oversight

Aberte Realty, Inc., Buffalo, NY

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-03-30.

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

                                                                       Issue Date

                                                                            March 30, 1998
                                                                       Audit Case Number

                                                                            98-NY-222-1002



TO:            Glen Ruggles, Director Single Family Housing,
                                Buffalo Area Office


FROM:          Alexander C. Malloy, District Inspector General for Audit
                                       New York/New Jersey

SUBJECT:       Aberte Realty, Inc.
               Real Estate Asset Manager Contract
               Buffalo, New York


We have completed our review of Aberte Realty, Inc., Real Estate Asset Manager (REAM), which
is under contract with the U.S. Department of Housing and Urban Development (HUD) to manage
HUD owned single family properties in the Buffalo, New York area. The objective of our review was
to determine whether the REAM complied with the terms of its contract pertaining to: (1) securing
assigned properties, (2) identifying and eliminating conditions that present safety hazards, and (3)
assuring that subcontractors performed all assigned work in an acceptable manner.

Our review disclosed that the REAM did not always comply with the terms of its contract.
Specifically, the REAM did not assure that subcontractors performed all of the work reflected on
assigned work orders, and that the quality of their work was always adequate. Consequently, HUD
paid for work that was either not performed or not performed in an acceptable manner.

Within 60 days please furnish this office, for each recommendation in the report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and the target completion date; or
(3) why action is not necessary. Also, please furnish us copies of any correspondence or directives
issued related to the review.

If you or your staff have questions, you should contact William H. Rooney, Assistant District
Inspector General for Audit, at (212) 264-8000 extension 3976.
Executive Summary
We completed a review of Aberte Realty, Inc. Real Estate Asset Manger (REAM), which under
HUD contract N-014-95-341, to manage HUD owned single family properties in Buffalo, New York
area. The objective of our review was to determine whether the REAM complied with its contract
with HUD pertaining to: (1) securing assigned properties, (2) identifying and eliminating conditions
that present safety hazards, and (3) assuring that subcontractors performed all assigned work in an
acceptable manner.

We concluded that the REAM did not comply with all of the terms contained in its contract with
HUD. The noncompliances are discussed below.




                                      Our review disclosed that the REAM did not always assure
 The REAM did not always
                                      that subcontractors: (1) performed all of the repairs and/or
 comply with its contract
                                      services reflected on assigned work orders; and (2) provided
                                      quality repairs and/or services. These deficiencies occurred
                                      because the REAM did not provide proper oversight over
                                      work performed by subcontractors. As a result, we found and
                                      questioned payments totalling at least $5,975 that were made
                                      to various subcontractors for work that was either not
                                      performed or not performed in an acceptable manner.

                                      In addition, we observed that the work orders prepared by the
                                      REAM did not always provide for repairs that would have
                                      corrected safety hazards, such as patching a hole in the roof of
                                      one of the properties. This occurred because the REAM did
                                      not always prepare detailed work orders adequately.

                                      Also, our review disclosed management issues that must be
                                      addressed. For example, in some instances, we were unable to
                                      determine if work performed by subcontractors or inspections
                                      performed by the REAM were within the established time
                                      frames required by the REAM's contract. We were unable to
                                      make this determination because the REAM was not correctly
                                      tracking the dates the subcontractors completed their work.

                                      Among other recommendations, we recommended that HUD
                                      take appropriate administrative action against the REAM for
                                      not complying with all of the terms of its contract.

                                      The results of our audit were discussed with the REAM’s
 Exit conference held
                                      representative and the Buffalo Area Office Officials during the
 February 5, 1998



                                               Page iii                                  98-NY-222-1002
Executive Summary



     course of our audit and at an exit conference held February 5, 1998 attended by:

                                      Real Estate Asset Manager

                                      Stewart A. Aberte, President
                                      Gerald M. Trafalski, Attorney

                                      Buffalo Area Office

                                      Glenn Ruggles, Single Family Housing
                                      Mark Surdi, Production/Real Estate Owned Branch
                                      Lambros Touris, Housing Specialist
                                      Rosemarie Canestro, Housing Specialist

                                      Office of Inspector General

                                      William H. Rooney, Assistant District Inspector General
                                                            For Audit
                                      Garry Clugston, Senior Auditor
                                      Patrick Anthony, Auditor

                                      The REAM did not agree with all of the deficiencies discussed
                                      in the finding. The REAM’s written comments are included as
                                      Appendix D to this report. In addition, the REAM’s written
                                      comments have been summarized and provided at the end of
                                      the finding and in Appendix B.




98-NY-222-1002                                 Page iv
Table of Contents

Management Memorandum                                                          i


Executive Summary                                                            iii


Introduction                                                                  1


Finding

           The REAM Did Not Always Comply With
           the Terms of its Contract                                          3


Internal Controls                                                             9


Follow Up On Prior Audits                                                   11

       A   Schedule of Unsupported Costs                                    13

       B   Summary of Deficiencies                                          15

       C   Pictures of Properties                                           43

       D   Auditee Response                                                 45

       E   Distribution                                                     67


Abbreviations
HUD            U.S. Department of Housing and Urban Development
OIG            Office of Inspector General
REAM           Real Estate Asset Manager




                                       Page v                     98-NY-222-1002
Introduction
The Buffalo Area Office’s Single Family Division awarded a contract (N-014-95-341) to Aberte
Realty, Inc., Real Estate Asset Manger (REAM) on May 1, 1995 to provide management and related
services to single family properties owned by or in the custody of HUD in the Buffalo, New York
area. For performing all services cited in the contract, HUD paid the REAM a fixed fee for each
property assigned to the REAM. The fee was $325 for the first year of the contract, which increased
to $345 during the second year.

The contract required the REAM to secure the properties and eliminate any conditions that presented
safety hazards. The services for each property included a detailed written report of all damages that
should be repaired or replaced.

With HUD’s authorization, the REAM is allowed to subcontract for services or repairs when the cost
does not exceed $1,000. HUD agreed to pay for all supplies, materials, equipment and services
necessary to perform and complete all needed work. The contract provides that the REAM may
subcontract for such work without getting competitive bids if the price is considered reasonable.
Regarding completed work, the REAM is required to inspect completed repairs within 24 hours of
being notified by a subcontractor. Furthermore, the REAM certifies on the Acquired Property
Inspection Report HUD-9519 that all repairs and/or services are completed before submitting a
subcontractor’s invoice to HUD for payment.



                                      The audit objective was to determine whether the REAM
 Audit Objective
                                      complied with its HUD contract pertaining to: (1) securing
                                      assigned properties, (2) identifying and eliminating conditions
                                      that present safety hazards, and (3) assuring that
                                      subcontractors performed all assigned work in an acceptable
                                      manner.

