The U.S. Department of Housing and Urban Development’s (HUD), Office of Inspector General audited The Temtor, a residential and commercial development in St. Louis MO.  We selected The Temtor for audit because the project quickly defaulted on its mortgage and requested a partial payment of claim.  The project reached final endorsement on January 30, 2012, and failed to make timely mortgage payments beginning March 1, 2012.  Our audit objective was to determine whether Temtor’s project funds were used for ineligible expenses.

We found The Temtor used project funds for ineligible and unsupported expenses.  This misuse included payments of developer fees, unsecured loans, and excessive funds to the management agent.  In addition, Temtor transferred funds out of its tenant security deposit reserve account and submitted incorrect accounting reports that concealed the transfers. 

We recommend that HUD require the project owners to return $401,705 in ineligible disbursements to the project operating account and provide support for $316,883 disbursed for unsupported costs or return the funds to the project operating account.  Additionally, we recommend that HUD pursue appropriate administrative sanctions against the individuals involved, to include suspension, debarment, or limited denial of participation.