We completed a corrective action verification of HUD’s actions in implementing portions of Audit Memorandum 98-AO-219-1804, issued September 24, 1998; Upfront Grant for Ridgecrest Heights Apartments, CEMI-Ridgecrest, Inc., Washington, DC. The specific objective of this corrective action verification review was to determine if HUD ensured the repayment of excess proceeds from the sale of townhomes located at Ridgecrest Heights Apartments.

HUD failed to adequately follow the procedures it agreed to in its close-out memorandum with the Office of Inspector General. Since HUD did not ensure the grantee submitted the proper documentation to ensure repayment of the sales proceeds, we estimated a preliminary amount of excess sales proceeds due to HUD to be $780,326, subject to additional verification. HUD needs to verify the amount of the sales proceeds and determine whether any funds remain in the project’s trust fund, and then ensure those funds are returned to HUD as required by the grant agreement.

Based on the results of our verification, we recommend that HUD’s Deputy Assistant Secretary of Multifamily Housing Programs verify the final amount of sales proceeds, determine if any amounts should be returned to HUD, and ensure such amounts are repaid to HUD under the terms of the grant agreement. We also recommend that after 10 years from the date of final development has expired, determine whether any funds remain in the project’s trust fund, and ensure such amounts are repaid to HUD under the terms of the grant agreement.