Support or reimburse the project from nonproject funds for the $20,000 value of the project’s van, which was transferred without sufficient documentation showing that the transfer was for reasonable operating expenses.

Support or reimburse the project from nonproject funds for the $51,261, as appropriated, in credit card purchases without sufficient documentation showing that the purchases were for reasonable operating expenses or necessary repairs of the project.

Reimburse the project from nonproject funds for the $2,020 in credit card purchases that was not used for reasonable operating expenses of the project.

Reimburse the project from nonproject funds for the $5,302 in petty cash expenditures that was not used for reasonable operating expenses of the project.

Pay the project from nonproject funds for the $390,583 in uncollected rental revenue.

Determine the market value of the operating rights for the 10 licensed beds sold in April 2015. If the licensed beds were sold for less than market value, the owner should reimburse the project from nonproject funds for the difference between the market value and the $150,000 sales price of the operating rights for the 10 licensed beds.

Implement adequate procedures and controls to ensure that it (1) uses project funds for reasonable operating expenses or necessary repairs of the project, (2) obtains HUD approval before disposing of the project’s assets, (3) receives market value for the sale of licensed beds, (4) obtains HUD approval for the entities selected to manage the project before entering into management agent agreements with the entities, (5) properly completes Medicaid applications, and (6) makes timely mortgage payments to prevent a $1,591,849 claim to HUD on the mortgage.

Work with the project’s owner and Greystone for the owner to develop an action plan to bring the owner current on the project’s mortgage, reserve for replacements, and taxes and insurance to prevent a claim to HUD on the mortgage.

Certify and provide supporting documentation showing that the identified deficiencies have been corrected for the 8 of 109 properties cited in this audit report.

Reimburse HUD $19,280 in ineligible management fees for 20 properties for which initial services were improperly performed before promotion to ready-to-show status.

Reimburse HUD $6,525 in ineligible routine inspection fees for 93 properties that contained property preservation and protection deficiencies.

Improve its quality control procedures to accurately track and conduct reviews in a manner that ensures all properties in its active inventory comply with HUD’s and its own requirements to prevent $594,000 in monthly routine inspection fees from being spent over the next year for properties that are not adequately maintained. The quality control procedures should include but not limited to continued training of BLM’s staff and subcontractors on properly identifying and addressing property deficiencies; maintaining sufficient documentation of its monthly quality control reviews and corrective actions; verifying that the datestamped photographs were for the corresponding inspection dates; and regularly updating its tracking mechanism for desktop reviews of inspections to ensure that it conducts desktop reviews for properties that are still in its inventory.

Assess BLM’s performance under the area 4P contract at least quarterly to determine whether it has improved its performance. If its performance does not improve, HUD in coordination with the Office of the Chief Procurement Officer should determine whether BLM has defaulted on its contract and take the appropriate actions.

Update the terms in the purchase agreement to ensure that the agreements define “extenuating circumstance” in reference to foreclosure avoidance, establish how long stabilization outcomes can continue to be reported as planned, and establish financial or other penalties to hold purchasers accountable in instances of nonreporting and noncompliance.

Direct the applicable lenders to provide evidence that the properties for the 1,383 FHA-insured loans not included in our sample had a safe and potable water source, or that the appraisers had not notified the lender of the water quality issue on their appraisals. If the lenders cannot provide this evidence, HUD should direct them to perform water testing and any necessary remediation to ensure that the properties have a safe and potable water source, or indemnify HUD against future loss.

Take appropriate administrative action against the lenders or appraisers for any cases in which it finds that they did not take appropriate steps to ensure that properties had a safe and potable water source.

Develop and implement additional guidance to advise lenders and appraisers when water testing is required for properties serviced by a public water system which has issued a public notice of water contamination.

Develop and implement policies and procedures to ensure that appraisers comply with guidance implemented to resolve recommendation 1C, including penalties for failure to comply, thereby ensuring that at least $238,090,214 million is put to better use.

Consider requiring water testing for all FHA-insured properties.

Work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD. This action will protect HUD against future losses of $2,434,204 for the 49 loans.