We audited Four Freedoms House of Philadelphia, Inc.’s management of its Section 202 housing project. We selected Four Freedoms for an audit because we received a complaint alleging that it mismanaged its Section 202 housing project. Our audit objective was to determine whether Four Freedoms managed its Section 202 housing project according to the requirements of its regulatory agreement and applicable HUD requirements. We focused the audit on reviewing recent monitoring of the project; Four Freedoms’ maintenance of the property, management of security deposits, use of emergency capital repair program grant and operating funds, management and use of replacement reserve funds; and whether its board of directors consisted of the number of members required by its regulatory agreement.

We found that Four Freedoms generally managed its housing project according to its regulatory agreement and HUD requirements and the allegations of mismanagement in the complaint generally had no merit. However, it did not properly deposit and insure all of its replacement reserve account funds, and its board of directors was comprised of fewer than the number of members required by the regulatory agreement.

We recommend that HUD require Four Freedoms to (1) transfer replacement reserve account funds to other banks to ensure that the funds are deposited into interest-bearing accounts and fully insured at all times in accordance with HUD requirements and (2) increase the membership of its board of directors to comply with its regulatory agreement.