                                      The audit covered the period January 1, 1997 to July 31,
 Audit Scope and
                                      1997. Also, we examined selected records from subsequent
 Methodology
                                      periods. The audit field work was conducted from July 15,
                                      1997 to October 31, 1997.

                                      To achieve our objective, we interviewed individuals who
                                      complained about the REAM. Also, we interviewed, officials
                                      at Aberte Realty, Inc., and HUD’s Buffalo Area Office . We
                                      reviewed HUD’s contract with the REAM. We analyzed data
                                      from HUD’s Single Family Acquired Asset Management
                                      System database. We reviewed property files of the Buffalo
                                      Area Office and the REAM. As of July 7, 1997, the REAM
                                      was responsible for 250 properties. We performed inspections
                                      on 21 of those properties to determine: whether HUD made


                                                Page 1                                   98-NY-222-1002
Introduction



                 payments for work either not performed or not performed
                 adequately; whether the REAM properly prepared work
                 orders and identified all necessary work; whether the REAM
                 inspected the properties to assure that all work was
                 acceptable; and whether the REAM implemented adequate
                 procedures to track work orders.

                 The audit was conducted in accordance with generally
                 accepted government audit standards.

                 A copy of this report was provided to the REAM.




98-NY-222-1002           Page 2
                                                                                         Introduction




  The REAM Did Not Always Comply With the
           Terms of its Contract


Our review of the activities of the REAM that managed HUD owned properties in the Buffalo, New
York area disclosed that the REAM did not always comply with the terms of its contract.
Specifically, we found that the REAM did not always assure that subcontractors: (1) performed all
of the repairs and/or services reflected on assigned work orders; and (2) provided quality repairs
and/or services. Consequently, we found and questioned payments of at least $5,975 that were made
to subcontractors for work either not performed or not performed in an acceptable manner.

In addition, we observed that the REAM required subcontractors to perform unnecessary repairs,
such as, the removal of linoleum. Since the REAM is only required to perform repairs that secure
the property and/or correct safety hazards, work such as the removal of linoleum would be
unnecessary and questionable. In other instances, we observed that the REAM did not identify repairs
that would have corrected safety hazards, such as patching a hole in the roof of one of the properties.
Finally, we observed that work orders prepared by the REAM were not specific as to the scope of
work required. We believe that the above deficiencies occurred because the REAM neither exercised
adequate care in preparing work orders nor provided proper oversight over work performed by
subcontractors.

Also, our review disclosed management issues that must be addressed. For example, in some
instances the REAM was not correctly tracking the completion of the work performed by
subcontractors. These issues are further explained in the finding.



                                       Under the HUD contract awarded May 1, 1995, the REAM is
 Criteria
                                       required to manage and service single family properties that
                                       are owned by or in the custody of HUD in the Buffalo New
                                       York Area. Section C of the contract provides that the REAM
                                       is to secure the property and eliminate conditions that
                                       represent safety hazards. The contract further provides that
                                       the REAM is to solicit bids, prepare work orders and submit
                                       the work orders to HUD for approval. Once accepted by
                                       HUD, work orders are assigned to subcontractors who are
                                       expected to complete the work within five days. The REAM
                                       is expected to inspect the completed work within 24 hours of
                                       notification that the work is completed. Finally, once the work



                                                 Page 3                                   98-NY-222-1002
Finding



                           is completed and inspected, the REAM instructs HUD to pay
                           the subcontractor.

                           We examined the records of 21 properties managed by the
 We examined the records
                           REAM. The REAM prepared 26 work orders for these
 of 21 properties
                           properties amounting to $18,918 of estimated work. We
                           determined that for 6 of the 21 properties, the REAM
                           provided the proper oversight over services provided and
                           repairs made to the properties, as required by its contract.
                           However, for the remaining 15 properties involving 21 work
                           orders, which reflected work estimated to cost $14,514, we
                           found that the REAM did not provide adequate oversight over
                           the work of subcontractors and therefore did not comply with
                           the terms of its contract with HUD. As a consequence, we
                           identified numerous deficiencies and questioned payments of
                           $5,975 to subcontractors for work that was either not
                           performed or not performed in an acceptable manner.
                           Appendix A summarizes the deficiencies per property and
                           Appendix B describes the deficiencies per property in greater
                           detail. Appendix C shows a picture of work that was not done
                           at the first property listed in Appendix B. In our working
                           papers, we have pictures of other examples of work not done
                           at other properties.

                           In addition to the problems discussed above, we identified
 Other management issues
                           management issues that the REAM must correct. For 4 of the
 the REAM must correct
                           21 properties in our sample, we were unable to determine
                           whether work performed by the subcontractors or the
                           inspections performed by the REAM were within the
                           established time frames stipulated in the contract between
                           HUD and the REAM. The subcontractors are required to
                           complete the work within five days after receipt of the work
                           order from the REAM, and the REAM is required to inspect
                           the work within 24 hours of the subcontractors’ completion
                           date, which is a span of six days. Our review disclosed that
                           the span of time between the date of HUD’s authorization of
                           the work order and the date that the REAM certified that the
                           work was completed varied from 13 to 35 days. In essence,
                           we could not determine if the subcontractors were taking
                           longer than five days to complete the work or the REAM was
                           not inspecting the work within 24 hours of the completed
                           work.




98-NY-222-1002                      Page 4
                                                                                Finding



                          In connection with the above, we were unable to make a
 REAM needs a better
                          determination because the REAM was not correctly tracking
 work order tracking
                          the dates the subcontractors completed the work. However,
 system
                          in at least one instance, we determined that the subcontractor
                          was not completing the required work within five days and
                          that the REAM was not monitoring the time it was taking the
                          subcontractor to complete the work. For example, we noticed
                          for one property that on June 16, 1997, HUD authorized a
                          work order to clean up debris. Our initial inspection of the
                          property on July 23, 1997, indicated that the work had not
                          been performed. We followed up and visited the property on
                          August 13, 1997, and we found that not only was the work
                          still not performed but the REAM was unaware that it was
                          had not been performed.

                          Also, our review disclosed another management issue that
 Work performed without
                          must be addressed. Specifically, we observed an instance
 HUD's prior approval
                          where the REAM allowed a subcontractor to complete
                          additional work without HUD's prior approval. For example,
                          the REAM prepared the work order on August 6, 1997, the
                          subcontractor completed the work on August 9, 1997;
                          however, HUD did not authorize the work until September
                          16, 1997. The contract between HUD and the REAM
                          specifically requires that HUD authorize the work before a
                          work order is assigned to a subcontractor.

                          Finally, our review disclosed another management issue that
                          must be addressed. Specifically, we observed that the REAM
                          used a subcontractor to not only make repairs to HUD owned
                          properties but to conduct inspections of the work of other
                          subcontractors hired by the REAM. We believe that this is a
                          conflict of interest because this subcontractor may be able to
                          eliminate competition by incorrectly reporting the quality of
                          work performed by other subcontractors as unacceptable. We
                          suggest that the HUD Buffalo Area Office request a legal
                          decision to determine whether this situation is allowable.



