Fort Pierce - Community Services Report

8/12/2019 Fort Pierce - Community Services Report

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City of Fort Pierce

Audit of the Community

Services Division

Prepared For

Mr. David Recor ICMA-CM

City of Fort Pierce

Oce of the City Manager

City Hall, 100 North US 1

P O B 1480


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P O Box 1480

TABLE OF CONTENTS

LIST OF EXHIBITS ..............................................................................2

INTRODUCTION ................................................................................ 3

BACKGROUND .............................. ...............................................6

AUDIT SCOPE OBJECTIVES AND AUDIT METHODOLOGy ................7

DOCUMENTS RECEIVED .....................................................................9

PROGRAMS AUDITED .........................................................................

INTERVIEWS ............................................................ ................... 18

FINDINGS ............. ..............................................................................26

REVIEW / ANALYSIS OF CASES ........................................................ 40

CONCLUSION ................................................................... .................. 130


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INTRODU TION

Kessler's limited forensic audit o the City o Fort Pierce Community Services Division( CSD ) has exposed a systemic failure throughout every aspect o the CSD' s oversightresponsibility o the taxpayer funds it has been entrusted to administer. This failure and acertain arrogance to the programs rules and regulations prevented assistance reachingthose in real need. This audit found that there was a complete abdication o the oversightrole o the CSD staff to protect and properly distribute taxpayer funds. Taxpayers shouldnever have to worry that their money is treated like candy.

The Kessler audit disclosed favortism to other City workers and other individualsincluding relatives o City staff, which in some cases the actions, appear to indicate theft.The entire process o awarding funds to the needy should have been administered by theCSD in a straightforward, level handed and transparent process but the Kessler auditrevealed it was not. In fact this audit only touches on certain aspects o the awarding otaxpayer funds and it is strongly suggested that all areas in which funding to the public bythe City was involved be audited. Additionally, the audit disclosed major concerns aboutthe selection o contractors, awarding o bids and ultimate dealing with contractors.Based upon Kessler's findings we recommend that the entire purchasing process bethoroughly investigated.

Kessler found that CSD failed to have adequate controls in place to guard against fraud,abuse and conflicts o interest by the contractors and the programs it was administering,appears to have been beset by fraud, conflicts o interest and willful mismanagement.Processes that were established to prevent fraud were abdicated.


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Corruption is a broad term encompassing many types o behavior. The discrepanciesKessler uncovered during its review equates the manner CSD was operated with theactions o individuals running a corrupt organization. While the most blatant form ocorruption are obvious, there are certain acts which while not as clear cut are nonethelesscorrupt including n employee s abuse o office to benefit friends and relatives, fraud,misappropriation o public funds, paying for goods / services not delivered, bribery andbid rigging.

Based upon the audit results in the Kessler Report additional audits must be conductedconcerning other areas linked to the CSD operation including employee s affiliationswith corporations and relationships between bidders for contracts, a review o the CSDexpense and travel accounts, a review o the repayment o mortgage payments andsettlements by applicants, the return o rental deposits from the landlord and ainvestigation to see i applicants still resides in the property taxpayers funded forrehabilitation and down payment assistance. Additionally, a complete review o everymortgage issued by the City must be conducted by a legal team to determine i they wereprepared correctly. It is also suggested that an Anti-Fraud and Code o Ethics Policy beestablished and that an ethics training program be provided to all City workers. Finally areporting system should be established similar to Kessler s Fraudbusters Tip reportingservice so that employees can anonymously report instances o fraud andmismanagement.

Additionally, Kessler recommends that this report be referred to United States Attorneyso that a Grand Jury can be convened as it has broad powers to make inquiries andcompel record production and testimony into criminal matters as well s civil matters,regardless o whether criminal or irregular conduct is ultimately charged. t also has the


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brought into question the creditability and integrity o other City staff, many o which arededicated hard working employees. These few have served to undermine the public sconfidence and trust in the entire City.

The statements made in The Kessler Report that managerial practices need improvement,as well s other conclusions and recommendations represent the opinions o KesslerInternational. Determinations o corrective action to be taken must be made byappropriate City Officials.


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B CKGROUND

The City o Fort Pierce through the CSD administers various grants from the state andfederal government whose primary objective according to the department's website s to,develop a viable urban community, including decent housing, a suitable living

environment, and vastly expanded economic opportunities, principally for persons o lowand moderate income. All activities must be eligible under 24 CFR 570.201-206, andaddress national and local community development objectives.

In early 2009, a City finance employee began questioning the irregularities in theprocessing o grant applications and the preferential treatment to two city employees whowere granted loans over other applicants.

Kessler International ( Kessler ) was retained by the City o Fort Pierce ( City ) toconduct a forensic audit o CSD. Kessler has had to limit the scope o this engagementbased upon the magnitude o findings that have been uncovered so far. t should be notedthat the examples Kessler cites in this report represent a miniscule portion o theproblems, discrepancies and inconsistencies encountered during the audit .

pplication ProcessThe application process first begins with an individual obtaining an application from theCSD office. The individual is told to fill out the application completely, and is provideda list o documents that must be provided before the application s accepted. Theapplicant is told to call the CSD to schedule a meeting to review the application anddiscuss what type o assistance is being provided. Kessler have been advised that onlyapplicants who are illiterate or can't write legible have the applications filled out by CSD


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AUDIT SCOPE OBJECTIVES AND AUDIT METHODOLOGY

Kessler's forensic audit included a review o the State and Federal guidelines applicableto the distribution o grant and mortgage funds as well as the guidelines issued by theCSD. The review concentrated on areas o concern in which Kessler was informedinstances o negligence, fraud, public corruption, nonfeasance, malfeasance andmisfeasance might have occurred over the past five years.

