Issue Date
October 18, 1996
Audit Case Number
97-PH-241-1001
TO: Joseph K. Aversano, Director, Community Planning
and Development Division, Virginia State
Office, 3FD
FROM: Edward F. Momorella, District Inspector General
for Audit, Mid-Atlantic, 3AGA
SUBJECT: City of Charlottesville
Community Development Block Grant Program
Charlottesville, Virginia
We audited selected activities of the City of Charlottesville (Grantee) Community Development
Block Grant (CDBG) Program. The purpose of the audit was to determine whether the activities
were administered in accordance with applicable HUD regulations and requirements and Grantee
policies.
Based on our review, the Grantee needs to improve its management and oversight of the
Economic Development Loan Program.
Within 60 days, please give us, for each recommendation made in the report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and the date to be completed;
or (3) why action is considered unnecessary. Also, please furnish us copies of any
correspondence or directives issued because of the audit.
If you have any questions, please contact Irving I. Guss, Assistant District Inspector General for
Audit, at (215) 656-3401.
Management Memorandum
97-PH-241-1001 Page ii
Executive Summary
The purpose of the audit was to determine whether the City of Charlottesville administered
selected CDBG Program activities according to HUD regulations and requirements and Grantee
policies.
The audit disclosed that the Grantee effectively
administered the CDBG Program. However, a problem was
identified requiring corrective action by the Grantee.
The Grantee did not administer the Economic Development
Grantee improperly
Loan program properly as required by Federal regulations
funded three loans
and program guidelines. The Grantee did not provide the
necessary management oversight by ignoring its own
written guidelines. The Grantee failed to document that the
appropriate analysis was done, national objective met,
financial commitment obtained and loan expenditures were
supported. As a result, the Grantee provided ineligible
loans totaling $54,821 to three borrowers.
We recommend the Grantee: (1) repay the program from
non-Federal funds the loan principal totaling $54,821 and
pay to HUD all interest earned on the loans, and (2)
implement written procedures to ensure program
regulations and requirements are followed.
We discussed the draft finding with Grantee representatives
during the audit and at an exit conference held on October
10, 1996. The draft finding was provided to the Grantee
and the response received was considered in our report.
The Grantee response is included as Appendix C.
Page iii 97-PH-241-1001
Executive Summary
97-PH-241-1001 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Finding
The Grantee Needs to Improve the
Management of the Economic Development
Loan Program 3
Internal Controls 15
Follow Up On Prior Audits 17
Appendices
A Finding Loan Analyses - Borrowers A, B and C 19
B Schedule of Ineligible Costs 25
C Auditee Comments 27
D Distribution 31
Page v 97-PH-241-1001
Table of Contents
Abbreviations
CDBG Community Development Block Grant
CFR Code of Federal Regulations
HUD Department of Housing and Urban Development
OIG Office of Inspector General
97-PH-241-1001 Page vi
Introduction
The City of Charlottesville has received a total of $8,826,790 in CDBG entitlement funds since
1982. HUD provided CDBG entitlement funds to the Grantee for the following three recent
program years:
Program Years Amount
1993 $697,000
1994 $758,000
1995 $735,000
The Grantee is governed by City Council and administers the CDBG program through the City
Manager and the Department of Community Development. Mr. Satyendra Singh Huja is the
Director of Planning and Community Development.
To administer the Economic Development Loan Program the Grantee established a Loan
Committee. The Committee is responsible to review and recommend projects to be funded with
an economic development loan. The Loan Committee consists of five members: a staff member
of the Department of Community Development, a member of the Charlottesville business
community, two loan officers of lending institutions located in Charlottesville and a resident of
a CDBG target neighborhood.
CDBG Program records are maintained at City Hall in Charlottesville, Virginia.
The primary objective of the audit was to determine
Audit Objective
whether the Grantee administered its CDBG Program in
accordance with HUD regulations and requirements, and
local policies. Based on survey results the audit focused on
selected program activities covering public improvements,
property rehabilitation and the Economic Development
Loan Program.