Auditee Comments          At the exit conference, the REAM explained that work was
                          sometimes done after the REAM certified that the actual work
                          was completed. The wrought iron railings mentioned in
                          Appendix B-1 is an example of work completed after the
                          REAM certified that it was done. The REAM did not explain
                          why this occurred. In addition, the REAM said that the


                                   Page 5                                   98-NY-222-1002
Finding



                     auditor did not understand the time frames mentioned in the
                     contract. Once, the REAM prepares a work order, it is sent to
                     HUD and HUD may return the work order two to three days
                     latter. Finally, the REAM agreed to make certain changes in its
                     operation.



                     All work should be performed satisfactorily and inspected at
 OIG Evaluation of   the time the REAM certifies that all work has been completed.
 Auditee Comments    As a result of what we were told at the exit conference, we
                     added a recommendation that HUD inspect some properties
                     immediately after the REAM certifies that the work has been
                     completed to verify that all work has been completed in a
                     satisfactorily manner.

                     We mentioned in the draft finding that the span of time
                     between the issuance of work order and the date that the
                     REAM certified that work was completed ranged from 17 to
                     41 days. As a result of the auditee's comments, we
                     recalculated the amount of time between the date that HUD
                     returned the work order to the REAM, and the date that the
                     REAM certified that the work was done. The recalculation
                     resulted in a time span of 13 to 35 days. This still exceeds the
                     six day span required by the HUD contract.



Recommendations      We recommend that the Buffalo Area Office:

                     1A.    Take appropriate administrative action against the
                            REAM for not complying with all the provisions of its
                            contract.

                     1B.    Require the REAM to reimburse HUD $5,975 for
                            payments made to subcontractors for incomplete
                            and/or unacceptable work.

                     1C.    Require the REAM to implement a tracking system
                            that properly identifies the dates that the
                            subcontractors completed their work and the dates that
                            the REAM performed the required inspections.

                     1D.    Ensure that repairs are not performed without HUD's
                            prior approval.


98-NY-222-1002                Page 6
                                                      Finding




1E.   Obtain a legal opinion on whether the REAM can
      allow a subcontractor to make repairs on certain
      properties and conduct inspections of the work
      performed by other subcontractors.

1F.   Assure that REAM prepares work orders in detail, i.e.,
      cubic yards of debris to be removed and square feet of
      defective paint surfaces to be treated.

1G.   Inspect properties shortly after the REAM certifies that
      all work has been completed to verify that the work
      has been performed in a satisfactorily manner.




        Page 7                                   98-NY-222-1002
Internal Controls
In planning and performing our audit, we considered internal controls of Aberte Realty, Inc. to
determine our auditing procedures and not to provide assurance on internal controls. Internal
controls are the process by which an entity obtains reasonable assurance as to achievement of specific
objectives. They consist 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 categories
 Internal control assessed
                                       were relevant to our audit objectives: (1) controls over work
                                       order preparation; (2) controls over work performed by
                                       subcontractors; and (3) controls over the authorization of
                                       payments to subcontractors. We evaluated all of the control
                                       categories identified above by determining the risk exposure
                                       and assessing control design and implementation.

                                       It is a significant weakness if internal controls do not give
 Assessment results
                                       reasonable assurance 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, there are significant weaknesses in
                                       controls over the preparation of work orders and work
                                       performed by subcontractors.




                                                Page 9                                   98-NY-222-1002
Follow Up On Prior Audits
This is the initial OIG audit of the subject Real Estate Asset Manager.




                                               Page 11                    98-NY-222-1002
                                                                                        Appendix A

Schedule of Unsupported Costs




                                 Finding
                                 Number              Unsupported (1)
                                    1                         $5,975



(1) Questioned/Unsupported Costs are costs that are not clearly eligible or ineligible but warrant
    being contested (e.g. lack of satisfactory documentation to support the eligibility of the costs,
    etc.).




                                               Page 13                                   98-NY-222-1002
APPENDIX B
                                                 ABERTE REALTY, INC.
                                           ERIE/NIAGARA COUNTY, NEW YORK

                                              SUMMARY OF DEFICIENCIES


                                  Services                Questionable  Necessary
                       Work      and Repairs Quality of Amounts and/or Items Not       Work    Unsupported
                      Order(s)       Not      Work       Items on Work Identified on Order Not /Questioned   Appendix
     Address          Amount     Completed Inadequate        Order      Work Order Specific       Costs      Reference
   28 Regent St.       $995          X           X            X             X          X          $995         B-1
   64 Lilac St.        $990          X                        X                        X          $990         B-2
   10 Wood Ave.       $1,225         X                                      X          X          $950         B-3
  662 Cradle Ave.      $985          X           X                                                $515         B-4
  124 Loepere St.      $965          X           X                          X                     $250         B-5
  612 East Amherst    $2,200         X           X            X                        X         $1,600        B-6
  499 Howard St.       $750                      X                          X          X          $225         B-7
  480 East Amherst     $450                      X                                                $450         B-8
  278 Brinkman Ave.    $990                                                 X                      $0          B-9
   80 Edson St.       $1,035                                                X                      $0          B-10
   40 Ruhland St.      $320                                                 X                      $0          B-11
   47 Jackson Ave.     $685                                                 X                      $0          B-12
  308 Koons Ave.       $999                                                 X                      $0          B-13
   75 Waterman St.     $980                                                 X          X           $0          B-14
 1147 Lasalle Ave.     $945                                                 X          X           $0          B-15
            TOTALS    $14,514        6           6            3             11         7         $5,975
                                                                         APPENDIX B-1
                                                                           PAGE 1 OF 1


                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              28 Regent Street

FHA Number:                    372-195148

Subcontractor                  ABLE Snowplowing Inc.

Work Order Amount              $995.00


Summary:

When the REAM certified that all work was completed and that the property was ready to
be listed for sale, some work listed on the work order had either not been performed or
not performed adequately. In addition, the work order, which was prepared by the
REAM, did not list all repairs necessary to eliminate safety hazards. Conversely, the work
order included the replacement of an item that was not necessarily to eliminate a safety
hazard. Finally, the work order did not adequately specify the scope and amount of work
to be performed.

