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We reviewed the disbursement of project funds for seven of the Sections 202 and 811 supportive housing projects for the elderly and persons with disabilities managed by Taliafaro, Inc.  We initiated the audit under the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General’s annual audit plan.  Our objective was to determine whether Taliafaro used project funds appropriately and operated multifamily projects located in Tennessee, which received housing assistance under Sections 202 and 811 of the Housing Act, in accordance with HUD’s and its own requirements and regulatory agreements.  Specifically, we wanted to determine whether Taliafaro adequately supported project expenses, properly procured goods and services, and charged only the appropriate fees in managing the projects.

Taliafaro did not disburse project funds in accordance with HUD’s and its own requirements.  In each of the seven projects reviewed, Taliafaro failed to ensure that payments were adequately supported and goods and services were properly procured because it lacked adequate controls to (1) properly support its disbursements and (2) obtain bids for goods and services.  As a result, more than $61,000 in payments was unsupported.

In addition, Taliafaro charged unauthorized management and accounting fees for two projects because it lacked adequate controls over charging fees to the project. As a result, HUD and the project owners lacked assurance that more than $15,000 in management and accounting fees were eligible and appropriate.

We recommend that HUD require Taliafaro to (1) support or reimburse the appropriate projects more than $61,000 from non-project funds for the unsupported disbursements and improper procurements, (2) reimburse the two projects more than $15,000 from non-project funds for the unauthorized management and accounting fees, (3) reduce the balance of management fees payable by the balance of as much as $2,876 for ineligible management fees accrued but not paid, (4) stop collecting fees without proper authorization, and (5) implement adequate controls to ensure that payments are adequately supported, goods and services are properly procured, and only authorized fees are collected.