We reviewed HUD, Grantee, and subrecipient records and
Audit Scope
interviewed staff responsible for program activities. We
reviewed four economic development loans and
interviewed accessible borrowers. We inspected four
rehabilitated properties and interviewed owners. We
conducted windshield inspections of 20 properties painted
under the Free Paint Program.
Our audit was performed between April 1996 and
Audit Period
September 1996, and covered the activities from July 1994
Page 1 97-PH-241-1001
Introduction
through March 1996. The audit period was expanded when appropriate.
We conducted the audit in accordance with generally
accepted government auditing standards.
97-PH-241-1001 Page 2
Finding
The Grantee Needs to Improve the
Management of the Economic Development
Loan Program
The Grantee did not administer the Economic Development Loan Program properly as required
by Federal regulations and program guidelines. The Grantee did not provide the necessary
oversight by ignoring its own written guidelines. The Grantee failed to document that the
appropriate analysis was done, national objective met, financial commitment obtained and loan
expenditures were supported. As a result, the Grantee provided CDBG assistance for ineligible
loans to borrowers.
HUD requires that a CDBG Grantee must make an
Eligibility and national
eligibility determination and a national objective
objective determinations
determination before providing CDBG financial assistance
not done as required
to a for-profit business. Both determinations must be
completed and documented before the Grantee executes an
agreement to provide assistance.
We reviewed the Grantee's entire portfolio consisting of 4
loans with outstanding balances. For three of the four
loans, the Grantee failed to meet the eligibility and national
objective determinations as follows:
Loan Inadequate National Financial
Amount Appropriate Objective Commitment Unsupported
Borrower Ineligible Analysis Not Met Not Supported Expenditures
A $25,000 X X X X
B 12,321 X X
C 17,500 X X X X
Total $54,821
Inadequate appropriate analysis
The Grantee did not maintain the required written analyses
for the three loans. As a result, the Grantee could not show
that the loans did not unduly enrich the borrowers and that
the assistance is appropriate to carry out the project.
Page 3 97-PH-241-1001
Finding
According to 24 CFR 570.203(b):
"...In order to ensure that any such assistance does not
unduly enrich the for-profit business, the recipient shall
conduct an analysis to determine that the amount of any
financial assistance to be provided is not excessive, taking
into account the actual needs of the business in making the
project financially feasible and the extent of public benefit
expected to be derived from the economic development
project. The recipient shall document the analysis as well
as any factors it considered in making its determination that
the assistance is necessary or appropriate to carry out the
project...."
The financial statements for borrower A indicated that there
was $135,000 in liquid assets which was more than
sufficient to cover the borrower's investment of $15,000
and the economic development loan of $25,000. In
addition, the borrower and her spouse had a net worth of
$672,866.
For the loans to borrowers B and C, the Grantee did not
Grantee failed to justify
document the appropriate analyses to determine that the
borrowers needed
assistance requested was (a) not excessive and met the
program financing
actual needs of the borrower, (b) necessary to make the
activity financially feasible, and (c) not substituted for
funding available from other sources.
We were advised by the Grantee that the loans to borrowers
A and C were made because they were minorities and the
location of the businesses.
The Grantee did not justify that the borrowers maximized
private financing prior to executing the agreements.
Therefore the Grantee had no assurance the borrowers
needed CDBG financing.
National objective not met
The Grantee did not support achievement of the national
objective for the three loans reviewed. The Grantee
accepted information which did not meet HUD regulations
and did not perform an on-site review to verify the
information. As a result, the Grantee could not ensure that
97-PH-241-1001 Page 4
Finding
CDBG assisted activities met the low and moderate income
benefit for the creation or retention of jobs.