Kessler conducted interview with current and former employees o the CSD, the FinanceDepartment, the Purchasing Department, Management Information System, contractorsto the City and recipients o funds.

In order t accomplish the goals o the City, Kessler reviewed and analyzed an extensivenumber o files, documents and examined City e-mails. Kessler also conducted an indepth review and analysis o a sampling o applicant's case files and conducted researchon employees o the City to determine their affiliation with various corporations and todocument whether these corporations received funding through the CSDThe cases files reviewed include the following programs:

Hurricane Housing Recovery ( HHR ) Programs Community Block Development Grant ( CBDG ) Programs State Housing Initiatives Partnership ( SHIP ) Programs Home Again Program REACH Program Weatherization Program


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During the course o the audit documents were not readily available thus it should benoted that Kessler utilized the accounts payable date shown on the general ledger whenactual cancelled checks were not available for our examination and analysis.


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DOCUMENTS RECEIVED

During the course of the audit Kessler was supplied and utilized various documents anddigital files provided by the City, which includes the following:

Previous Audits and Investigations Florida Housing Coalition Report October 21,2009 Housing and Urban Development Audit Report September 27, 2002) Housing and Urban Development Audit Report January 31, 2003)

Documents received from the City Anonymous Complaints Approved Contractors Application Approved Contractors List Case Overviews CDBG Awards Code of Ethics for Public Officers and Employees Community Development Block Grant CDBG) 2005 Disaster Recovery Community Development Block Grant CDBG) Housing Rehabilitation

Assistance Programs Revised July 12,2006) Community Service Organizational Chart Community Services Housing Assistance Programs Repayment Guidelines Communitywide Council Organizational Chart Communitywide Council Credit Card Statement 2008


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Hurricane Housing Recovery Program (HHRP) guidelines HOME Again Disaster Assistance Program (HOME) guidelines HOME Again Grants HOME Again Program Report (2005-2007) HUD Consolidated and Action Plan 2005-2010 List o City Employees who Received Grants New Hire/Termination Report (2005-2009) Organizational Chart for Fort Pierce Previous Audit Reports (2002-2003) Rehab Specialist Job Description State Housing Initiatives Partnership Program (SHIP)- Local Housing Assistance

Plan (2003-2006) SHIP Housing Rehab Waiting List Supporting Documentation o Purchase o Land from Jazco Development, Inc. Statements o Financial Interests Temporary Employee Outline Trial Balance (2005-2009) Various Cases from the Hurricane Housing Recovery ( HHR ), Community

Block Development Grant ( CBDG ), State Housing Initiatives Partnership( SHIP ), Home Again Program and REACH Programs.

Weatherization Chart Work Write-up Sample

Items that were requested by Kessler but were not produced by the City Complete List o All Approved Contractors since 2005


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PROGRAMS AUDITED

Kessler's audit encompassed a comprehensive review of the programs administered bythe CSD including:

State Housing Initiatives Partnership's ( SHIP ) Local Housing Assisting Plan(Exhibit 1

The Local Housing Assistance Plan (LHAP)'s purpose is to Provide guidelines,operating procedures, and strategies to be utilized in delivery of affordable housingefforts for very low, low, and moderate income households within the city limits of FortPierce.

Kessler compared the requirements of the SHIP Program as stated by the City with therequirements of the State for the SHIP Program and have found many discrepancies inour cursory review of these documents. The City does not provide in the application,A statement that it is a first degree misdemeanor to falsify information for the purposeof obtaining assistance. Additionally the SHIP Program states that an applicant mustbring a Federal Income Tax Return to verify the number of legal dependants, incomefrom interest, dividends and partnerships. Kessler has found no copies of or reference toFederal Income Tax Returns on file with any of the applicants. This is a seriousweakness of the program and allows the applicant to easily modify their application toreceive assistance.

Kessler have also determined that the SHIP Program guidelines as per the State of FloridaStatutes indicate that if an individual has equity in a property that a calculation must be


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The program strategies as provided by the City are as follows:

Housing Rehabilitation The City's Rehab Specialist will inspect homes oeligible applicants to identify work activities, through a work write up, forimprovements that are needed for safe and sanitary habitation, correction osubstantial code violations, or the creation o additional living space;

o Maximum award: $15,000

Emergency Repairs Repairs considered an emergency will be available toowner/occupied households. The qualifications for an emergency situation mayvery from a leaking roof, plumbing, to faulty wiring. In general, any situation thatendangers the health or safety o the family will be considered an emergencyrepair; Eligible applicants must contribute a minimum o $500.


Down Payment Assistance Assist(s) eligible first time homebuyers with downpayment and closing costs to purchase a newly constructed home, not to exceed$259,440 or an existing home, which need repairs, not to exceed $280,658 for useas their principal residence;

o Maximum award: $15,000 for very low and low income families, and$10,000 for moderate income families

New construction o multi-family rental units SHIP funds may be used aspart o the local contribution when participating in such programs as, but notlimited to, the Florida State Apartment Incentive Loan (SAIL) and Housing TaxCredit programs when they are used to perform construction o multi-family


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Eligible expenses include delinquent mortgage payments (principal, interest, taxesand insurance), attorney fees, late fees, and other customary fees;


DisasterlPost Disaster/Mitigation/Recovery, In the event o a state, federal, orlocally declared natural disaster by Executive Order s required in Section420.9078(1), F.S., funds will be used to leverage with available federal and stateresources to assist income eligible households with disaster related repairs.


