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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited Majestic Management, LLC’s management agent activities for the public housing program at the East St. Louis Housing Authority.  Our objective was to determine whether Majestic Management made only eligible and supported payments for payroll, complied with procurement requirements, and properly performed initial tenant certifications and annual tenant recertifications.

Majestic Management improperly charged payroll costs to the projects.  It transferred more money from the projects to itself than was needed to fund payroll, paid employees who were not dedicated solely to Authority operations without adequate documentation, improperly paid its employees bonuses, improperly accrued and paid employees for leave time, and paid employees while they were suspended without pay.  In addition, Majestic Management did not comply with procurement requirements.  It did not obtain price quotes or maintain adequate records and improperly used companies owned by employees or their spouses.  As a result, it deprived projects of at least $109,665 in operating subsidies needed to run the projects, and HUD and the Authority had no assurance that the projects benefited from more than $1 million spent without adequate support.  Furthermore, Majestic Management did not properly perform initial certifications and annual recertifications. 

We recommend that HUD require the Authority and Majestic Management to support or reimburse the projects more than $1 million for the unsupported payroll costs and improper procurements, reimburse the projects $109,665 for ineligible payroll costs, and recompute the tenant rent for the households with exceptions.  We also recommend that Majestic Management be required to improve its controls, train its staff, and repay excessive annual leave.