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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, and Johnson County Audit Services, Johnson County, KS, audited the City of Olathe, KS, based on a hotline complaint.  Our audit objectives were to determine whether (1) the complainant’s allegations were substantiated, (2) the City listed the proper affordability period for the Neighborhood Stabilization Program (NSP) homes it sold, and (3) the City received maximum benefit from the HOME Investment Partnerships Program grant funds it received.

We substantiated some of the complainant’s allegations.  Specifically, the City did not properly allocate administrative costs to its housing rehabilitation programs, and it improperly sold an NSP home to a City employee’s daughter.  In addition, the City did not select applicants appropriately and ensure that its NSP waiting list was accurate and updated.  In addition to the complainant’s allegations, we found the City forgave its NSP promissory notes much sooner than required, and it did not fully use its HOME funds.

We recommend that the Director of the Kansas City, KS, Office of Community Planning and Development work with the State of Kansas and Johnson County to require the City to provide adequate support for $575,855 in unsupported salary costs and $38,711 in unsupported management fees or reimburse HUD from non-Federal funds any portion it cannot support.  We also recommend that the City reimburse its NSP $39,500 for the promissory note that it satisfied when the homeowners sold their home before completion of the correct affordability period and up to $52,150 from the net proceeds for the promissory note that it satisfied for the home that went into claim after our review.  In addition, we recommend that the City implement detailed NSP policies and procedures, checklists, and applications that disclose potential conflict-of-interest relationships.  The City should receive monitoring by the appropriate grantee to ensure that it implements the recommendations.  Further, we recommend that the County pursue the efficiencies to be gained by consolidating the two entities’ HOME programs, and the City should amend previous HOME agreements to be aligned with the County’s HOME program and release all loans that have met the 10-year affordability period.