REPORT DIGEST

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the
Single Audit Act and OMB
Circular A-133)
For the Year Ended:
June 30, 1998

Summary of Findings:

 

SYNOPSIS

¨ The Illinois Affordable Housing Trust Fund loan application supporting documentation was incomplete, and loans were not processed in a timely manner. 

¨ Section 8 and Section 236 tenant eligibility files lacked proper supporting documentation and contained numerous errors. This finding has been repeated since 1989.

¨ The waiting lists at some developments were not properly maintained. This finding has been repeated since 1995.

 

 

{Expenditures and Activity Measures are summarized on the next page.}

FY 1998

FY 1997

FY 1996

• Total Governmental Fund Revenue
  Real Estate Transfer Taxes
  % of Total Revenue
  Federal Home Funds
  % of Total Revenue
  Investment, Interest and Other Income
  % of Total Revenue
• Total Governmental Fund Expenditures
  Grants
  % of Total Expenditures
  General and Administrative
  % of Total Expenditures

$44,531,684
$23,450,608
52.7%
$17,560,764
39.4%
$3,520,312
7.9%
$10,391,745
$6,695,023
64.4%
$3,696,722
35.6%

$33,950,851
$19,471,247
57.4%
$11,355,729
33.4%
$3,123,875
9.2%
$12,599,636
$7,975,873
63.3%
$4,623,763
36.7%

$39,973,819
$18,625,639
46.6%
$18,387,132
46.0%
$2,961,048
7.4%
$11,734,920
$8,041,712
68.5%
$3,693,208
31.5%

• Total Administrative Fund Revenue
  Service Fees
  % of Total Revenue
  Interest and Investment Income
  % of Total Revenue
  Other Income
  % of Total Revenue
• Total Administrative Expenses
  Salaries and Benefits
  % of Total Expenses
  Average No. of Employees
  Professional Fees
  % of Total Expenses
  Other General and Administrative Expenses
  % of Total Expenses
  All Other Operations Items
  % of Total Expenses
• Net Value of Property and Equipment

$22,231,267
$7,182,201
32.3%
$6,933,105
31.2%
$8,115,961
36.5%
$16,074,621
$5,862,586
36.5%
162
$1,360,009
8.5%
$3,157,930
19.6%
$5,694,096
35.4%
$1,386,712

$14,487,608
$7,020,162
48.4%
$4,762,327
32.9%
$2,705,119
18.7%
$11,323,997
$6,084,516
53.7%
167
$1,185,982
10.5%
$3,120,553
27.6%
$932,946
8.2%
$1,319,409

$15,902,776
$6,999,652
44.0%
$6,303,964
39.6%
$2,599,160
16.4%
$12,724,503
$6,084,996
47.8%
171
$1,172,822
9.2%
$2,999,325
23.6%
$2,467,360
19.4%
$1,145,115

FY 1998

FY 1997

FY 1996

• Total Number of Bond Issues Outstanding
• Total Bond Issue Value (in millions)

94
$2,060

84
$2,028

80
$2,018

Loan application supporting documentation is incomplete and loans are not processed timely

Waiting lists were not properly maintained at 10 of 20 developments tested

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

ILLINOIS AFFORDABLE HOUSING TRUST FUND

The Illinois Affordable Housing Trust Fund loan application supporting documentation is incomplete, and loans are not processed in a timely manner. This is in violation of the Authority's internal policies and procedures regarding timely processing of development applications.

The testing of loan application files indicated delays regarding the initial notification to an applicant that the application was suitable for processing within 10 days of application receipt as required by Authority policy. Also, a project summary sheet was not prepared within three weeks of receipt of the application, as required by Authority policy. Finally, site visits were not properly documented. Authority policy requires a site visit to be performed as part of the loan application process. However, the Authority could not provide documentation to indicate if site visits were conducted.

We recommended the Authority review and revise its policy requiring that applicants be notified within 10 days whether or not their applications are suitable for processing to a more reasonable time period. We also recommended the Authority ensure a date is placed on all project summary sheets and that application completeness be monitored so that project summary sheets can be prepared immediately upon receipt of all necessary information. Finally, we recommended the Authority adhere to its policy and maintain documentation to support site visits. (Finding 98-1, pages 13-15)

The Authority concurred with our recommendations to review and revise its current policy requiring an applicant's notification within 10 days and the maintenance of documentation to support site visits. Authority personnel also stated they concurred with our recommendation to ensure original dates and current dates are placed on project summaries.

