oversight

                                                      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 31 , 1998                                                       98-AT-212-1810


MEMORANDUM FOR:                Thomas J. Rone, Director, Knoxville Multifamily Program
                                 Center, 4JHM


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


SUBJECT:         Report of Illegal Acts
                 Greeneville Manor Apartments
                 Greeneville, Tennessee

We have reviewed a citizen’s complaint regarding alleged illegal acts by the former resident
manager and his spouse at Greeneville Manor Apartments, an 80-unit complex insured under
Section 221(d)(3) of the Housing Act. The allegations included not depositing or recording in
project accounts cash collections from tenants, paying “phantom” companies for work performed
by project staff, purchasing items for personal use with project funds, keeping proceeds from sale
of project appliances, and other matters.

The objective of the review was to determine if the allegations were valid and if there was
adequate evidence to warrant administrative sanctions against the former employees. We
interviewed your staff, the management agent, the complainant, selected residents, and reviewed
selected HUD and project files and records.

                                     RESULTS OF REVIEW

The complaint was made verbally to the OIG Office of Investigation in October 1996, and
generally pertained to incidences in 1993 and 1994 when the complainant worked at the project.
The Office of Investigation re-contacted the complainant and reviewed the complaint in early
1998, and in June 1998, referred the matter to our office. The management agent fired the project
manager in March 1998 when they discovered a tenant who had not gone through the application
process. Shortly thereafter, a new resident manager determined that at least four residents had
been paying the former manager rent in cash even though the residents had been re-certified as
zero rent payers. The four residents provided the resident manager 12 rent receipts totaling $999
signed either by the former resident manager or his wife, none of which had been recorded in
project records or deposited into the project’s bank account.
During our review, we asked six additional tenants encountered at random about improper
payments. Two claimed to have paid the former manager rent even though certified at zero rent.
We did not ask the tenants to provide copies of receipts as they were outside their apartments,
and the management agent’s documentation of theft was sufficient. However, it is likely
additional theft occurred and could be documented.

We did not attempt to document the other allegations because of their age and, since the two
individuals no longer work at the project, the lack of a compelling reason to do so.

Attached is documentation of theft from two of the four tenants as follows:

       •   Each tenant’s rent computation form (HUD-50059) showing the correct rent.
       •   Copies of 10 receipts totaling $846, 3 signed by the former resident manager (on
           generic receipt forms) and 7 signed by his wife, all for amounts higher than required by
           rent computations.
       •   For one tenant, a copy of the project ledger showing no collections during the period
           covered by the receipt copies.

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 both former
employees.

RECOMMENDATION

1A.    We recommend that you issue, or request appropriate HUD staff with authority to issue,
       LDP’s for the former resident manager of Greeneville Manor Apartments and his spousal
       assistant 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 Ext. 4368.




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