Community Development Block Grant ( CDBG ) Housing RehabilitationAssistance Programs (Exhibit 2)

The Housing Rehabilitation Programs have provided financial and technical assistance tolow and moderate-income persons that own and occupy single-family residentialstructures in the city limits. Housing assistance to homeowners has been availablethrough emergency grants, deferred payment loans (forgiveness grants), and low interestrevolving loans.

Programs/strategies therein include: Rehabilitation Revolving/Deferred Loan Housing Programs, Substantial

rehabilitation assistance is available through a revolving and/or deferred mortgageloan. Funds will be used for improvements that are needed for safe and sanitaryhabitation, correction o substantial code violations, or the creation o additionalliving space;


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Emergency Repair Assistance Program, Funds will assist eligiblehomeowners whose health and/or safety is threatened by a hazardous condition,varying from a leaking roof, and plumbing to expose or faulty electrical writing;

o Maximum award: $15,000 per household, leverage ofloc l and state fundswhen repair costs exceeds the maximum award

Senior Citizen and Housing Security Program, The City of Fort Pierce, in itsefforts to provide a safe and suitable living environment, to evaluate and providesecurity measure in the homes of senior citizens and handicapped persons, agreeto install security measures that do not require intensive or extensive upkeep, nomonthly monitoring charges, and are easy to operate;

o Maximum award: To be determined on a case-by-case basis. Leverage oflocal and state funds will be applied when necessary

U-Paint-It Program, The paint program is a Clean-Up/Fix-Up programintended to serve as an incentive for citizens to beautify the exterior appearance oftheir homes.

o Maximum award: One hundred, ninety dollars for paint and paint supplies

Hurricane Housing Recovery ( HHR ) Program (Exhibit 3)

The Hurricane Housing Recovery Program Sets forth the plans for the City of FortPierce to provide guidelines, operating procedures, and strategies to be utilized indelivery of housing recovery efforts for extremely low, very low, low, and moderateincome households within the city limits of Fort Pierce.


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for improvements that are needed for safe and sanitary habitation, correction osubstantial code violations, or the creation o additional living space;

o Maximum award: $50,000 for extremely low, very low, and low incomefamilies; $40,000 for moderate income families

Land Acquisition Funds will be utilized to purchase individual scatteredbuilding lots for homes to be built by Habitat for Humanity or an approved privatecontractor . The REACH Program is also part o the HHR Land Acquisitionprogram, where over 2.0 million was provided to finance the construction otwelve homes in the Oak's at Moore Creek.


Construction and Develop Financing Single-family bond issuance subsidiesor set asides for down payment/closing cost assistance and single-familycollaboration ownership strategy with the County and City o Port St Lucie onproperty in the County and/or City o Port St Lucie;

o Maximum award: $50,000 per unit

Housing Re-entry Assistance Provide eligible applicants with funds to assistwith temporary storage o household furnishing, security and utility deposits thatare required to secure needed housing within the city limits o Fort Pierce;

o Maximum award: $2,000 for extremely low, very low, low, and moderateincome families

Replacement o Site Built Housing Reconstruct severely substandard homes oeligible owner occupied single family homes that are not feasible for


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Foreclosure Eviction Prevention Limited amount of funding will be providedto assist with mortgage or rental payments up to three months, to eligibleapplicants residing within the city limits of Fort Pierce;

o Maximum award: $2,500 for extremely low, very low, low, and moderateincome families

Down Payment Assistance for New and Existing Purchases Assist eligibleapplicants with purchase of new construction or existing homes, which needrepairs, for use as their principal residence. Monies committed, but not utilizedby an applicant, will be returned to the down payment strategy for reallocation;

o Maximum award: $40,000 for very low, and low income families, $30,000for moderate income families

Acquisition o Building Materials Homeowners will be assisted with thepurchase of building materials for minor repairs to their homes; and

o Maximum award: $ 1 000 for extremely low, very low, low or moderateincome families

Hazard Mitigation Assistance will be provided to eligible homeowners toreduce or eliminate exposure of their lives and property from disasters harm.


HOME Again Disaster Assistance ProgramThe HOME Again Disaster Assistance Program is A disaster relief program that will


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(www.floridahousing.org. Fort Pierce was provided with $500,000 in funding throughthis program.

Weatherization ssistance ProgramThe Weatherization Assistance Program states, The mission o the program is to reducethe monthly energy burden on low-income households by improving the energyefficiency o the home. The guidelines allow for replacement o windows and doors,install insulation in the floor and attic, install solar screens, repair or replace heating andcooling units and repair or replace and water heaters.

A review was conducted o the procedures and guidelines from the Florida Department oCommunity Affairs Housing and Community Development applicable to theWeatherization Assistance Program. Kessler was not provided with any guidelinesprepared by the City.


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INTERVIEWSKessler conducted numerous interviews with current and former employees of the City ofFort Pierce, various contractors and grant mortgage applicants in order to obtain abetter understanding of the policies, procedures and circumstances involved in theissuance of funds and the methods of awarding grants and contracts.

During the interviews Kessler was repeatedly informed by individuals within the CSDthat if the funding from the State and Federal Government wasn t utilized then the grantswould have to be returned. Therefore, this could be a reason Kessler heard fromcontractors that the City was throwing money around like crazy and that some of thecontractors would do anything to get the business. There was a pervasive attitudeconveyed throughout the interview process that contractors had to provide kickbacks toCSD employees m order to do business with the CSD and City.

Another troubling attitude was that employees of the CSD repeatedly stated asjustification for certain actions that if the money was not spent it would be lost, and thatthere was a sense of urgency regarding dispensation of the funds because they werelimited by imposed t ime constraints.