Pertinent Details:

A.              Work Not Performed and the Quality of Work Performed Was Not
                Adequate:

                On August 11, 1997, the REAM certified on the Acquired Property
                Inspection Report HUD-9519 that all work was completed. However,
                our inspections, which were conducted on August 13, 1997 and
                September 12, 1997, showed that the subcontractor did not complete all
                of the items listed on the work order. Specifically,. the subcontractor did
                not: (1) install the wrought iron railings on the front porch (Appendix C),
                (2) replace the linoleum in the kitchen and the dining room and, (3)
                remove all of the debris from the property. Also, our inspection disclosed
                that the quality of the scrapping of the old paint and priming for the new
                paint, was unacceptable. Based on the REAM’s certification that all of the
                work had been completed, HUD paid the subcontractor $995. Based on
                the results of our review, the subcontractor was paid for work that was
                either not performed or not performed adequately. Thus, we have
                                                                      APPENDIX B-1
                                                                        PAGE 2 OF 2

            considered the amount of the payment to be questionable and unsupported
            cost (See Appendix B on page 15).

B.          Necessary Items Were Not Included On the Work Order While an Item
            Included was Questionable

            The work order prepared by the REAM should have included two
            additional items that would have ensured that the property was secured
            and safety hazards were eliminated. Specifically, the right side of the
            property needed to be scraped and primed for painting, which would have
            eliminated defective paint surfaces. Further, the garage window needed to
            be boarded up for security purposes. Also, there was a leaking water pipe
            in the basement that should have been repaired. Conversely, we do not
            believe that it was necessary to replace the linoleum in the kitchen and
            dining room because this type of work is more of a cosmetic nature than
            the repair to eliminate a safety hazard.

C.          Work Order Tasks Not Specific

            The REAM did not clearly identify certain tasks. In this case, the REAM
            required that the subcontractor to remove all debris from inside and
            outside the house, and to scrape and prime the left side of the house as
            needed. These statements are too vague and do not specify the estimated
            amount of debris to be removed or the area to be scraped and primed.
            Consequently, the scope of work was not adequately defined.


Auditee Comments


A.          The buyer entered this property without HUD’s or the REAM’s approval
            and started modifying this house. The piles of debris were from the buyer’s
            modification of the house. The linoleum was installed properly and then
            removed by the buyer. Attached is a picture (page 5 of Appendix D)
            which clearly shows the alleged wrought iron railings were affixed. HUD
            received its $995 worth of work.

B.          According to the REAM the intent of HUD’s Single Family 203B program
            requires that all floor coverings be finished and clean. Also, linoleum is
            required by HUD not cosmetic as alleged.

C.          The Request for Proposal (RFP) did not state that debris must be quoted
            in cubic yards. Further, the Government Technical Representative (GTR)
            does not require cubic yards. The GTR is aware that we maintain back up
            papers describing debris and its locations as well as estimates of yardage.
                                                                      APPENDIX B-1
                                                                        PAGE 3 OF 3



OIG Evaluations of Auditee Comments

A.           The REAM certified on August 11, 1997 that all work was completed. Our
             inspection of the property on August 13, 1997, which was two days after
             the REAM’s certified that the work had been performed, disclosed that the
             wrought iron rails had not been installed, the linoleum had not been
             removed, debris was still on the property, and the quality of the
             scrapping and painting on the garage and front windows was unacceptable.
             Our inspection was prior to any buyer submitting a bid on the property to
             HUD. A second inspection on September 12, 1997, noted that the
             wrought iron railings were still not installed, however, we noticed that
             someone had ripped out the old linoleum. Furthermore, there was no
             indication that new linoleum had been installed. It is apparent that at the
             time the REAM certified that the work had been completed, the work had
             not been performed. At the exit conference, we were told that the
             installation of the wrought iron railings occurred after the REAM certified
             that the work was done.

B.           HUD staff advised us that replacement of linoleum is not a necessary
             work item unless it is considered a safety hazard.

C.           The REAM’s contract with HUD provides that work must be identified
             in detail and that the REAM must prepare an itemized work order. Having
             the details in the REAM’s property file is not sufficient. The work to be
             performed need to be clearly described on the work orders for both the
             subcontractors and for HUD benefit. The absence of adequately
             described work prevents subcontractors from being fully aware of their
             responsibilities; and prevents HUD from being able to determine the
             adequacy of the work performed and the reasonableness of its cost.
                                                                         APPENDIX B-2
                                                                           PAGE 1 OF 1


                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK

                      NARRATIVE PROPERTY PRESENTATION

Property Address:             64 Lilac Street

FHA Number:                   372-171106

Subcontractor                 Nordic Construction

Work Order Amount             $990.00

Summary:

When the REAM certified that all was completed and that the property was ready to be
tested for sale, some work listed on the work order had either not been performed or not
performed adequately. In addition, it is our opinion that the amount allowed by the
REAM for one work item appears excessive. Finally, the work order prepared by the
REAM did not always specify the scope and amount of work to be performed.

Pertinent Details:

A.              Work Not Performed

                On June 14, 1997, the REAM certified on the Acquired Property
                Inspection Report HUD-9519 that all work was completed. However, our
                inspection on July 24, 1997, disclosed that the subcontractor did not
                perform all of the items on the work order. In addition to not boarding up
                a door, the subcontractor did not remove: (a) all the debris from the
                property, and a tree that was already cut down, and (b) glass in the
                hallway. Based on the REAM’s certification that all work items had been
                completed, HUD paid the subcontractor $990, which in our opinion
                included payment for work not performed. Thus, we have consider the
                amount of the payment to be questionable and unsupported costs (See
                Appendix B on page 15).

B.              Questionable Amount Charged For a Task

                The REAM included a $400 item on the work order that pertain to the
                removal of a tree that had been cut down. In our opinion, the $400 paid
                to remove the tree appears excessive.
                                                                             APPENDIX B-2
                                                                               PAGE 2 OF 2

C.               Work Order Task Not Specific

                 The REAM did not clearly identify the following task. The work order,
                 which was prepared by the REAM, provided for the removal of debris from
                 the entire property, both inside and outside. However, the REAM did not
                 specify the estimated amount of debris to be removed. As a result, the
                 scope of work was not adequately defined.

Auditee Comments

A.               We notified HUD (September 10, 1997 ) that the work was incorrectly
                 approved and the subcontractor paid. We subsequently had the work order
                 completed by another subcontractor without any cost to HUD.

B.               The tree was in the rear yard. Since a driveway did not exist, it was difficult
     for the subcontractor to reached the back yard.

C.               Each property file has a yellow sheet from the original inspection which
                 notes all yardage of debris. The REAM only uses the total dollar amount
                 on the work order to prevent any problems that may result from
                 differences of opinions as to how much yardage exist.

OIG Evaluations of Auditee Comments

A.                On June 14, 1997, the REAM certified that the work was done when
                  some work had not been performed. It was not until after our inspection
                  that the REAM notified HUD that some work had not been performed.
                  Also, it should be noted that the REAM submitted a second request for
                  payment for the same work and HUD did not allow payment.

B.                We believe that the removal of four or five short section of a tree should
                  have been completed in less than an hour. A charge of $400 for this work,
                  in our opinion, is totally unreasonable and excessive.

