Provide sufficient documentation to support that the Cooperative used its share of the proceeds from initial membership sales in accordance with the grant agreement. If the Cooperative cannot do this, it should transfer funds from its operating account, in an amount equal to half of the principal on the mortgages to the Cooperative for all membership sales less the amount the Cooperative can support that it used for eligible purposes, to a reserve account to be used in accordance with the grant agreement.

Implement adequate procedures and controls to ensure that its share of the proceeds from initial membership sales is used in accordance with the grant agreement.

Implement adequate procedures and controls to ensure that the Cooperative receives HUD approval before using the $148,872 in proceeds from initial membership sales offset by undisbursed funds which was in the Cooperative’s reserve for replacements account for the project.

Sign the amendment to the use agreement which would require the Cooperative to ensure that monthly housing expenses did not exceed 35 percent of the members’ monthly adjusted gross income only at the time of sale. If the Cooperative does not sign the amendment, it should verify the current household income for all members to determine whether the members are paying more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses. For any members that are paying more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses, it should determine the amount the household overpaid and reimburse the household that amount. It should also implement adequate procedures and controls to ensure that members do not pay more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses.

Implement adequate procedures and controls to ensure that it sells memberships to the same proportion of very low-, low-, and moderate-income households as stated in the resident income profile in paragraph 4.a. and required by paragraph 10.b. of the use agreement.

Require the member for whom it tried to transfer the membership associated with a unit in which the remaining member passed away, to move into the unit or continue to pursue the release of the member’s membership rights to the Cooperative.

Require the members who did not maintain their unit at the project as their principal residence to move into the unit or continue to pursue the sale of their membership in the Cooperative.

Provide sufficient documentation to support that the single occupant of a unit was a member of the Cooperative. If the Cooperative cannot do this, it should determine who has the right to membership associated with the unit, transfer the membership to that person if appropriate, and require him or her to move into or sell the unit.

Implement adequate procedures and controls to ensure that members maintain their units at the project as their principal residence or sell their memberships.

Rent the unit that was used to provide rent-free housing to former employees of the management agent to a very low-, low-, or moderate-income household selected from a waiting list for rental units that meets the requirements of the resident home-ownership plan and considers the tenant profile.

Implement adequate procedures and controls to ensure that the project’s units are used for rental or cooperative housing unless otherwise approved by HUD.

Implement adequate procedures and controls to ensure that it submits the required reports to HUD to show continued compliance with the program.

Ensure that the Cooperative’s board members and responsible staff of the Cooperative’s management agent are provided training on HUD’s requirements and the grant agreement.

Consider removing from the Cooperative’s board the member who did not maintain their unit as their principal residence.

Make a preliminary determination as to whether the Cooperative is in default of the grant agreement. If it is preliminarily determined that the Cooperative is in default, HUD should provide the Cooperative notice of the determination and propose corrective or remedial actions to address the default and prevent the Cooperative from repaying the remaining $18,149,023, which HUD disbursed for the project ($18,607,467 in funds disbursed for the project – $458,444 in proceeds from initial membership sales the Cooperative remitted to HUD).

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to certify and provide supporting documentation that the identified deficiencies have been corrected for the 57 properties cited in this audit report.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to repay $8,034 in ineligible monthly management and inspection fees for 57 sample properties with health and safety hazards or significant not-ready-to-show conditions.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to support or repay $488,883 in unearned property management and inspection fees for 1,028 properties with three or more consecutive unresolved discrepancies in its routine exceptions reports.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to implement an effective quality control system, including specifying how many quality control field inspections it will perform, how it will select properties for review and inspection, reviewing exception reports by case number, completing the routine inspection form during field inspections, documenting quality control findings and how it resolved them, and retaining records that allow it to identify and correct patterns of deficiencies and poor performance. This would put an estimated $891,000 to better use in the next 12 months.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to evaluate the structure of its exception reports to ensure that they do not omit existing hazards and other issues reported by inspectors.