We audited Diamond Park because of concerns raised by the U.S. Department of Housing and Urban Development’s (HUD) Departmental Enforcement Center regarding the management of the project and we had never audited it. Our audit objective was to determine whether the owner managed the project in accordance with its regulatory agreement and HUD requirements. We focused the audit on reviewing (1) participant eligibility and their selection from the waiting list; (2) the accuracy of and support for housing assistance payments; (3) the management of security deposits and rental receipts; (4) the use of operating funds; (5) the management and use of reserve for replacement funds; (6) maintenance of the property; (7) whether the project made mortgage payments; and (8) whether the project submitted annual financial statements.
The owner of Diamond Park generally managed its project in accordance with its regulatory agreement and HUD requirements. Specifically, the owner (1) assisted eligible participants; (2) made housing assistance payments that were generally accurately calculated, and supported; (3) properly managed its security deposits and rental receipts; (4) properly used operating funds; (5) properly managed and used reserve for replacement funds; (6) maintained the property in good physical condition; and (7) made mortgage payments as required. However, it did not maintain adequate documentation to show that participants were selected from its waiting list as required and did not submit financial statements for fiscal years 2013 through 2016. These conditions occurred because the project lacked procedures to ensure that it maintained documentation to show that it selected participants from the waiting list appropriately and lacked funds to pay an independent accounting firm to audit its financial statements. As a result, HUD had no assurance that the project treated applicants fairly and consistently in accordance with program requirements and was unaware of the project’s financial position. During the audit, HUD began working with the owner to have an independent accounting firm prepare the missing financial statements.
We recommend that HUD require the owner to develop and implement procedures to ensure that it maintains documentation to show that it selected participants from the waiting list in accordance with applicable requirements. We did not make a recommendation regarding the missing financial statements because HUD was working with the owner to correct the situation.