The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the Meeker Family and Elderly Housing project based on a referral from HUD’s Office of Multifamily Housing Programs in Denver, CO. The project is owned and managed by the Meeker Housing Authority. HUD alleged that the owner had failed to file audited financial statements or make mortgage payments to HUD for the past 10 years. Our objectives were to determine whether the owner properly maintained its bank accounts, used project funds only for eligible expenses, properly submitted its financial statements and mortgage payments, and conducted eligible project improvements with reserve for replacement funds.
The owner did not maintain its bank accounts in the name of the project and did not separate project and owner funds. The owner used operating funds to pay for ineligible and unsupported expenses. It did not submit its annual financial statements to HUD for more than 10 years and did not maintain separate books of account for the ownership entity. It also did not make the required mortgage payments on its $1.4 million outstanding mortgage balance. Additionally, the owner improperly used project operating funds to pay for project renovations.
We recommend that the Director of HUD’s West Region Office of Multifamily Housing Programs require the owner to (1) put all project bank accounts in the name of the project; (2) separate all owner bank accounts from the project’s bank accounts; (3) develop and implement controls over the distinction between project funds and owner funds, for its use of the project funds, to ensure that the certified public accountant submits audited financial statements and that the project does not use operating funds for any items that qualify for the use of reserve for replacement funds; (4) take HUD-approved training; (5) submit any outstanding audited financial statements; (6) work with the local multifamily office to make any outstanding mortgage payments; (7) repay the project’s operating account for the $143,805 spent on ineligible expenses using nonproject funds; (8) reimburse the project’s operating account $50,400 from the reserve for replacement account; and (9) provide support for the $12,355 in project funds spent to pay individuals who were not on the payroll.