agencies or other organizations to provide services an d activities needed for residents. As a result, HUD lacks assurance that the expenditure of th e Grant funds will be effective and meet HUD's program objectives. Regulation 24 CFR 968.301 (a) states that the purpose o f HUD's Regulations the Comprehensive Grant Program is to provid e modernization assistance to housing authorities fo r rehabilitation, upgrading, maintenance, and improvements of public housing developments for the benefit of lo w income families and to ensure the continued availability of housing for the families. Regulation 24 CFR 968.310 lists the eligible costs fo r which the Comprehensive Grant funds can be used. Th e construction of a police station is no t included as an eligible cost. The Hamtramck Housing Commission inappropriatel y The Planned Use of plans to use Comprehensive Grant funds to construct a Comprehensive Grant 19,600 square foot multi-purpose facility that includes a Funds is Improper police station. The estimated construction cost of th e facility is $1,803,000 and will be financed by Fiscal Yea r 1993 and 1994 Comprehensive Grant Program funds. The planned facility will not be on the Commission' s property. It is one-quarter of a mile from the elderl y development and two miles from its family development . The facility is planned to be built on a parcel of vacant park land donated by the City of Hamtramck. Seventy-five percent, or 14,700 square feet, of the facility Page 3 97-CH-184-1801 Finding will be occupied by a resident activity center. The cente r will consist of a full size basketball court, vocationa l training area, drug rehabilitation area, socia l workers' office, computer training room, and conference rooms. Th e Commission's Executive Director said the facility wil l provide the low income residents and the City o f Hamtramck residents adult education classes, family sel f sufficiency programs, computer training, drug awarenes s programs, family planning, counseling and social services. The Director said the Commission will provide bus o r shuttle service for its residents to go to the facility . However, the Director did not have specific plans tha t addressed required resources or how this would b e accomplished. The Commission also did not have an y commitments from social service agencies or othe r organizations to provide supportive services or conduc t other activities that are planned for the facility. As a result, HUD lacks assurance that the planned resident activit y center will adequately benefit the low income residents. The remaining 25 percent of the space will be used for a The Facility Includes A City of Hamtramck police station. The police station wil l Police Station include three cells for holding prisoners with sanitar y facilities, an evidence storage room, a fingerprint room, a control room with public desk area protected by bulle t resistant windows, a vehicle garage, and two Officer locker rooms. The locker rooms will have sanitary facilities an d lockers for 40 police officers. The City of Hamtramck has a total of 54 Police Officers. Based on one-quarter of th e square footage cost of the building a nd an additional cost of $50,000 for police construction requirements, we estimate the total cost of the police station to be $488,250. Since the police station will not be located on the Commission' s development sites, it will not be a direct benefit to the low income residents. The Commission contends that the City is paying for th e police station because it has donated the site for the facility and the police station will provide police presence that will provide round the clock security at no cost to th e Commission. According to the Commission's propose d lease agreement with the City, the City's in-kin d contribution will be approximately $366,000. Th e 97-CH-184-1801 Page 4 Finding agreement states that the City: will tra nsfer 2.9 acres of land worth in excess of $271,000; will forgo tap fees of abou t $80,000; and will reduce its building inspection fees b y $15,000. Additionally, the City will pay the Commissio n one dollar per year for the police st ation space. The term of the lease will be 25 years. The Commission did not have an appraisal to support the value of the donated land. We believe the City's contribution does not adequatel y cover the cost of constructing the police st ation or the future rental value of the space. The City's in-kind contribution is approximately $122,250 less than the immediate cost o f construction and the rental charge for the 4,900 square feet over 25 years is $1,748,050 less than the average cost fo r which the space should rent. Our cal culation is based on an average rental rate for office space in the Hamtramck area of $14.27 per square foot per year. We used the rental rate contained in the Metropolitan Detroit Office M arket Review Newsletter published by Trerice Tosto Managemen t Information Systems. As of October 4, 1996, the Michigan State Office has no t approved the Commission's plan. Recommendations We recommend that the Michigan Stat e Office's Director of Public Housing requires the Hamtramck Housin g Commission to: 1A. Provide support that the resident activity center will substantially and primarily benefit the Commission's low income residents before approving the plan . The support should include a plan for transportation that addresses required resources. Additionally, the Commission should have commitments fro m supportive service agencies and other organizations to provide services and activities planned for th e facility. We also recommend that the Michigan State Office' s Director of Public Housing: 1B. Not approve the use of Comprehensive Grant Funds Page 5 97-CH-184-1801 Finding to pay any portion of the cost of a police station. 97-CH-184-1801 Page 6 Appendix A Distribution Secretary's Representative, Midwest Director, Public Housing Division, Michigan State Office (2) State Coordinator, Michigan State Office (2) Director, Accounting Division, Midwest Field Comptroller, Midwest Assistant General Counsel, Midwest Public Affairs Officer, Midwest Assistant to the Secretary for Field Management, SC (Room 7106) Assistant to the Deputy Secretary for Field Management, SC (Room 7106) Acquisitions Librarian, Library, AS (Room 8141) Chief Financial Officer, F (Room 10166) (2) Deputy Chief Financial Officer for Operations, FO (Room 10166) (2) Comptroller/Audit Liaison Officer, Office of Public and Indian Housing, PF (Room 4122) (3) Associate General Counsel, Office of Assisted Housing and Community Development, GC (Room 8162) Assistant Director in Charge, U.S. GAO, 820 1st St. NE, Union Plaza, Building 2, Suite 150, Washington DC, 20002 (2) Page 7 97-CH-184-1801
Hamtramck Housing Comm., Hamtramck, MI
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-10-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)