Throughout the interview process some CSD employees pointed out the lack oforganization and compliance within the department. One employee explained there is alack organization and oversight by supervisors within the department, and indicated thatwhile working in the department they were subjected to a hostile work environment.

pplicationsKessler interviewed two employees, whose job title was Community Service Specialists.


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that it was then decided by the CSD that the applicant would prepare a draft application,and submit it to the CSD, at which point the Community Service Specialists wouldtranscribe the information to a new form. Kessler noted that on forms completed byCSD employees egregious errors were noted including incorrect social security numberand names of applicants. Kessler finds this practice to be dubious at the least, as theoriginals forms completed by the applicants were either discarded or given back to theapplicants.

Kessler was also informed that in cases where completed forms had to be notarized, theseforms would be placed in an inbox along with a copy of the driver's license of theapplicant and would be notarized at a later date. This is in violation of the FloridaStatutes Title X, 117.107 (9); which states:

A notary public may not notarize a signature on a document if the person whosesignature is being notarized is not in the presence of the notary public at the timethe signature is notarized. Any notary public who violates this subsection isguilty of a civil infraction, punishable by penalty not exceeding 5,000, and suchviolation constitutes malfeasance and misfeasance in the conduct of officialduties. t is no defense to the civil infraction specified in this subsection that thenotary public acted without intent to defraud. A notary public who violates thissubsection with the intent to defraud is guilty of violating S 117.105.

Kessler was also advised that during the period covered by the audit, that CSD employeeswere responsible for drafting mortgages. Based upon the review conducted y Kessler,many of the mortgages contained significant errors including conflicting repaymentperiods indicated on the same mortgage note, misspelling of individuals names on


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resource was not utilized. Kessler has been advised that currently the mortgages aredrafted by the legal department, instead o the CSD.

idsAccording to CSD employees interviewed the bidding process is performed by thePurchasing Department o the City in conjunction with CSD staff. A CSD employeestated that prior to his employment at the CSD bids were routinely awarded even throughthey were not the lowest bid. Another employee who confirmed this practice justified thereason why this had occurred was that the lowest bid was below the cost o what CSDexpected it should cost, the contractor was unfit to conduct the work, or the contractorshad other jobs in which case the bid was provided to the next highest bidder. Nodocumentation regarding how these decisions were reached was contained in the casefiles and furthermore, insomuch as many o these bids were publicly advertised and hadto follow guidelines, this practice is questionable. In fact one employee stated that hissole basis to price out a bid to refer to the Home Depot catalog. This did not explain howthis CSD employee estimated the costs for labor.

Contractors and Change OrdersKessler heard from many City employees that the work performed by the contractors wassub par. In fact Kessler has been advised by a Rehab Specialist that recipients o fundingwould complain to management within the City regarding the quality o work that wasconducted on their home, whether it was rehabilitation or a complete home construction.The Rehab Specialist continued to state that i an individual complained, additional workwas conducted on the premise, and that in some cases the work performed would goabove and beyond the need to bring the dwelling up to code. The Rehab Specialistjustified these large projects by stating that, People complain and get what they want.


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provide a doctors note which indicated that because of respiratory problems this itemwas necessary. Kessler was unable to find any of documentation located within the casefiles it reviewed proving this claim.

Kessler was also told there are too many people handling paperwork, causing documentsto go missing and to be misplaced. n employee stated that it is especially difficult tolocate change orders in the case files from contractors and approval of change orders bythe CSD. The employee also informed Kessler that it was common for CSD employeesto type the change order document submitted by the contractor and discard the original.When asked why this practice occurred the employee could not elaborate. This practicewas confirmed by Kessler during their review of the case files as many files do notcontain original documents from the contractor including change orders. This modusoperandi clearly presents a situation that requires additional investigation.

DemolitionDuring an interview with one of the Rehab Specialist, Kessler was advised that there wasa general rule followed regarding the issuance of funds for rehabilitation projects.Kessler was told that the cost of the rehabilitation project must be less than 50% of theassessed value of the property. f the cost of rehabilitation is more than 50% of theassessed value of the property a determination is made as to whether to proceed with therehabilitation or to conduct a complete demolition and rebuilding of the house.According to the individuals interviewed the estimate is based on the discretion of theRehab Specialist and Kessler did not find any written guidelines for this practice.

Multiple ontractsKessler was informed that a general practice within the CSD is that contractors were not


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t is also interesting to note that during the construction o the REACH Program houses,three contractors were utilized to construct twelve homes.

PNC Bank flk a National City Bank ftk a Harbor Federal Savings BankKessler conducted an interview with an individual representing PNC Bank f/kla NationalCity Bank f/kla Harbor Federal Savings Bank (a member o the St Lucie CountyLending Consortium). Kessler was informed that in many cases, different defermentperiods o City mortgages were utilized as strategies to allow an individual to becomequalified for a first mortgage through a financial institution. Kessler was also advisedthat i a mortgage was deferred beyond a period o three years, this debt would not beused in the calculation for prequalification o a first mortgage. Additionally, Kessler wasinformed that many o the applicants receiving funding from the City were in debt, and insome cases collection, less consideration would be placed on the collection accounts i itwere a student loans or a medical bill when the first mortgage was calculated for pre-qualification.

Program Specific NotesDuring interviews it was related to Kessler that the maximum amount o an award to anapplicant was mandated by law. During the audit Kessler identified many projects inwhich the allocations exceed the maximum.