According to 24 CFR 570.506:
"Each recipient shall establish and maintain sufficient
records to enable the Secretary to determine whether the
recipient has met the requirements of this part. At a
minimum, the following records are needed: ...(b)(5) For
each activity determined to benefit low and moderate
income persons based on the creation of jobs the recipient
shall provide the documentation described in either
paragraph (b)(5)(i) or (ii) of this section...:
According to 24 CFR 570.506(b)(5)(ii):
"Where the recipient chooses to document that at least 51
percent of the jobs will be held by low and moderate
income persons, documentation for each assisted business
shall include: ...(B) A listing by job title of the permanent
jobs filled and which jobs were initially held by low and
moderate income persons; and (C) For each such low and
moderate income person hired, the size and annual income
of the person's family prior to the person being hired for the
job."
For the loans awarded to borrowers A, B, and C, the
Family income not
Grantee did not maintain documentation that identified the
determined for persons
size and annual income of each family for the person
employed
benefitting from the employment. In addition, the Grantee
did not maintain information identifying the permanent jobs
by job title for borrower C.
Borrower B was not informed of the need to document the
size and annual income of the employee's family prior to
employment.
The Director of Planning and Community Development
stated that he was not aware that in order for an individual
to be considered low income, the size and income of the
entire family was to be considered.
Page 5 97-PH-241-1001
Finding
Financial commitment not supported
The Grantee did not ensure that private funds identified by
Grantee failed to validate
the borrowers to leverage the CDBG funds were committed,
private funds provided
provided and expended for the activity. The loan files
identified private funding for the activity. The Grantee
guidelines require that they ascertain the source of private
funds is committed and the source has the capacity to
deliver the funds. However, the Grantee's commitment
letter did not require the borrower to support that the private
funds had been provided before disbursing the loan to the
borrower. As a result, the assisted project may have been
financially weakened and the borrower unduly enriched.
Borrower A determined that $110,000 was necessary to
make leasehold improvements, purchase equipment and
have initial working capital to open a
delicatessen/convenience market. The financing was to
come from the following sources:
Bank financing and $ 70,000
letter of credit
Economic Development 25,000
Loan
Borrower equity 15,000
$110,000
We accounted for $80,357 of the funds provided. The
balance of $29,643 was not accounted for. There was no
evidence that the borrower provided the $15,000 for the
business.
The Grantee did not obtain adequate documentation to
support borrower C's fifty percent commitment for the loan.
The borrower determined her commitment to be $26,327.
She provided a letter stating that she had invested over
$25,000 of her own funds but provided a listing showing
only $15,044 of equipment purchased and renovations, of
which $8,862 was supported by invoices. The borrower did
not provide support for the remaining $17,465.
97-PH-241-1001 Page 6
Finding
Borrowers A and C have declared bankruptcy and have
gone out of business. By not requiring borrowers to
evidence that private funds were committed and provided
before disbursing the loan, the Grantee did not assure the
business had an opportunity to succeed.
Unsupported loan expenditures
For two loans, the Grantee did not maintain the required
documentation needed to support the eligibility of payments
made from loan proceeds. As a result, the Grantee is unable
to verify that the loan proceeds were spent for eligible
activity costs.
According to 24 CFR 85.20(b):
"The financial management systems of grantees and
subgrantees must meet the following standards: (1)
Financial reporting. Accurate, current, and complete
disclosure of the financial results of financially assisted
activities must be made in accordance with the financial
reporting requirements of the grant or subgrant. (2)
Accounting records. Grantees and subgrantees must
maintain records which adequately identify the source and
application of funds provided for financially assisted
activities. These records must contain information
pertaining to grant or subgrantee awards and authorizations,
obligations, unobligated balances, assets, liabilities, outlays
or expenditures, and income."
For borrower A, the loan conditions required the borrower
Borrowers use of loan
submit copies of all invoices to the Grantee before
funds for activities
disbursement of loan proceeds. The loan approval letter
unsupported
stated that the borrower was to use the $25,000 loan
proceeds for leasehold improvements to the business. The
Grantee improperly disbursed the $25,000 without
obtaining full documentation to support the improvements.