C.                As previously stated, the REAM’s contract requires that work
                  specifications must be in detail and that the REAM must prepare an
                  itemized work order. Having the details in the REAM’s property file is
                  not sufficient. The tasks need to be clearly identified on the work orders
                  for both the subcontractors and HUD. The absence of adequately
                  described work prevents the subcontractors from being fully aware of their
                  responsibilities; and prevents HUD from being able to determine the
                  adequacy of the work performed and the reasonableness of its cost.
                                                                        APPENDIX B-3
                                                                          PAGE 1 OF 1


                             ABERTE REALTY, INC.
                       ERIE/NIAGARA COUNTY, NEW YORK


                     NARRATIVE PROPERTY PRESENTATION

Property Address:            10 Wood Avenue

FHA Number:                  372-151345

Subcontractors               Anthony Zolnowski/AM Wholesale


Work Order Amounts           $950.00
                             $275.00

Summary:

When the REAM certified that all work was completed and that the property was ready to
be listed for sale, some work listed on the work order had not been performed. In
addition, the work order prepared by the REAM did not list all necessary items to be
repaired and did not always specify the scope and amount of work to be performed.

Pertinent Details:

A.             Work Not Performed

               On July 18, 1997 and August 1, 1997, the REAM certified on the
               Acquired Property Inspection Reports HUD-9519 that all work was
               completed. However, our inspection on August 13, 1997, indicated that
               the subcontractors had not performed all the work listed on the work
               order. We found that the subcontractors did not: (1) remove all of the
               debris, (2) scrape and paint as needed, and (3) repair the flooring of the
               front deck. Based on the REAM’s certification that all work items had
               been completed, the subcontractors were paid $950, which in our opinion
               included payment for work not performed. Thus, we have considered the
               amount of the payment to be questionable and unsupported (See Appendix
               B on page 15).

B.             Necessary Items Were Not Included On The Work Order

               The work order prepared by the REAM did not include repairs needed to
               prevent damage to the property by the elements, such as the repair of a
               large hole in the roof.
                                                                       APPENDIX B-3
                                                                         PAGE 2 OF 2

C.           Work Order Task Not Specific

             The REAM did not clearly identify the following task. The work order,
             which was prepared by the REAM, provided for the removal of all debris
             from the property, both inside and out. However, the REAM did not
             specify the estimated amount of debris to be removed. As a result, the
             scope of work was not adequately defined.

Auditee Comments

A.           We sent this subcontractor back to remove debris and to repair the deck.
             He returned and completed the work . The paint was inspected by the
             auditor, 30 days after the date of the work order.

B.           With regards to the safety hazard, we believe then and now that a safety
             hazard did not exist, due to a roof leak. We do not repair roof leaks on
             HUD Single Family 203k properties.

C.           The RFP did not state that debris must be quoted in cubic yards. Further,
             the GTR does not require cubic yards. The GTR is aware that we maintain
             back up papers describing debris and its location as well as estimates of
             yardage.

OIG Evaluations of Auditee Comments

A.           The REAM certified that all work was done on August 1, 1997. However,
             some work had not been performed when we inspected the property on
             August 13, 1997. Some work had not been performed when we
             reinspected the property on September 10 , 1997.

B.           The hole in the roof needed to be repaired to prevent further damage to
             the property from the elements.

C.            As previously stated, the REAM’s contract requires that work
             specifications must be in detail. Having the details in the REAM’s property
             file is not sufficient. The tasks need to be clearly identified on the work
             orders for both the subcontractors and HUD. The absence of adequately
             described work prevents subcontractors from being fully aware of their
             responsibilities, and prevents HUD from being able to determine the
             adequacy of the work performed and the reasonableness of the cost of its
             cost.
                                                                         APPENDIX B-4
                                                                           PAGE 1 OF 1


                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              662 Cradle Avenue

FHA Number:                    372-190873

Subcontractor                  Anthony Zolnowski/AM Wholesale

Work Order Amount              $985.00


Summary:

When REAM certified that all work was completed and that the property was ready to be
listed for sale, some work listed on the work order had either not been performed or not
performed adequately.



Pertinent Details:

A.              Work Not Completed and The Quality of Work Performed Was Not
                Adequate:

                On August 1, 1997, the REAM certified on the Acquired Property
                Inspection Report HUD-9519 that all work was completed. However, our
                inspection on August 13, 1997, disclosed that the subcontractor did not
                remove all debris from the property. Also, our inspection disclosed that
                the quality of work pertaining to the cutting of bushes was inadequate. For
                example, the contractor left the bush trimmings on the ground. The
                subcontractor was paid $515 to perform the work. We have questioned
                this amount (See Appendix B on page 15) since it included payment for
                work not performed and/or for work not performed adequately.

Auditee Comments

A.              The cutting of the bushes was only $75.00 of the work order and the
                bushes were cut. The subcontractor removed all debris, except paint cans
                and hazardous chemicals, as it is the REAM’s practice not to do so. We
                found no problem with the work performed.
                                                                     APPENDIX B-4
                                                                       PAGE 2 OF 2


OIG Evaluations of Auditee Comments

A. The REAM’s contract provides that hedges, grass and other clippings must be removed
   from the property. The contract requires the REAM to remove and dispose of interior
   and exterior debris and leave the property broom clean. We inspected this property
   after the REAM’s certification that all work was completed. The hedge trimmings
   were not removed. HUD staff indicated that the REAM’s contract requires the
   removal of debris and does not exclude the removal of hazardous material.
                                                                          APPENDIX B-5
                                                                            PAGE 1 OF 1


                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              124 Loepere Street

FHA Number:                    372-175654

Subcontractor                  C&R Construction

Work Order Amount              $965.00


Summary:

When REAM certified that work was completed and that the property was ready to be
listed for sale, some work on the work order had either not been performed or not
performed adequately. In addition, the work order prepared by the REAM did not
include all necessary items to be repaired.

Pertinent Details:

A.              Work Not Performed and the Quality of Work Performed Not Adequate:

                On July 18, 1997, the REAM certified on the Acquired Property Inspection
                Report HUD-9519 that all work was completed. However, our
                inspection on July 23, 1997, disclosed that the subcontractor did not
                complete all the work on the work order. We found that the subcontractor
                did not board up a rear window. In addition, our inspection disclosed that
                the quality of work pertain to scrapping and priming was not acceptable.
                Based on the REAM’s certification that all work had been completed, the
                subcontractor was paid $250, which, in our opinion, included payment for
                work not performed. Thus, we have considered the amount of the payment
                to be questionable and unsupported costs (See Appendix B on page 15).