REACH ProgramKessler spoke with one City employee whom received assistance from one o the CSDprograms. This employee informed Kessler that the entire process, and particularly theclosing process o the mortgage, was not thoroughly explained by staff at the CSD. TheCity employee stated that her closing date changed multiple times, and had no idea why


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horrible experience and indicated that because o delays by CSD staff that she wasclose to living in the street because she had given notice o her leave to her landlord andthe closing was continually postponed.

During an interview with another CSD employee, Kessler learned that over $2 milliondollars had been allocated to the REACH Program, part o the HHR Program. Kesslerwas also told that there were two Phases to the project. Kessler has identified that Phase1 was for a selected target area which was bordered by North 13 t Street on the West,North 2th Street to the East, Canal Terrace on the North and Avenue B on the South.Phase 2 o the project was to provide funding for purchasing a home outside o thedesignated target area, i funds were available after Phase 1. No paper work wasprovided to Kessler to describe the nature o Phase 2.

Additionally, two City employees both o whom had worked in the CSD were the on yindividuals to receive funding from this so called Phase 2 o the REACH Program. It hascome to Kessler's attention that a CSD supervisor and a former CSD employee whoreceived funding from Phase 2 were friends, and have known each other since highschool. Kessler has also been advised by numerous employees that the originalamortization schedules prepared by the City for these mortgages allegedly containederrors. No amortization schedules were able to be produced showing these errors. Theoriginal interest rate for the one employee was listed as 4% and for the other employeewas listed as 3%. These were both allegedly reduced to 1 , so that these employeescould afford the mortgage. The change in interest rate has not been recorded with theClerk o the Circuit Court.

One employee that received funding from this so called Phase 2 also stated that she had


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landlord had kept it Additional assistance was provided to the employee in June 2007for eviction assistance, the amount paid was 2,485.

Rehab SpecialistBased upon the interviews conducted the job specifications o a Rehab Specialists includea review o the work plan which outlines work to be conducted on a residence to bringthe dwelling up to code, and includes an estimated dollar amount for the cost o theproject. Based upon the work plan a mandatory onsite walk through o the residence isdone with the proposed contractors. The Rehab Specialist is also supposed to conduct aperiodic review o the work in progress and approve any change orders.

During interviews, Kessler discerned significant differences in the qualifications, skillsand experience o Rehab Specialists. For example, in one instance, a Rehab Specialisthad over fifteen years experience as an engineer and was licensed as a building inspector.Another employee who holds the position o a Rehab Specialist appears to have little orno qualifications other than having attended some industry related seminars.

Kessler has also learned during the audit that the Rehab Specialists were routinelyapproached by contractors, offering kickbacks. One Rehab Specialist related that henever took a kickback and states ethical and moral standards as the reason for himdismissing the offers he receives. The same individual also related to Kessler rumors thatother Rehab Specialists had been approached by contractors offering kickbacks, butstated he could not verify i the other Rehab Specialist accepted the offers. AnotherRehab Specialist claimed that one o his former co-workers routinely bragged about anincome o over 100,000 per year. A Rehab Specialists income is limited to 55,972.80.


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maintained y the front desk receptionist. During the audit Kessler has determined thatthere are instances o cronyism where the firs t come first serve mantra was notfollowed.


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FINDINGS

2002 Avenue 0 Fort Pierce FLOn 111011990 J.P. Morgan and Ola Mae Morgan received funding from the City in theamount of 11,700, for housing rehabilitation work to be conducted on the propertylocated at 2002 Avenue 0 in accordance with a Housing Rehabilitation Agreement dated

0/1990 The Housing Rehabilitation Agreement states the individuals of thehousehold include J.P. Morgan, Ola Mae Morgan and Idella Morgan. The CityPromissory Note that accompanied the Mortgage Deed specifies a repayment term of

11,700 over a period of ten years at 5 interest. Payments in the amount of 123.10were to begin on 6 111990 and the last payment was due on 511 2000 in the amount of

123.64.

On 412611994 a Warranty Deed shows the property having transferred ownership fromJ. P. Morgan, Sr. to Mary Patricia Matthews. The Warranty Deed is witnessed andsigned by Betty J. Barnes and Evelyn Home. This document states that it should bereturned to B B Bookkeeping Financial Services, 1711 North 25th Street, Suite D FtPierce, FL 34947. The Florida Department of State does not have any listing for B BBookkeeping Financial Services as either a corporation or fictitious business. Kesslerdid however locate at the same address, a for profit corporation named B BBookkeeping Income Tax Service, Inc. which lists Betty 1. Barnes as the RegisteredAgent and President and Clifford Barnes as Vice President.

A Satisfaction of Mortgage dated on 4 2011998 and filed 4124 1998 for the Mortgagefiled in 1990 is dated four years after the property is sold.


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funding from the City, since the property was not in their names. These documents aresigned and notarized by CSD employees.

n 3118/2005 A Notice of Commencement is issued for J P. Morgan and Betty Barnesand is notarized by a CSD employee. This document was filed on 3/25/2005 with theClerk of the Circuit Court and names the contractor as Artenal ConstructionCompany/Sunrise City CHDO.

n 4/13/2006 a Quitclaim Deed was issued and filed with the Clerk of the Circuit Courton 4/14/2006, transferring ownership of 2002 Avenue 0 from Mary Patricia Matthews4211 W Grace Street Tampa, FL to Mary Patric ia Matthews, Betty J Barnes and IdellaSiplin. The Florida Department of State indicates that Idella Siplin, 1441 Pineburke Lane,Fort Pierce was the Registered Agent and President of Morgan Siplin, Inc. a for profitcorporation formed on 9/24/2007 and dissolved on 9/26/2008.