Only $15,027 of the loan proceeds was supported by the
borrower.
Borrower C's loan documents did not require the borrower
to maintain necessary records for loan expenditures. The
borrower's loan application showed that $13,510 was to be
spent for leasehold improvements and $3,990 for
Page 7 97-PH-241-1001
Finding
equipment. The $13,510 was documented by a contractor's
proposal but there was no evidence provided that the
leasehold improvements were done. No support was
obtained for the equipment purchases.
The Director of Planning and Community Development
stated that the economic loan program was a cost
reimbursable program and thought the costs were
supported.
Without complying with the financial management
standards, the Grantee cannot assure the CDBG funds were
used for eligible activities.
* * * *
The level of risk for a loan must be thoroughly evaluated to
avoid assisting a business which has no likelihood of
success regardless of the amount of assistance. In our
opinion the Grantee underwrote loans which were not likely
to succeed, as evidenced by borrowers A and C defaulting
on their loans within seven months of execution.
Because the Grantee did not make and maintain the
required written determinations and analyses, and support
that the assisted economic development activities met the
low and moderate income national objective, three loans
reviewed, totaling $54,821 were determined to be
ineligible.
Auditee Comments Borrower A:
Inadequate appropriate analysis
The Grantee states that the loan granted to borrower A was
based solely upon the borrowers income and assets.
Spousal income and assets were not considered. The
Grantee states that the purpose of the program was
encouraging minority entrepreneurship and the hiring of
low and moderate income employees. The borrower was a
minority and a woman. The borrower, in addition to
Grantee financing, obtained financing from a bank and
97-PH-241-1001 Page 8
Finding
invested personal funds. This diversification made her
liability affordable.
National objective not met
The Grantee's former analyst stated that it was very difficult
and possibly illegal to request verification of income from
people applying for employment. She had discussed the
issue with the Richmond HUD office and had received
permission to give the income guidelines to the employers
and let the employers ask the employees if they met the
criteria in the guidelines. The employer would then report
the employee's income to the city if it was low or moderate.
Financial commitment not supported
The Grantee submitted documentation to support $52,978.
Additional leasehold improvements totaling $8,650 were
made. The city's guidelines state that a borrower is eligible
for up to $25,000 or 50% of the total cost of rehabilitation,
whichever is less.
Unsupported expenditures
The Grantee states that they have documentation showing
that the borrower spent approximately $61,628 on the
business which included approximately $16,868 spent on
leasehold improvements. The Grantee felt that the
borrower had paid more than half of the required
investment.
Borrower B:
Inadequate appropriate analysis
The Grantee states that the borrower was not a minority but
her business was located in a CDBG target neighborhood.
The loan was needed to move her to a more visible location
that was more accessible to her clientele which included
minorities and allows her to provide employment to low
and moderate income people.
The Grantee states that various estimates were received as
a basis for comparison to assure the assistance requested
Page 9 97-PH-241-1001
Finding
was not excessive and met the needs of the borrower.
Representatives of the city visited the site and future site to
verify the needs of the borrower.
National objective not met
The Grantee obtained information from the borrower
concerning family size and other sources of income. The
documentation accompanied their response.
Borrower C:
Inadequate appropriate analysis
The Grantee states that the applicant was very enthusiastic
about fulfilling the public benefit requirement for the loan.
The Grantee states that they were eager to begin the
economic development loan program and to encourage
women and minorities to pursue business ownership in
CDBG target areas and on the Downtown Mall. The loan
allowed the borrower to expand her business and create
employment for low and moderate income people.
National objective not met
The Grantee repeated their response given to national
objective not met for borrower A.
Financial commitment not supported
The Grantee states that their guidelines show that a
borrower might be eligible for up to $25,000 or 50% of the
total cost of rehabilitation, whichever is less. The borrower
reduced her loan request from $25,000 to $17,500. The
Grantee states that the borrower met her obligations by
spending $15,044 on inventory and that they had records
from Building and Life Safety showing that another $3,050
was spent.