SECTION 8 AND SECTION 236 TENANT ELIGIBILITY

Federal eligibility files for Section 8 and Section 236 tenants lacked proper supporting documentation, and the eligibility forms, which are used to determine Housing Assistance Payments, contained numerous errors. This finding has been repeated since 1989.

During audit testing, numerous errors were found in the 80 files reviewed. The files contained errors resulting in both underpayments and overpayments by the Department of Housing and Urban Development (HUD). There were also many files containing inaccurate information, incomplete or missing forms, and inadequate documentation.

The Authority is responsible for adequate monitoring procedures to ensure subrecipients are complying with requirements of applicable federal programs. This includes ensuring that federal funds are being used for the assistance of eligible tenants only and that adequate supporting documents are retained to verify tenants' eligibility. The numerous errors could result in incorrect payments from HUD and the subsidy of ineligible tenants. Ultimately, they could jeopardize future federal financial assistance.

We recommended the management of each development attend training on an annual basis, with new development managers to attend training within the first three months. We also recommended that the Authority develop a policy containing disciplinary actions to be taken for failure to comply with the policy and that site visits be conducted once per year. (Finding 98-2, pages 16-18)

Authority officials stated they have instituted a requirement for relevant management staff to attend a two-day training session biennially. They further stated they concur with the spirit of the recommendation for new management to attend training within the first three months, but believe attendance within the first six months is more realistic. Authority personnel also stated they do not agree to conduct site visits annually since it is their belief that the developments do not need annual audits. (For previous Authority responses, see Digest footnote #1.)

EQUAL OPPORTUNITY AND FAIR HOUSING

The waiting lists at some developments were not properly maintained as required by the Department of Housing and Urban Development (HUD). HUD requires certain developments to have "waiting lists" to ensure applicants are processed on a first come, first serve basis. This finding has been repeated since 1995.

We noted 10 of 20 highest risk developments, as determined by the Authority, were not in compliance with the respective development's Tenant Selection Plan. We found:

¨ Applicants were not kept at the top of the list where there was no availability for a particular unit.

¨ Procedures were not consistently applied to contact and offer vacant units to applicants.

¨ Applicants were not processed according to the Tenant Selection Plan.

¨ Two developments did not have approved Tenant Selection Plans.

Although the Authority requires developments to submit Tenant Selection Plans for approval, current monitoring is not adequate to ensure the developments are operating in accordance with plans submitted.

We recommended the Authority monitor each development's compliance with the waiting list procedures. We also recommended the Authority create a policy that states the disciplinary action that will be taken for failure to comply with the procedures. (Finding 98-3, pages 19-20)

The Authority responded that it believes it cannot do enough monitoring to ensure complete compliance with the procedures because the application of the Tenant Selection Plan procedures by the owners and agents of the developments are not within the direct control of the Authority. However, Authority officials stated they would ensure that the properties' management personnel are aware that noncompliance is unacceptable to the Authority. (For previous Authority responses, see Digest footnote #2.)

OTHER FINDINGS

The remaining findings are less significant and are being given appropriate attention by the Authority. We will review progress toward implementing these recommendations in our next audit. Responses to the recommendations were provided by Executive Director John Varones.

AUDITORS' OPINION

Our auditors state the Authority's financial statements for the year ended June 30, 1998 are fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:BAR:pp

SPECIAL ASSISTANT AUDITORS

Arthur Andersen LLP were our special assistant auditors for this audit.

DIGEST FOOTNOTES

#1 SECTION 8 AND SECTION 236 TENANT ELIGIBILITY - Previous Authority Responses.

1997: "The Authority is in the process of developing a requirement for relevant development management staff to attend a two day training session biennially. The training will address both general management issues including waiting list administration as well as program specific eligibility regulations. In addition, the Eligibility & Processing Officers' (EPO) procedures will be revised to reflect an increased emphasis regarding on-site audits. EPO staff workload will also be reviewed."

1996: "The Authority will review the files in question and will make necessary adjustments upon the completion of the review. The Authority will continue to emphasize to management agents the importance of accuracy as it relates to tenant eligibility and tenant rent. In addition, the Authority continues to offer training and retraining for site managers and strongly recommends that new managers attend and that managers be retrained every two years. The Authority will continue to advise site managers that continuing inaccuracies may result in abatement of Housing Assistance Payments.