Kessler requested a copy of the case file for J. P. Morgan and Betty Barnes. The Citywas unable to produce any documentation concerning the original application andqualification of the applicants. The only documentation the City was able to produce wasa Contractors Final Invoice Release of Liens and Warranty from Artenal ConstructionCompany / Sunrise City CHDO dated 3/18/2005 and signed 4118/2004 by a RehabSpecialist, Betty J. Barnes and a contractor's rep, whose name is indistinguishable. TheCity was also able to produce a Certificate of Final Inspection indicating that the finalinspection was completed on 4/18/2005 and is signed by the Rehab Specialist and BettyJ. Barnes on that day and Dorina L Jenkins on the following day. n unknownContractor's rep signature also appears on the document. Finally, the City produced poorreproductions of eight photographs of items such as a light bulb, fan, cabinets, and


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Kessler also uncovered that this same Betty Barnes is linked to a number o corporationsincluding as a Director o New Mount Zion Missionary Baptist Church o Ft Pierce, Inc.the institution which is noted above as collecting bids for the City. Toby Philpart islisted as the Registered Agent and a Director o the New Mount Zion Missionary BaptistChurch o Ft Pierce, Inc. as well as the Registered Agent and President o Sunrise CityCommunity Housing Development Organization, Inc.

nonymous ComplaintsKessler has received a tip on our r a u d u s t e r s website, an anonymous methodindividuals can use to report allegations o fraud, waste, and mismanagement. Thedetails o the anonymous tip states,

I am letting you know for you to look into the Home Again Program. I believethe city built 2 homes during this time and there was one certain contractor that Ibelieve he received probably 95% o the bids. This was a contractor that duringthis time was very close to the Assistance Director o the department, went andgot his contractors license. This contractor was the one that got all the bids atOaks Creek too. Which was very fishy. You also need to look into theWeatherization Program. The funding was for Weatherization and they used themoney for other purposes, rehabs etc.

Based upon accusations made in this tip, Kessler conducted limited review outside thescope o the audit.

Kessler found that three contractors were chosen to construct the twelve homes as part othe REACH Program, and that a contractor did not receive 95% o the bids .


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ApplicationsDuring Kessler's review and analysis of the case files for the CSD, Kessler found manyirregularities with the applications filed with the CSD. Kessler had been advised thatapplicants must fill out the application completely and provide all requesteddocumentation before an application is accepted. This rule is clearly not being followedby the CSD, as Kessler saw that many of the applications are incomplete and or aremissing supporting documents. Kessler was also informed during interviews that manyapplicants who are considered illiterate or can't write clearly have the applicationcompleted or rewritten by employees of the CSD. Many of the REACH Programsapplicants (including the three family members who each received a residence in theOak 's at Moore Creek) all had their application filled out by the same staff member at theCSD and the original applications are not maintained in the file.

Additionally, Kessler has discovered that many of the program guidelines indicate thatIncome Tax Returns be provided to document the income as reported by the applicants.During the review of the case files Kessler noted that none of the case files includedIncome Tax Returns for the applicants.

Coastal Group Investments Inc. - CSD Employee CorporationThis for profit corporation was formed on 2 19 2004 and was dissolved on 9 1612005 forfailure to file an administrative report with the Florida Department of State. Thecorporation's Registered Agent and President is listed as Sheppard Sylvester. Thecompany filing also lists two Vice Presidents. One is a former CSD employee whoreceived funding for a mortgage from the City and the other islwas her husband who waspaid as a handyman listed on one of the examples listed below.

th


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t should be noted that there are two Warranty Deeds on file with the Clerk o the CircuitCourt for the property sold by Coastal Group Investments Inc. with different addressesbut both have the same Parcel ID Number and the legal description indicates them to bethe same property.

The first sale that occurred on 2/27/2004 was recorded with the Clerk o the Circuit Courton the same date. The sale was from Vernon M Dixon and Gertrude B Dixon to CoastalGroup Investments Inc.

The property was subsequently transferred via a Warranty Deed from Coastal GroupInvestments Inc. on 8/17/2004 transferring ownership to Lawrence Sparkman andCherry Osbourne Sparkman and lists the property address as 1705 North 43 rd Street FortPierce FL. This Deed was recorded with the Clerk o the Circuit Court on August 202004.

A second Warranty Deed was filed executed and notarized on the same date 811712004)but was only recorded with the Clerk o the Circuit Court on 9/23/2004. t is unclear howtwo Warranty Deeds both executed on the same date could contain different propertyaddresses.

Additionally Kessler has learned that in 1999 Vernon Dixon Sr. o Fort Pierce the ownero Dixon Harvesting pleaded guilty to one count o scheming to defraud in Palm BeachCounty Circuit Court. Dixon was sentenced by Judge Barry M Cohen to one year ohouse arrest followed by 10 years probation. His bookkeeper Barbara Hall 29 o Port StLucie also entered a plea to scheming to defraud and was sentenced to five yearsprobation and 250 hours o community service.


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Code o EthicsKessler reviewed the Code of Ethics for Public Officers and Employees document thatwas produced by the City. Within the document it states,

f any public officer or employee, of the City is an officer, director, partner,proprietor, associate, or agent of, or owns a material interest in any business entitywhich is granted a privilege to operate in this state, he shall file a sworn statementdisclosing such facts no later than 45 days after becoming an officer or employeeor after the acquisition of such position or material interest. He shall file a swornstatement with the employee Personnel Director and Clerk of the Circuit Court ofthe county in which he is principally employed.