Unsupported expenditures
The Grantee states that it was their understanding from the
Richmond HUD office that they only had to verify the
expenditures that the Grantee paid for and that the
97-PH-241-1001 Page 10
Finding
borrower's funds did not have to be verified. They also
state that they have invoices and records in their files
showing that the borrower spent $14,178 for leasehold
improvements and $4,301 on equipment.
In response to recommendation 1A the Grantee states
borrower B is currently repaying the loan with all principal
and interest being deposited in a CDBG account. $375 was
repaid by borrower C. $2,727 was repaid by borrower A
and $7,573 was recovered through enforcement of the
City's security interest in her inventory. All funds
recovered have been deposited in CDBG accounts, and
should be deducted from any amount alleged to be due
from the City.
OIG Evaluation of Borrower A:
Auditee Comments
Inadequate appropriate analysis
The Grantee states that the loan was based solely upon the
borrower's income and assets. However, the Grantee file
documented only the joint or combined financial statements
of the borrower and spouse.
Based upon Grantee files documentation, the borrower had
access to liquid assets to fund the business rather than using
CDBG funds.
National objective not met
The Grantee did not provide documentation supporting the
achievement of the national objective by the borrower.
Providing the employer the income guidelines and asking
the employee if they met the guidelines does not comply
with the regulations. The employer was required to obtain
from the employee the family size and the annual income of
the family prior to being hired. The Grantee did not
provide the legal statue why obtaining this information was
illegal.
Financial commitment not supported
Page 11 97-PH-241-1001
Finding
The Grantee resubmitted receipts previously reviewed. The
documentation supplied did not change the amount of
financing found unsupported. The Grantee did not support
that the borrower provided her contribution of $15,000.
Unsupported expenditures
The Grantee did not support $9,973 of leasehold
improvement expenditures required by loan documents.
Borrower B:
Inadequate appropriate analysis
The Grantee did not provide documentation to verify the
appropriate analyses was performed. In addition, the
Grantee states that they had received various estimates and
had visited the site. However, the Grantee did not provide
documentation to support their statements. The borrower's
file contained no documentation to support that alternative
financing had been pursued.
National objective not met
Documentation provided by the Grantee did not document
income of the employee's family prior to the person being
hired for the job as required. The Grantee only required the
borrower to determine if the income received by the
employee was the only source of income. Family income
was not required.
Borrower C:
Inadequate appropriate analysis
Documentation was not provided by the Grantee showing
the appropriate analyses supporting their justification for
executing the loan. The borrower's files contained no
documentation to support that alternative financing had
been pursued.
National objective not met
97-PH-241-1001 Page 12
Finding
Our response under borrower A applies.
Financial commitment not supported
The reduction of the loan amount does not change the
Grantee's failure to document and support the borrowers
commitment of $15,044 or the additional $3,050 recorded
on Building and Life Safety records.
Unsupported expenditures
The Grantee did not provide documentation to support
borrower expenditures.
Recommendations We recommend the Grantee:
1A. Repay the program loan proceeds repaid by the
borrower plus from non-Federal funds, principal
balances outstanding for the three loans cited in this
finding totaling $54,821. Pay to HUD all interest
earned on the loans.
1B. Implement written procedures to ensure program
guidelines are followed and Grantee files include
documentation to support eligibility with Federal
regulations. The procedures must make it clear that
before CDBG financial assistance is provided,
eligibility and national objective determinations
shall be completed, documented, and included in the
loan file of the applicant. No agreement shall be
executed with a for-profit applicant unless these
conditions are met.
Page 13 97-PH-241-1001
Finding
97-PH-241-1001 Page 14
Internal Controls
In planning and performing our audit, we considered the internal control systems of the
management of the Grantee in order to determine our auditing procedures and not to provide
assurance on internal control.
