We audited BLM Companies LLC, a contracted field service manager in HUD’s real estate-owned Management and Marketing III program, as part of the activities included in our 2017 annual audit plan and because it was the sole contractor performing property preservation and protection services for U.S. Department of Housing and Urban Development (HUD)-acquired properties located in Ohio. Our audit objective was to determine whether BLM provided property preservation and protection services in accordance with its contract with HUD and its own requirements.
BLM did not provide property preservation and protection services in accordance with its contract with HUD and its own requirements. Specifically, it did not ensure that it performed adequate initial services before recently acquired HUD-owned properties were promoted to ready-to-show status. BLM also did not ensure that HUD-owned and custodial properties were maintained in accordance with its contract with HUD. As a result, HUD lacked assurance that BLM maintained the properties in a manner that preserves communities and the value of the properties. Further, BLM inappropriately received more than $25,000 in management fees for properties that were not maintained in accordance with its contract. If BLM does not improve its process for performing property preservation and protection services, HUD could inappropriately pay $594,000 in monthly routine inspection fees for properties that are not maintained in accordance with its contract requirements over the next year.
We recommend that HUD require BLM to (1) certify and support that the applicable deficiencies have been corrected for the 8 of 109 properties cited, (2) reimburse HUD more than $25,000 for properties that did not receive proper preservation and protection services, and (3) implement adequate procedures and controls to ensure that all properties comply with its contract with HUD and its own requirements to prevent $594,000 in HUD funds from being spent over the next year on management fees for properties that are not adequately maintained. Further, we recommend that HUD assess BLM’s performance at least quarterly and if its performance does not improve, HUD should determine whether BLM has defaulted on its contract and take the appropriate actions.