We audited the U.S. Department of Housing and Urban Development’s (HUD) Resident Homeownership Program grant for Carmen-Marine Apartments (project). The audit was part of the activities in our fiscal year 2015 annual audit plan. We selected the project based on a request from HUD’s Chicago Multifamily Housing Hub. Our objective was to determine whether the Carmen-Marine Cooperative and management agent operated the project in accordance with HUD’s requirements and the grant agreement.
The Cooperative and management agent did not ensure that (1) the Cooperative always maintained a proper waiting list for rental units and appropriately selected households for initial membership sales, (2) sufficient documentation was maintained to support that the Cooperative’s payments to HUD for initial membership sales were accurate, (3) sufficient documentation was maintained to support whether the City of Chicago should have received proceeds from subsequent membership sales, (4) housing was affordable for all members, (5) members maintained their units as their principal residence, (6) the Cooperative could support that it notified the Chicago Housing Authority that it received excessive Section 8 Housing Choice Voucher program housing assistance payments for units, and (7) the Cooperative submitted required reports to HUD. As a result, HUD and the Cooperative lacked assurance that the project was operated in accordance with HUD’s requirements and the grant agreement, and the Cooperative is at risk of having to reimburse HUD nearly $22.7 million in Program funds.
We recommend that the Director of HUD’s Multifamily Midwest Region (1) require the Cooperative to resolve the issues and implement adequate procedures and controls to address the weaknesses cited in this audit report and (2) make a preliminary determination as to whether the Cooperative is in default of the grant agreement.