oversight

Independent Auditor Report of Illegal Acts Marina Manor East Apartments Nashville, TN

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-07-28.

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

                                                      U.S. Department of Housing and Urban Development
                                                      District Office of the Inspector General
                                                      Office of Audit
                                                      Richard B. Russell Federal Building
                                                      75 Spring Street, SW, Room 330
                                                      Atlanta, GA 30303-3388
                                                      (404) 331-3369




July 28, 1998                                                            No. 98-AT-212-1809


MEMORANDUM FOR:               Ed Phillips, Director, Multifamily Program Center, 4LH


FROM:           Nancy Cooper, District Inspector General for Audit, Southeast/Caribbean, 4AGA


SUBJECT:        Independent Auditor Report of Illegal Acts
                Marina Manor East Apartments
                Nashville, Tennessee

We have completed a review of information provided by an Independent Auditor (IA) concerning
apparent illegal acts by two employees of Ghertner & Company, management agent for Marina
Manor East Apartments, a 161-unit HUD BMIR project insured under Section 221(d)(3) of the
Housing Act. The IA reported theft of tenant rental payments by the project manager and
assistant manager.

The objective of the review was to determine if there was adequate evidence to warrant
administrative sanctions against the employees. We interviewed your staff, the management agent
and the IA, and reviewed selected IA audit working papers.

RESULTS OF REVIEW

The theft was discovered when a former tenant complained to the management agent that the
manager denied his request for a security deposit refund. The manager said he had not paid the
deposit, but the tenant had a receipt supporting the payment. Based on the incident, the
management agent requested the IA to perform a special review of cash receipts. The IA
reviewed cash receipts for the 18 months ended March 31, 1997, and determined $1,967 was
unaccounted for (Attachment 1). Subsequently, the management agent and new property
manager determined additional amounts were missing. The IA’s audit report and audit working
papers for the year ended September 30, 1997, reflected a theft loss of $5,453 (Attachment 2). A
letter from the management agent dated December 16, 1997, fixed the total loss at $5,561,
including $299 taken by the assistant manager (Attachment 3). The management agent allowed
both employees to resign.
The former property manager was responsible for the majority of the theft. The assistant manager
reportedly took only $299, and repaid it the same month. The former manager was also repaying
funds taken. The management agent applied $1,452 of unpaid salary to the debt (Attachment 3),
and the former manager made three payments of $100 each (see Attachment 4 for copies of two),
reducing the amount owed to $3,510 as of the date of our review.

Title 24 CFR 24.700 authorizes HUD officials designated by the Secretary to order a limited
denial of participation (LDP) for any program participant based on adequate evidence of, among
other things, irregularities in a participant’s past performance in a HUD program. We believe
there is need and adequate evidence of irregularities to issue LDP’s against the former employees.

RECOMMENDATION

1A.    We recommend that you issue, or request appropriate HUD staff with authority to issue,
       LDP’s for the former manager and assistant manager of Marina Manor East Apartments
       as provided by 24 CFR 24.700.

                                              * * * * *

Within 60 days, please furnish this office, for the recommendation cited, 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 our review.

Should you or your staff have questions, please call me at (404) 331-3369 or Rudy E. McBee,
Assistant District Inspector General for Audit, at (423) 545-4368.




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