During the course of Kessler's audit it was noted that many employees of the City areaffiliated with outside corporations, apparently unbeknownst to the City. Kessler has alsodocumented that in some instances corporations have received grants, and Cityemployees were affiliated with these corporations.

Disbursements from other FundsDuring the review of the General Ledger Kessler noted many disbursements, some ofwhich exceed $100,000 over a four year period were paid to entities that were listed asinactive with the Florida Department of State for over 20 years and have connections toindividuals associated with the City. A complete investigation of these disbursementsshould be conducted.

E MailsKessler conducted a limited review of the e-mails provided by the City for the period of


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correct procedures had been followed. The e-mail continues to state that, We did notissue the title insurance policies for those 8 properties since the policy would except tothe contractor's filing a Claim o Lien within one year o the Notice o Commencement.Since the Notice o Commencement was recorded on 12/23/09, I believe that the mostprudent course o action at this point would be to wait until the 23 r o this month to issuethose polices as the contractor's right to file a claim would be extinguished. Additionalcorrespondence indicated that, they (two contractors) were not aware o the proceduresthey need to follow to have the retainage fee released.

Another e-mail states that a contractor for the REACH Program failed to pay twosubcontractors in the amount o 1 0,000.Kessler observed an e-mail from an individual in a management position within the City.The e-mail reprimands the Finance Department and CSD, stating, We have a departmentthat apparently lacks oversight, has had demonstrated poor judgment on a wide variety oissues involving the use o taxpayer dollars in the recent past. The e-mail continues tostate that, the football team that our (City Employee) oversees in his private life was therecipient o the largest share referencing disbursements o funds. Additionally the e-mail states, All in all, this is a horrible example o transparence in the spending o publicfunds. Too many City employees were at the public trough well before the public evenknew there was a public trough.

n e-mail from a CSD employee responding to a HUD official states that she is shockedby a letter criticizing the discrepancies a HUD official found with CDBG funding, whichthe HUD official indicates were never addressed.


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Florida Housing Finance Corporation Inspector GeneralKessler inquired with the Florida Housing Finance Corporation on certain questionsregarding the issuance of funds from the CSD. A question that was posed to theInspector General of the Florida Housing Finance Corporation was, If a deposit isprovided to the landlord and returned at the end of the lease does it go back to theprogram? The Inspector General stated that the funds should be provided back to theprogram. Kessler has found that in many instances there is no documentation locatedwithin the file that tracks these funds after they are issued, and as a result these funds areunaccounted for.

Letters to ContractorsOn 12/15/2009 Kessler issued letters via FedEx to eleven contractors requesting copiesof all bids, change orders and invoices submitted to the City for various years be suppliedas third party verifications during the audit. As of the date of this report, only onecontractor, S V American Contractors, Inc. has complied. This contractor wasawarded a bid to construct four homes for the REACH Program. Based upon thesubmission of documents Kessler has determined that $588,000 was the total cost of thecontract to construct four homes, and the amount disbursed to this contractor for the workconducted was $601,665.06. Kessler has documentation stating that a change order wassubmitted on 8 12 2009 by S V American Contractors, Inc. in the amount of $7,115, ithas been determined that $6,550.06 had been disbursed to the contractor and has beendetermined to be an irreconcilable difference. The requests have simply been ignored bythe other contractors.

PNC Bank flk/a National City Bank flk/a Harbor Federal Savings Bank


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awarded funds from the Down Payment Assistance Program as seen below in Case 46.A copy of the lending institutions included in the St. Lucie County Lending Consortiumis attached as Exhibit 4 t should be noted that during Kessler's review only a selectnumber of cases contained other lending institutions as the primary mortgage holder.

Rehabilitation and Reconstruction ProjectsBased upon Kessler's review of the work performed relative to the rehabilitation projects,it has been determined that the work conducted appears to be more of a remodelingprogram instead of a rehabilitation projects. Such expenses that were incurred includegranite kitchen countertops, a screened in porch, a patio where no patio existedpreviously, cast aluminum customized address plaque, a new lawn lamp, a vanity with acultured marble top basin and a new concrete driveway.

Additionally, many of the Rehabilitation Projects that were reviewed by Kessler haveexceeded the amount of maximum award set forth the by the CSD. Kessler has alsoreviewed cases that have exceeded the threshold that the amount expended on a projectcannot exceed 50% of the assessed value ofth project.

The Ship Foundation Inc.During the course of the audit Kessler noted in the General Ledger sizable disbursementsamounting to $28,765 during the years 2004 through 2006 to the organization namedabove. In so much as this foundation carries the same name (SHIP) as the awards beingmade by CSD, it was further investigated.

A search was done of the Florida Secretary of State and it was determined that a CityPurchasing Department employee was the Registered Agent and Treasurer of the entity


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A search was conducted of GuideStar which is a service that lists all not for profitcorporations, infonnation about the entity and their Federal Tax Returns (990's). It wasdisclosed that The Ship Foundation, Inc. never filed a Federal Tax Return delineatinghow it received and spent its funds for the life of the corporation.

A telephone call was placed to the City Employee who was listed as the Registered Agentand Treasurer and the status of the corporation was discussed. The employee infonnedKessler that the corporation was a not for profit corporation, and she was listed as theRegistered Agent and Treasurer since she was the person who secured the monies fromthe City. She stated the money was there. She further stated that the organization wasrun by the Friendship Missionary Baptist Church for an after school day care and summerday camp. She related that she used to be a member of the Church and that it is herunderstanding the financial records of the entity were discarded. She suggested in aprogressively agitated tone that Kessler contact the Church for further infonnation.

