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Jax Daily Record Thursday, Sep. 24, 201512:00 PM EST

Missing documents, potential conflicts cited in council auditor's report on taxpayer-funded housing program

by: David Chapman

An audit of how the city’s Housing Division handled state dollars for affordable housing reveals a litany of missing documents and a possible conflict of interest requiring possible disciplinary action.

Called the State Housing Initiatives Partnership, the program provides funding to local governments as an incentive to produce and preserve affordable homeownership and multifamily housing. Its goal is to serve low- and moderate-income families.

The City Council Auditor’s Office report spans fiscal 2009-12 and looks at five programs:

• Homeowner-occupied rehabilitations, which let people have repairs made to their homes and tap in to city sewer services

• Rental rehabilitation, for repairs of multifamily units

• Down payment assistance for homes

• Foreclosure prevention, which helps people bring their mortgages current

• Homebuyers counseling, which pays for classes to help people learn about buying a home.

Council Auditor Kirk Sherman said the city received about $10 million during the span of the report.

His office turned the audit over to the administration.

Marsha Oliver, Mayor Lenny Curry’s spokeswoman, said the city’s Inspector General is reviewing the report.

In an effort to contribute to the integrity of the report, she said, the administration is prohibited from comments at this time.

For most of the programs reviewed, it appeared the recipients met the criteria to receive funding.

However, the foreclosure prevention program had so many missing documents the auditors couldn’t make that determination.

There also were holes throughout the five programs’ records, where documents for contractors weren’t available.

That could have been anything from proof of insurance and State of Florida competency certificates to a company’s articles of incorporation and a builder’s resume.

And, while the auditor’s report said it looked like the housing projects the money helped fund were completed, it couldn’t verify that. Again, missing documents were the reason.

The city’s Housing and Community Development Division agreed with the findings. But, it also said those areas already were identified as needing improved policies and the report reinforced those findings.

A U.S. Housing and Urban Development consultant has worked with the division for three years on such improvements, according to the response.

Specifically to the foreclosure prevention program, auditor testing of 35 funding files from two vendors showed not enough documentation to determine whether participants were eligible.

For example, 32 of the 35 didn’t show affected properties were current on property taxes and homeowner’s insurance. In 18 of the 35, there wasn’t anything to show the applicant actually lived at the property. And 15 didn’t have documents supporting verified income.

The foreclosure program is no longer funded by state dollars, the division said in its response. If it is in the future, a checklist for such items will be incorporated.

Outside of the missing information, the most serious finding related to a potential conflict of interest with securing contracts for rental rehabilitation work.

The city awards funds to nonprofits to complete the work and it’s the responsibilities of those organizations to receive quotes from contractors to do the project.

In four of the nine project files reviewed, the auditors found two officials with construction companies chosen for work were also officers of two of the not-for-profits awarded projects.

In one example, for three of four projects, the person who was president of the construction company also was vice president of the not-for-profit.

The vice president of the company thereby would see all the construction bids — a conflict of interest.

In the fourth project, the president of another not-for-profit was president of the construction company that submitted a quote. One other quote was received after, but wasn’t chosen.

“This appears to be a significant conflict of interest,” the report states.

It goes on to say it appeared the city program manager had knowledge of those conflicts of interest and “did nothing to stop this from occurring.”

Additionally, more quotes should have been received for all those projects.

The auditors suggested the mayor’s administration investigate the matter to determine if disciplinary action is needed. The division in it’s response said its pursuing disciplinary action against the employee, which may include termination.

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