B.              Necessary Items Were Not Included on The Work Order

                The work order prepared by the REAM did not include all the items
                necessary to secured the property and to eliminate safety hazards.
                Specifically, the work order did not require the subcontractor to seal an
                unsecured sky light.
                                                                       APPENDIX B-5
                                                                         PAGE 2 OF 2

Auditee Comments

A.           We found all work completed satisfactory. If a rear window needed
             boarding when the auditor was there on July 23, 1997, it did not mean that
             the work was not completed. This is a junk house, valued at $2,900 in a
             tough area. Windows are unboarded/broken daily in this area.

B.           We would never repair a skylight on a $2,900 house that is to be torn
             down. It is doubtful that anyone would attempt to enter from the skylight.
             We believe that this property was as secure as one can be, given its
             location.

OIG Evaluations of Auditee Comments

A.           We recognize that boarded up windows can be reopen; however, our
             inspection disclosed that the rear window has never been boarded-up. The
             REAM should not have certified that the work was completed when the
             subcontractor had not addressed all the items

B.           The HUD staff indicated that this property was not on the list to be
             demolished and had not been sold as of February 20, 1998. Further, the
             skylight was on the lower level of the roof and in our opinion should have
             been sealed to secure the property.
                                                                        APPENDIX B-6
                                                                          PAGE 1 OF 1


                             ABERTE REALTY, INC.
                       ERIE/NIAGARA COUNTY, NEW YORK


                     NARRATIVE PROPERTY PRESENTATION

Property Address:            612 East Amherst Street

FHA Number:                  372-129525

Subcontractors               Nordic Construction
                             Handy Andy’s
                             Handy Andy’s
                             Clark Contracting

Work Order Amounts           $950.00
                             $850.00
                             $400.00


Summary:

When REAM certified that work was completed and the property was ready to be listed
for sale, some work on the work orders had either not been performed or not performed
adequately. In addition, the work order, which was prepared by the REAM, included
an unnecessary work item, and did not adequately specify the scope and amount of work
to be performed. As a result, we have questioned $1,600 of the amounts paid to
subcontractors.

Pertinent Details:

A.             Work Not Performed and the Quality of Work Performed Was Not
               Adequate:

               The REAM prepared two work orders for painting this property. The
               original work order dated April 20, 1997, required the subcontractor to
               scrape the exterior as needed. The subcontractor was paid $350 to
               perform the work. The REAM prepared a second work order on July 18,
               1997, and required another subcontractor to scrape and paint the exterior.
               This subcontractor was paid $650. On July 25, 1997, the REAM prepared
               an addendum to the second work order for additional painting and
               scraping. The subcontractor was paid another $200. On May 1, 1997, the
               REAM certified on the Acquired Property Inspection Report HUD-9519
               that the work on the first work order was completed. Further, the REAM
                                                                       APPENDIX B-6
                                                                         PAGE 2 OF 2

            certified on August 1, 1997, that the work on the second work order,
            including the addendum, was completed. However, our inspections on July
            23, 1997 and September 26, 1997, disclosed that neither subcontractors
            adequately completed the painting of the property. The first
            subcontractor’s performance was unacceptable because the subcontractor
            did not eliminate all the peeling paint on the house and did not remove
            paint chips from around the property. Also, this subcontractor did not
            properly scrape the house. The work done by the second contractor was
            unacceptable because there were yellow paint spills on the roof and in the
            front of the house. Based on the REAM’s certification that work had been
            completed, HUD paid the subcontractors $1,200, which in our opinion,
            included payments for work not performed and for work not performed
            adequately. Thus, we have considered the amount of the payment to be
            questionable and unsupported (See Appendix B on page 15).

B.          Questionable Amount Charged For a Task

            The REAM prepared another work order to remove all debris from the
            inside and the outside of the house. The subcontractor charged and was
            paid $400 to remove the debris. We believe that this amount is excessive.
            The work order was prepared after our initial inspection. The debris
            remaining was portions of a drop ceiling that fell into the kitchen. Thus,
            we have questioned the $400 payment to the subcontractor as being an
            excessive payment.


C.          Work Order Task Not Specific

            The REAM did not clearly identify the following task. The REAM
            required the subcontractor to remove debris from the entire property both
            inside and outside. However, the REAM did not specify the estimated
            amount of debris to be removed. Also, the work order was not specific as
            to the scrapping and painting that was needed.

Auditee Comments

A.          The work order dated April 20, 1997 had only $350 of paint scraping to
            be done. Three months later, a neighbor complained about paint chips
            coming off the house. It is HUD position to keep neighbors satisfied. A
            HUD staff member and the REAM’s representative inspected this property
            and believed that it was ugly, sloppy, etc., but did not agree as to what to
            do with the subcontractor. The subcontractor believed that the wood had
            many layers of paint on it; therefore, it would be impossible to get a
            smooth finish (they also slopped paint all over the asphalt siding). We find
                                                                       APPENDIX B-6
                                                                         PAGE 3 OF 3

             no reason to believe that HUD did not get what it paid for. While the
             results were not pretty, the subcontractor did try.

B.           With regard to the $400 work order issued to Clark Contracting, this was a
             poorly written work order. Our secretary ordered the work, but did not
             comprehend the scope of the work. But, HUD did get its value.

C.           The RFP did not state that debris must be quoted in cubic yards. Further,
             the GTR does not require cubic yards. The GTR is aware that we maintain
             back up papers describing debris and its location as well as estimates of
             yardage.
.

OIG Evaluations of Auditee Comments


A.           We identified that the quality of the work pertaining to the second work
             order was poor and believe that the subcontractor should not have been
             paid for unacceptable work. Furthermore, if the original subcontractor had
             performed the work properly there would not have been a need for the
             second work order. The REAM should not have certified that the original
             work was completed when it was not and should not have signed off on the
             second work order when the work completed was unacceptable.

B.           Payment should be based on the items listed on the work order. We believe
             that the $400 charged for the items listed on the work order was excessive,
             if additional work was done it was not listed on the work order.

C.            As previously stated, the REAM’s contract requires that work
             specifications must be in detail. Having the details in the REAM’s property
             file is not sufficient. The tasks need to be clearly identified on the work
             orders for both the subcontractors and HUD. The absence of adequately
             described work prevents subcontractors being fully aware of their
             responsibilities; and prevents HUD from being able to determine the
             adequacy of the work performed and the reasonableness of its costs.
                                                                         APPENDIX B-7
                                                                           PAGE 1 OF 1


                             ABERTE REALTY, INC.
                       ERIE/NIAGARA COUNTY, NEW YORK


                     NARRATIVE PROPERTY PRESENTATION

Property Address:             499 Howard Street

FHA Number:                   372-177921

Subcontractors                Handy Andy’s
                              Handy Andy’s

Work Order Amounts            $600.00
                              $150.00

Summary:

When the REAM certified that work was completed and that the property was ready to
be listed for sale, some work had not been completed in an acceptable manner. In
addition, the work orders prepared by the REAM did not list all the necessary items to be
repaired and did not always specify the scope and amount of work to be performed.