Internal control is the process by which an entity obtains reasonable assurance as to achievement
of specified objectives. Internal control consists of interrelated components, including integrity,
ethical values, competence, and the control environment which includes establishing objectives,
risk assessment, information systems, control procedures, communication, managing change, and
monitoring.
We determined that the following internal control
Internal controls assessed
categories were relevant to our objectives:
• Administrative controls over the Economic
Development Loan Program
• Administrative controls over rehabilitation and public
improvement activities
• Procurement
• Program Income
A significant weakness exists if internal control does not
Assessment Results
give reasonable assurance that the entity's goals and
objectives are met; that resource use is consistent with laws,
regulations, and policies; that resources are safeguarded
against waste, loss, and misuse; and that reliable data are
obtained, maintained, and fairly disclosed in reports. Based
on our review, we believe the following item is a significant
weaknesses:
• Administrative controls over the Economic
Development Loan Program
This weakness is detailed in the finding in this report.
Page 15 97-PH-241-1001
Internal Controls
97-PH-241-1001 Page 16
Follow Up On Prior Audits
This is the first audit of the Grantee's program by the OIG.
Page 17 97-PH-241-1001
Follow Up On Prior Audits
97-PH-241-1001 Page 18
Appendix A
Finding Loan Analyses
Borrower A
LOAN AMOUNT: $25,000
LOAN TERMS: Interest at 3% for 5 years. If promised employment not
accomplished within the period of time specified, or ceases
for a period of three consecutive months during the life of
the loan, the interest rate will be increased to 3 points above
the prevailing market rate of the bank.
CLOSING DATE: June 10, 1994
PROPOSED USE
OF FUNDS: To open a delicatessen/convenience market that will serve
downtown Charlottesville.
PROPOSED
OBJECTIVE: To create and fill the equivalent of 8 full time jobs. The
applicant agreed to hire low to moderate income individuals
for at least 51% of the jobs (equal to at least 5 full time
positions). At least two of the low and moderate income
individuals shall be hired during the first six months of
operations with the remaining positions filled within two
years of the opening of the business.
SUMMARY OF
ANALYSIS: We consider the loan ineligible for the following reasons:
Inadequate appropriate analysis
The Grantee did not document analysis justifying the
financial need of CDBG funds for the business. Financial
statements indicated that the borrower had $135,000 in
liquid assets which were more than sufficient to cover the
borrower's investment of $15,000 and the economic
development loan of $25,000. In addition, the borrower
and her spouse had a net worth of $672,866. Therefore,
CDBG funds were substituted for the available private
funds of the borrower.
Page 19 97-PH-241-1001
Appendix A
National objective not met
The borrower submitted reports which indicated that the
business hired low and moderate income individuals. No
documentation exists identifying the size and annual
income of the employee's family prior to the employee
being hired. The borrower last submitted a report in
September 1995 since then the business closed. The
Grantee did not verify any of the information on the reports.
Financial commitment not supported
The borrower promised to invest $15,000 into the business.
The borrower did not support financing of $29,643 and
related costs incurred for the business. Therefore, we have
no assurance that the borrower provided the $15,000 for the
business.
Unsupported expenditures
The loan conditions included that the borrower submit
copies of all invoices to the Grantee before loan proceeds
will be disbursed. The loan approval letter stated that the
borrower used the $25,000 loan proceeds for capital
improvements to the business. However, the Grantee could
support only $15,027 of the $25,000. The balance of
$9,973 was unsupported and is included in the $29,643
listed above.
LOAN STATUS: Since the loan went into default in December 1994, the
borrower has made only three payments. The business is
presently closed.
97-PH-241-1001 Page 20
Appendix A
Borrower B
LOAN AMOUNT: $12,321
LOAN TERMS: Interest at 3% for 3 years. If promised employment not
accomplished within the period of time specified, or ceases
for a period of three consecutive months during the life of
the loan, the loan will be due, and payable in full at the time
the Grantee determines that the required employment has
not been accomplished.
CLOSING DATE: August 11, 1995
PROPOSED USE
OF FUNDS: To renovate a new facility for use as a full-service beauty
salon that will allow more visibility by being on the street
level.
