Discussion Draft Audit Report-Issued REV MCHA2

Issue Date November 19, 2007 Audit Report Number 2008-CH-1001 TO: Thomas S Marshall, Director of Public Housing Hub, 5DPH for FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA SUBJECT: The Housing Authority of the City of Michigan City, Indiana, Failed to Follow Federal Requirements for Its Nonprofit Development Activities HIGHLIGHTS What We Audited and Why We audited the Housing Authority of the City of Michigan City’s (Authority) nonprofit development activities. The review of public housing authorities’ development activities is set forth in our annual audit plan. We selected the Authority because it was identified as having high-risk indicators of nonprofit development activity. Our objective was to determine whether the Authority diverted or pledged resources subject to its annual contributions contract (contract), other agreement, or regulation for the benefit of non-U.S. Department of Housing and Urban Development (HUD) developments. What We Found The Authority diverted and pledged assets subject to its contract, other agreements, or HUD’s regulations for the benefit of Michigan City Housing Development, Incorporated (nonprofit), the Authority’s nonprofit entity. It failed to file declarations of trust on 32 properties purchased using Turnkey III Homeownership (Turnkey III) sales proceeds. It also inappropriately transferred ownership of 29 of the 32 properties ...