1995: "The Authority is in the process of reviewing the files in question and will make necessary adjustments upon completion of the reviews. During site visits by Authority staff, the 50059 forms are reviewed and calculated for completeness and accuracy. The Authority will continue to emphasize to management agents the importance of accuracy as it relates to tenant eligibility and tenant rent. In addition, the Authority will continue to offer training and retraining for site managers and strongly recommends that new managers attend immediately and that all managers be retrained biannually. The Authority will also advise site managers that continuing inaccuracies may result in abatement of Housing Assistance Payments."

1994: "HUD regulations require that the tenant file systems be established and maintained for three years. The Authority supports this requirement by supplying checklists to management personnel during monthly training sessions and strongly encouraging their use. These checklists recap all information which should be included in each on-site tenant file. In addition, when the Eligibility and Processing (E&P) Officers do an on-site tenant audit, they check to see that the tenant files are in order and that all verification forms are properly filed.

1993: "During site visits by the E&P Officers, the Form 50059's are reviewed and calculated for completeness and accuracy. The Authority will continue to emphasize to management agents the importance of accuracy as it relates to tenant eligibility and tenant rent.

In addition, the Authority continues to offer training and retraining for site managers and strongly recommends that new managers attend immediately and for all managers to reattend biennially.

The Authority is in the process of reviewing the files in question as noted in the above findings and will make necessary adjustments upon completion of the reviews."

1992: Same response as 1993.

1991: Same response as 1993.

1990: Same response as 1993.

1989: "During all training sessions, on-site audits and telephone conversations with management personnel, the E&P Officers stress the importance of accurate and complete 50059 forms. These forms are now reviewed by computer which is supposed to eliminate human error. Should the computer reject a file due to erroneous information, the E&P Officer checks the form and contacts the on-site manager. For major errors, a new 50059 is requested. Should the error be of the type found during the audit, the on-site manager is told to correct the error on their 50059 form. The E&P Officer then corrects the IHDA 50059 and the file is reentered into the computer. The on-site manager, however, may not always follow through and correct the on-site 50059 form."

#2 EQUAL OPPORTUNITY AND FAIR HOUSING - Previous Authority Responses

1997: "Standardized tenant selection plan models have been created for the respective programs monitored by the Authority. However, the differences among program requirements make it difficult, if not impossible, to develop universal policies, procedures, and forms.

The Housing Management Officers have been instructed to place greater emphasis on the waiting list during site visits. The frequency of these site visits is reviewed annually. All developments are visited a minimum of two times per year.

Effective January 1, 1998, management site staff will be required to attend Authority training sessions on a periodic basis. The curriculum of these training sessions has been expanded to place greater emphasis on waiting list procedures."

1996: "Each development's Tenant Selection Plan contains specific requirements and procedures with regard to maintaining waiting lists and processing tenant applications. As a part of its ongoing management training, the Authority will train management staff in following these procedures. Compliance with these procedures will be tested as a part of the Authority's ongoing monitoring of management performance."

1995: "The Illinois Housing Development Authority is the state's Housing Finance Authority. It acts as a PHA only for Moderate Rehabilitation developments. It was not indicated in the Finding what type of Section 8 the property was that treated federal preference applicants in a manner inconsistent with their development's Tenant Selection Plan. However, in its capacity as mortgagee and contract administrator, the Authority will place greater emphasis and detail on the tenant selection process (including the waiting list procedures) during its annual inspections. The Authority will more closely review the management staff's application and tenant selection process, comparing it to their Tenant Selection Plan. Should a discrepancy between the plan and the actual implementation of site procedures be determined, the Authority will direct management to come into compliance with their approved Plan.

When Change 24 of the HUD Handbook Regulations 4350.3 was received by the Authority, it requested that all of the developments in the Authority's portfolio submit revised Tenant Selection Plans for compliance. Models were provided for guidance depending on the type of subsidy program the development was receiving. The Authority anticipates that many of the developments are now better trained in the tenant selection process because of this action. The Authority has had many discussion with various agents and management staff on this subject. It will also review the possibility of incorporating the tenant selection process more fully into its bimonthly training for new managers and their site staff.