Pertinent Details:

A.             Quality of Work Was Not Adequate

               On August 10, 1997, the REAM certified on the Acquired Property
               Inspection Report HUD-9519 that all work was completed. However, our
               inspection on August 13, 1997, disclosed that the quality of work
               pertaining to scrapping and priming the house for paint was unacceptable.
               Based on the REAM’s certification that the work had been done, the
               subcontractor was paid $225. As a result of our review, we believe that
               the subcontractors was paid for work that was not adequately performed.
               Thus, we have considered the amount paid questionable and unsupported
               cost (See Appendix B on page 5).


B.             Necessary Items Were Not Included on The Work Order

               The work order prepared by the REAM did not include the repair of all the
               items necessary to ensure that the property was secured and safety hazards
               were eliminated. Specifically, the porch ceiling and interior of the upper
               unit needed to be scraped and primed.
                                                                      APPENDIX B-7
                                                                        PAGE 2 OF 2



C.           Work Order Task Not Specific

             The REAM did not clearly identify the following task. The REAM required
             a subcontractor to remove the debris from the entire property both inside
             and outside. However, the REAM did not specify on the work order the
             estimated amount of debris to be removed. As result, the scope of work
             was not adequately defined.

Auditee Comments

A.           The REAM inspected this property and disagrees with the auditors opinion
             regarding scraping.

B.           The REAM could not recall this property.

C.           The RFP did not state that debris must be quoted in cubic yards. Further,
             the GTR does not require cubic yards. The GTR is aware that we maintain
             back up papers describing debris and its locations as well as estimates of
             yardage.

OIG Evaluations of Auditee Comments

A.           Our inspection of the completed work disclosed that the scrapping and
             priming of the house for paint was unacceptable.

C.           As previously stated, the REAM’s contract requires that work
             specifications must be in detail. Having the details in the REAM’s property
             file is not sufficient. The tasks need to be clearly identified on the work
             orders for both the subcontractors and HUD. The absence of adequately
             described work prevents subcontractors from being fully aware of their
             responsibilities; and prevents HUD from being able to determine the
             adequacy of the work performed and the reasonableness of its cost.
                                                                        APPENDIX B-8
                                                                          PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK

                      NARRATIVE PROPERTY PRESENTATION

Property Address:             480 East Amherst Street

FHA Number:                   372-167066

Subcontractor                 Gary A. Illos

Work Order Amount             $450.00

Summary:

When the REAM certified that work was completed and that the property was ready to be
listed for sale, some work on the work order had not been completed in an acceptable
manner.

Pertinent Details:
A.             Quality of Work Was Not Adequate

            On June 20, 1997, the REAM certified on the Acquired Property
            Inspection Report HUD-9519 that all work was completed. However, our
            inspection disclosed that the quality of work pertaining to scrapping and
            priming the house for paint was unacceptable. The painting was poorly
            done with a color that did not match the original paint on the house. Based
            on the REAM’s certification that the work had been completed, HUD paid
            the subcontractor $450. As a result of our review, we believe that the
            subcontractor was paid for work that was not adequately performed.
            Thus, we have considered the amount of the payment questionable and
            unsupported costs (See Appendix B on page 15).
Auditee Comments

A.              Our work order did not require paint to match. We ordered scraping and
                painting but did not say tint to match. The subcontractor may have used
                poor judgement by not tinting but he was not required to do so. The work
                was done.

OIG Evaluations of Auditee Comments

A.              We agree that the contractor may have used poor judgment in not
                matching the paint. However, we believe that the overall quality of the
                work was unacceptable and the REAM should not have certified that the
                repairs were completed.
                                                                           APPENDIX B-9
                                                                             PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              278 Brinkman Avenue

FHA Number:                    372-226480

Subcontractor                  ABLE Snowplowing Inc.

Work Order Amount              $990.00

Summary:

The REAM prepared a work order that did not include all necessary work that should
have been performed .

Pertinent Details:

A.              Necessary Work Was Not Included On The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards
                eliminated. Specifically, the garage needed to be secured, and 13 tires along
                with broken glass in the garage needed to have been removed.

Auditee Comments

A.              The tires were indeed stacked neatly in the garage. The source of these tire
                is unknown. They were not originally there. The REAM recalls seeing them
                and recalls having them removed at the REAM’s expense under the terms
                of the contract.

OIG Evaluation of Auditee Comments

A.              Our concern is that the REAM failed to included that work on the work
                order. We inspected the property prior to the REAM’s certification that the
                work was done, and notice that the tires were in the garage. Likewise, the
                tires were still in the garage when we reinspected the property after the
                REAM certified that all work was completed.
                                                                        APPENDIX B-10
                                                                           PAGE 1 OF 1

                             ABERTE REALTY, INC.
                       ERIE/NIAGARA COUNTY, NEW YORK

                     NARRATIVE PROPERTY PRESENTATION

Property Address:             80 Edson Street

FHA Number:                   372-177399

Subcontractors                Buczek, Inc.
                              Rayford Enterprise

Work Order Amounts            $885.00
                              $150.00

Summary:

The REAM prepared a work order that did not include all necessary work that should
have been performed.

Pertinent Details:

A.             Necessary Work Was Not Included On The Work Order

               The work order prepared by the REAM should have included the following
               items to ensure that the property was secured and safety hazards were
               eliminated. The work order prepared by the REAM did not provide for
               scrapping and priming the house for paint, which should have been
               performed on the garage, the porch, the lower windows, and the right side
               of the house. Also, the work order did not provide for the repair of loose
               steps and a missing hand rail at the front entrance of the house.

Auditee Comments

A.             HUD staff and the REAM inspected this property together, and did not
               find lower windows or the right side of the house needing any work. If this
               house did need work all of us would have identified this situation.

OIG Evaluations of Auditee Comments

A.             We spoke with one of the HUD staff members that accompanied the
               REAM on its inspection. He told us that he accompanied the REAM to
               inspect the work of a subcontractor involved with a complaint. He stated
               that he was not looking for other items needing repair. Our inspection,
               supported by pictures indicated that scraping and painting was needed.
                                                                           APPENDIX B-11
                                                                              PAGE 1 OF 1



                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              40 Ruhland Street

FHA Number:                    372-135429

Subcontractor                  C&R Construction

Work Order Amount              $320.00

Summary:

The REAM prepared a work order that did not include all necessary work that should
have been performed.

Pertinent Details:

A.              Necessary Work Was Not Included On The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards were
                eliminated. Specifically, the REAM’s work order did not address the
                defective paint that needed to be removed from an interior room; the porch
                that needed to be scrapped and primed for paint; the windows that needed
                to be boarded on the lower left side of the property, nor that the glass that
                needed to be removed from the front window sill.


