Review of Section 202 Housing Project Looks into Possible Misuse of Funds

November 30, 2010
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At the request of U.S. Congressional Representative David Drier, from California, the Office of the Inspector General (OIG) conducted an audit of the Naomi Gardens, a Section 202 senior housing project, for possible misuse of funds. The OIG looked into whether the developer was awarding work to family members or project employees without seeking proposals from other companies and whether there were waiting list violations and families occupying multiple units.

Although the project’s expenses were properly authorized, the OIG found that the project did not adequately support that it conducted procurement activities in accordance with HUD requirements. As a result, it did not ensure that it paid at least $170,916 to contractors and suppliers at a reasonable cost, and according to HUD rules and regulations.

The audit also found that the project did not properly maintain its waiting list, and had skipped over eligible applicants to accommodate other applicants without proper justification, allowed applicants to remain on the waiting list longer than HUD rules allowed, and improperly allowed household member to transfer to additional units.

The auditors recommended that project owner California Trinity Housing Inc. and management agent ManSerMar, Inc.:

  • Implement additional procurement procedures and controls to ensure compliance with HUD Handbook requirements.
  • Follow and enforce the tenant selection plan and submit documentation to HUD showing that future waiting list pulls are conducted according to the plan.
  • Maintain a transfer waiting list for current residents.
  • Amend the tenant selection plan to clarify and address the transfer of household members to additional units.