We audited the management agent operations of the South Bronx Community Management Co., Inc. (agent), as they relate to the administration of the U.S. Department of Housing and Urban Development (HUD)-Section 202 direct loan for elderly and handicapped housing project Maria Isabel at the request of the HUD New York City Office of Multifamily Housing. The audit disclosed that the agent generally complied with HUD financial and unit maintenance standards regulations in its administration of the project. However, various issues warrant HUD’s attention to provide greater assurance that the project is managed in the most economical and efficient manner. Specifically, (1) tenant accounts receivable and vendor accounts payable were not properly reported, (2) prudent procurement practices were not always followed, (3) advances were made by and partially repaid to the agent without HUD approval, and (4) action to mitigate cash-flow problems was not addressed in a timely manner, but has since been taken. As a result, HUD was not made aware of the financial condition of the project, and the project experienced serious cash-flow problems.
We recommend that the Director of HUD’s New York Office of Multifamily Housing instruct the agent and property owners to determine the collectability of delinquent tenant accounts receivable and request HUD approval to write off those accounts determined to be uncollectible, strengthen procedures to ensure accurate reporting of accounts payable, establish procedures to request approval for receiving and paying agent advances, strengthen procedures to provide greater compliance with HUD’s and its own procurement procedures, and strengthen controls to ensure that late fees are minimized and that actions to mitigate cash-flow problems are addressed in a timely manner.