PROPOSED
OBJECTIVE: The borrower agrees to hire one stylist who is low-and-
moderate income individual within 90-days from the start
of the loan. In addition, the borrower will retain at least 4
low-and-moderate income individuals during the life of the
loan.
SUMMARY OF
ANALYSIS: We consider the loan ineligible for the following reasons:
Inadequate appropriate analysis
The Grantee did not document the appropriate analysis to
determine that the requested assistance was needed.
According to the Grantee, the borrower did not seek
assistance from any other source.
Page 21 97-PH-241-1001
Appendix A
National objective not met
The borrower submitted a report created by the Grantee and
copies of the pay stub indicating that low and moderate
income individuals were employed but did not provide
information of the size and annual income of the person's
family prior to the person being hired for the job. The
Grantee did not verify any of the information on the report.
LOAN STATUS: The loan is current.
97-PH-241-1001 Page 22
Appendix A
Borrower C
LOAN AMOUNT: $17,500
LOAN TERMS: Interest at 3% for 7 years. If promised employment is not
accomplished within the period of time specified, the
Grantee shall increase the loan interest rate to three (3)
points above that of the prevailing market rate as
announced periodically by the bank.
CLOSING DATE: January 28, 1994
PROPOSED USE
OF FUNDS: To enlarge an existing restaurant located in downtown
Charlottesville.
PROPOSED
OBJECTIVE: To hire two full-time low/moderate income individuals
within the first six months of the loan, and two additional
full-time low/moderate income individuals within three
months thereafter.
SUMMARY OF
ANALYSIS: We consider the loan ineligible for the following reasons:
Inadequate appropriate analysis
The Grantee did not document analysis justifying the
financial need of CDBG funds for the business. There was
no evidence showing that the borrower had attempted to
obtain financing from other sources.
National objective not met
The borrower submitted a report indicating that low and
moderate income individuals were hired. The report did not
provide information identifying (1) the permanent jobs by
job title and (2) the size and annual income of the person's
family prior to the person being hired for the job. The
borrower submitted the report on May 12, 1994, the month
the business closed. The Grantee did not verify any of the
information on the report.
Page 23 97-PH-241-1001
Appendix A
Financial commitment not supported
The borrower promised to commit half the cost of business
improvements totaling $26,327. The borrower supported
$8,862 of equipment owned. The borrower did not provide
support for the remaining investment of $17,465 to be
committed.
Unsupported expenditures
The Grantee's loan agreement did not require that the
borrower maintain required documentation for loan
expenditures. According to the economic development loan
application, the borrower was to spend $13,510 for
leasehold improvements and $3,990 for equipment. The
borrower did not provide evidence, cost documentation,
that the improvements were done and equipment purchased.
LOAN STATUS: The loan is in default, and the borrower has filed for
bankruptcy. The borrower made two payments before
default. The business is presently closed.
97-PH-241-1001 Page 24
Appendix B
Schedule of Ineligible Costs
Ineligible 1/
Finding $54,821
1/ Ineligible costs are clearly not allowed by law, contract, or
HUD policies or regulations.
Page 25 97-PH-241-1001
Appendix C
Appendix D
Distribution
Director, Community Planning and Development Division,
Virginia State Office, 3FD
Secretary's Representative, Mid-Atlantic, 3AS
Internal Control & Audit Resolution Staff, 3AFI
Manager, Virginia State Office, 3FS
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Audit Liaison Officer, CPD (Room 7228)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164)
Deputy Chief Financial Officer for Operations, FO (Room 10164)
Assistant Director in Charge, US GAO, 820 1st St. NE Union Plaza,
Bldg 2, Suite 150, Washington, DC 20002
City Manager
P.O. Box 911
Charlottesville, VA 22902
Page 31 97-PH-241-1001
City of Charlottesville, CDBG Program Charlottesville, Virginia
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-10-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)