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.
Recommendations
Public and Indian Housing
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Status2017-KC-1003-001-AOpenClosedClosed on January 12, 2018
Require the Authority to require Majestic Management to develop and implement a process to ensure that it makes any needed adjustments to employee payroll and transfers accurate amounts from the project accounts for payroll.
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Status2017-KC-1003-001-BOpenClosedClosed on January 12, 2018
Require the Authority to require Majestic Management to design and implement a process to ensure that actual staff hours are accurately tracked and only dedicated employees are paid from project funds.
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Status2017-KC-1003-001-COpenClosed$1,136,046.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on July 26, 2024Require the Authority and Majestic Management to support $568,023 spent on payroll allocated to the projects or repay the projects from non-Federal funds.
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Status2017-KC-1003-001-DOpenClosed$219,330.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on January 24, 2024Require the Authority and Majestic Management to reimburse from non-Federal funds the $109,665 in ineligible expenses that Majestic Management charged to the projects.
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Status2017-KC-1003-001-EOpenClosedClosed on December 04, 2018
Require the Authority and Majestic Management to repay any excessive annual leave that Majestic Management paid to its employees from project funds when its contract terminated in 2017.
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Status2017-KC-1003-002-AOpenClosedClosed on January 12, 2018
Require the Authority to provide training on procurement requirements in public housing to all Majestic Management employees working at the projects.
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Status2017-KC-1003-002-BOpenClosed$974,844.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on July 26, 2024Require the Authority and Majestic Management to support that the $487,422 spent on goods and services for the projects was a reasonable cost and the goods and services were procured from eligible vendors or repay the projects from non-Federal funds.
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Status2017-KC-1003-002-COpenClosedClosed on October 24, 2023
Require the Authority to review all other payments to the sampled vendors to confirm that the costs were reasonable and the goods and services were procured from eligible vendors or repay the projects from non-Federal funds.
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Status2017-KC-1003-003-AOpenClosedClosed on January 12, 2018
Require the Authority to monitor Majestic Management to ensure that the recent training was effective and the new checklist is in use and effective.
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Status2017-KC-1003-003-BOpenClosed$152.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on November 14, 2018Require the Authority to recompute the rents for the households noted above and as necessary for errors made by Majestic Management, reimburse tenants for overcharged rent from operating funds or rent credit, and enter into repayment agreements with tenants if they were undercharged based on nondisclosure of income.