The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited Majestic Management, LLC, located in St. Louis, MO. Our objective was to determine whether Majestic Management charged only the appropriate fees in managing the projects, properly procured goods and services, and disbursed project funds only for eligible and supported expenses.
Majestic Management improperly charged fees to its projects, did not properly procure goods and services, and spent project funds for ineligible and unsupported expenditures. As a result, it deprived its projects of at least $242,275 in funds needed to pay for essential items, and HUD and property owners had no assurance that the projects benefited from the $975,931 paid without adequate support.
We recommend that HUD require Majestic Management to (1) support or reimburse the appropriate projects more than $975,931 for the unsupported disbursements and improper procurements; (2) reimburse the appropriate projects their portion of $242,275 for work not completed, overbilled, or ineligible; (3) be monitored by HUD to ensure that employees understand and correctly apply procurement requirements, (4) update its management agreements to properly disclose its identity-of-interest companies to HUD and property owners; and (5) implement adequate controls to ensure that payments are adequately supported, goods and services are properly procured, and only authorized fees are collected.
Recommendations
Housing
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Status2017-KC-1001-001-AOpenClosed$17,414.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Provide support showing that $17,414 in management fees charged to the projects using a budgeted amount represented actual amounts or repay the difference to each affected project.
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Status2017-KC-1001-001-BOpenClosed$447,345.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Provide documentation to support that it paid itself $447,345 for eligible purposes or reimburse the appropriate projects for the balance.
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Status2017-KC-1001-001-DOpenClosed
Verify all management fees charged to the projects from 2013 through 2015 were appropriate.
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Status2017-KC-1001-002-AOpenClosed$231,091.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require Majestic Management to reimburse the appropriate projects their portion of $231,091 for work not completed or overbilled.
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Status2017-KC-1001-002-BOpenClosed$462,281.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Require Majestic Management to provide support that $462,281 paid for procurements was reasonable or reimburse the appropriate projects for the balance.
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Status2017-KC-1001-003-AOpenClosed$11,184.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Reimburse the appropriate projects their portion of $11,184 that it charged for ineligible items.
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Status2017-KC-1001-003-BOpenClosed$48,891.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Provide documentation to support that $48,891 was spent for eligible purposes or reimburse the appropriate projects for the balance.