Auditee Comments

A.              This is a property along with six others on this street were sold, for nearly
                nothing to a non-profit. This house should have been torn down. The
                estimated value was $1,000.

OIG Evaluations of Auditee Comments

A.              The auditee comments do not address the fact that the defective paint
                surface was not treated, as required in Exhibit 6 of the REAM’s contract.
                                                                        APPENDIX B-12
                                                                           PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:             47 Jackson Avenue

FHA Number:                   372-153700

Subcontractor                 ABC Property Maintenance, Inc.

Work Order Amount             $685.00

Summary:

The REAM prepared a work order that did not include all necessary work that should
have been performed.

Pertinent Details:

A.              Necessary Work Was Not Included On The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards were
                eliminated. Specifically, the REAM should have provided for the repair of
                buckled tiles in the bathroom on the work order and for scrapping and
                priming. Furthermore, the interior railing to the upstairs was broken and
                should have been repaired.

Auditee Comments

A.              This property had frozen plumbing which caused the buckled floors in the
                bathroom. It is not HUD’s policy to repair items of this nature for a HUD
                Single Family 203K property. The REAM found no safety risks in leaving
                the floor with slightly buckled floor tiles.

OIG Evaluations of Auditee Comments

A.              The ceramic floor tiles were more than slightly buckled. HUD staff advised
                us that since the house would be shown to prospective buyers any unsafe
                conditions should have been corrected. Therefore, the bathroom floor
                should have been repaired.
                                                                          APPENDIX B-13
                                                                             PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              308 Koons Avenue

FHA Number:                    372-230784

Subcontractor                  Jack’s Janitorial

Work Order Amount              $999.00

Summary:

The REAM prepared a work order that did not include all necessary work that should
have been performed.

Pertinent Details:

A.              Necessary Items Were Not Included in The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards were
                eliminated. The work order should have required the contractor to repair
                the interior stairs because they were unstable, and the roof because it was
                sagging and leaking.

Auditee Comments

A.              This was a tear down candidate. The REAM does not recall interior stairs
                that were unstable. The REAM does not repair roofs on junk houses,
                especially ones to be torn down.



OIG Evaluations of Auditee Comments


A.              The HUD staff indicated that this property was not on the list of property
                to be demolished, in fact it was eventually sold. Further, they indicated that
                if a leaking roof is causing further damage to the property, the roof should
                be repaired.
                                                                        APPENDIX B-14
                                                                           PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:             75 Waterman Street

FHA Number:                   372-213202

Subcontractor                 James Steer

Work Order Amount             $980.00

Summary:

The work order prepared by the REAM did not list all necessary items to be repaired, and
did not adequately specify the scope and amount of work to be performed.

Pertinent Details:

A.              Necessary Items Were Not Included on The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards were
                eliminated. The work order prepared by the REAM did not provide for
                repairing the steps to the basement, which were unsecured.

B.              Work Order Task Not Specific

                The REAM did not clearly identify the following task. The REAM included
                on the work order the removal of all debris from both the inside and the
                outside of the house. However, the REAM did not specify the estimated
                amount of debris to be removed.

Auditee Comments

A.              The REAM has no knowledge of unsecured basement steps.

B.              The RFP did not state that debris must be quoted in cubic yards. Further,
                the GTR does not require cubic yards. The GTR is aware that we maintain
                back up papers describing debris and its locations as well as estimates of
                yardage.


OIG Evaluations of Auditee Comments
                                                             APPENDIX B-14
                                                                PAGE 2 OF 2


B.   As previously stated, the REAM’s contract requires work specifications to
     be in detail. Having the details in the REAM’s property file is not
     sufficient. The tasks need to be clearly identified on the work orders for
     both the subcontractors and HUD. The absence of adequately described
     work prevents the subcontractors from being fully aware of their
     responsibilities; and prevents HUD from being able to determine the
     adequacy of the work performed and the reasonable of its cost.
                                                                        APPENDIX B-15
                                                                           PAGE 1 OF 1

                              ABERTE REALTY, INC.
                        ERIE/NIAGARA COUNTY, NEW YORK


                      NARRATIVE PROPERTY PRESENTATION

Property Address:              1147 LaSalle Avenue

FHA Number:                    372-204927

Subcontractor                  James Steer

Work Order Amount              $945.00

Summary:

The work order prepared by the REAM did not list all necessary items to be repaired and
did not adequately specify the scope and amount of work to be done.

Pertinent Details:

A.              Necessary Work Was Not Included On The Work Order

                The work order prepared by the REAM should have included the following
                items to ensure that the property was secured and safety hazards were
                eliminated. The work order prepared by the REAM did not provide for
                scrapping of defective paint on the porch and the replacement of rotten
                boards in the ceiling of the porch..

B.              Work Order Task Not Specific

                The REAM did not clearly identify the following task. The REAM
                included on the work order the removal of all debris from both inside and
                outside the house. However, the REAM did not specify the estimated
                amount of debris to be removed.

Auditee Comments

A.              The REAM has no knowledge or recollection.

B.              The RFP did not state that debris must be quoted in cubic yards. Further,
                the GTR does not require cubic yards. The GTR is aware that we maintain
                back up papers describing debris and its location as well as estimates of
                yardage.
                                                                    APPENDIX B-15
                                                                       PAGE 2 OF 2



OIG Evaluations of Auditee Comments

B.           As previously stated, the REAM’s contract requires work specifications to
             be in detail. Having the details in the REAM’s property file is not
             sufficient. The tasks need to be clearly identified on the work orders for
             both the subcontractors and HUD. The absence of adequately described
             work prevents subcontractors from being fully aware of their
             responsibilities; and HUD from being able to determine the adequacy of the
             work performed and the reasonableness of its cost.
                                                                    Appendix E

Distribution
Secretary's Representative, New York/New Jersey, 2AS
Director, Single Family Division, 2CPH, Buffalo Area Office (2)
Field Comptroller, Midwest Field Office, 5AF
Audit Liaison Officer, Mid-Atlantic Field Office, 3AFI
Buffalo Area Coordinator, 2CS (2)
Assistant to the Deputy Secretary for Field Management, SDF
(Room 7106)
Office of Housing-FHA Comptroller, HF (Attention: Comptroller,
 Room 5132) (5)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164) (2)
Deputy Chief Financial Officer for Finance, FF
 (Room 10166) (2)
Associate General Counsel, Office of Assisted Housing and
 Community Development, GC (Room 8162)
Director, Housing and Community Development Issue Area, U.S.
GAO, 441 G Street, NW, Room 274, Washington, DC 20548 (2)
Real Estate Asset Manager, Aberte Realty, Inc., Buffalo, New York




                                            Page 67                 98-NY-222-1002