Kessler was then transferred to her supervisor, the Purchasing Director who wanted toknow how he could help. He confinned the entity was run by the Friendship MissionaryBaptist Church, that it was inactive entity and that the City employee was the RegisteredAgent. He stated that his knowledge came with his affiliation of another Baptist Church.He also infonned Kessler that the City employee was upset with the questions beingasked of her as she had no idea why this entity should be looked at during the audit.A chart of the total disbursements to The SHIP Foundation, Inc. and the account thedisbursement was drawn from are provided below.


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conducted by the Rehab Specialist includes rehabilitation projects that need the dwellingbrought up to code.

Temporary EmployeesDuring our interview process Kessler was advised that a questionable practice occurs inthe selection o temporary employees Citywide. The process was described as,prospective employees would provide a resume to a City employee, and i thisprospective employee was deemed qualified for the position then the prospectiveemployee would be told to contact a temporary service agency. The City would thenrequest a position be filled from that agency and the prospective employee would beawarded the position. Kessler has also verified that temporary employees were hiredduring the summer o 2005 using a FEMA grant. One o these temporary employees wasa daughter o a City Purchasing Department employee. Kessler was further informed thatthese summer temporary employees did little or no work but got paid.

Wife o CSD EmployeeAccording to the General Ledger the wife o a CSD employee was awarded 4,800.00 on7128 2006 payable to Johnny Thomas Tree Service for disaster recovery. t is unclearwhich disaster the grant applies to.

Women with Words Inc.During the course o the audit it has come to Kessler's attention that funds from the Citywere awarded to the above name corporation. This not for profit corporation was formedon 1 09 2004 and is currently active. The registered agent and vice president listed withFlorida Dept o State is the Assistant Director o the CSD and the President is listed as aformer CSD employee. Additionally the treasurer is listed as Nerssia Martin.


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t should also be noted that the Assistant Director o the CSD is also the President oanother corporation the Florida Community Development Association Inc. an active notfor profit corporation formed on 7/26/1979 According to the website o the FloridaCommunity Development Association Inc. the objectives o this association are listedbelow:

1 To hold training workshops on regulatory and programmatic issues at locationsaround the state for all community development and economic developmentpractitioners;

2 To help identify common problems seek solutions and plan for an AnnualMeeting where members can share discuss and benefit from their experiences;

3 To act as a clearinghouse for the many questions posed by HUD and the CDBGprogram officials at the local level throughout the years;

4 To alert community development and economic development professionals toimportant program changes funding deadlines and emerging resources;

5 To develop professionalism among individuals responsible for implementingprograms by providing a forum for the exchange o ideas facilitating cooperationon common issues offering guidance and assistance to members and acting as aliaison with other agencies and groups.

Attached as Exhibit 6 is a copy o the Florida Community Development Association Inc.brochure which was available from the website.

Yearly uditsKessler has been provided with a previous audit report relative to the CSD conducted by


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discrepancies that have been found during Kessler s review o these cases, it is unclearwhy this previous audit report did not outline any discrepancies s noted in this report.


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REVIEW / ANALYSIS OF C SESCase #1 - Down Payment Assistance Program - HHR / SHIP

Income racket IVery Low I

This individual received a first mortgage from Harbor Federal Savings Bank for 86,800with repayment over a period of thirty years. The individual also received a FloridaHousing Finance Corporation mortgage for 14,999, satisfied over a period of fifty years,if the applicant remains a resident of the property.

Various Mortgages and Notes all applicable to the HHR Program dated 3/16/2007 werecontained in the file but signed by the borrower on different dates. One Down PaymentAssistance Note which is signed indicates a thirty year mortgage and a principal amountof 40,000 with 0% interest commencing 3/15/2008. A second Down PaymentAssistance Note which is signed maintains the same terms with conflicting information.On one section of the Note, the Mortgage is to commence on 3/1612007 and in anothersection it is to commence 3/15/2009. A third Down Payment Assistance Note indicatesthe borrower promises to repay 40,000 in principal but in the payment terms theprincipal amount is listed as 9,000 at 0% interest commencing 6/15/2007. A Mortgagewhich is signed and notarized on 3/17/2007 also indicates a 40,000 loan at 0% interestfor a thirty year term. The Mortgage which was filed with the County containingsignatures which were notarized on 3/16/2007 indicates a 40,000 note with requirement


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on a form dated 1124/2008. There is no explanation in the file to identify why suchdrastic discrepancies exist in the various documents.

On 5/23/2006 an award letter was sent by CSD which stated that the individual couldonly receive a maximum down payment assistance o $10,000 from the SHIP Program.A second letter was written on 3/2/2007 stating the individual had qualified to receive upto $15,000 through the SHIP Program and the individual received $15,000 on 3/16/2007.Maintained in the case file were two Down Payment Assistance Mortgages and oneDown Payment Assistance note relative to this applicant's award from the SHIPProgram, all dated 3/16/2007. One Mortgage document notarized on 3/16/2007 by ElaineRedden and filed with the Clerk o the Circuit Court indicates the borrower received$15,000 and must reside on the property for fifteen years. A second Mortgage documentis notarized and stamped on 3/16/2007 This is a true and certified copy o the originalinstrument which has been executed as indicated. St Lucie Title Service, Inc. by ElaineRedden indicates a mortgage o $40,000 for a period o fifteen years.

The application for funding filed with the City clearly states that the individual wasrequired to provide $500 at closing. The HUD Settlement Statement indicates that heonly provided $100. Again no explanation is provided in the file for the discrepancy.

On 1126 2009 a notice was filed stating the lender is seeking action o foreclosure on theborrower. There is no documentation contained within the case file that relays theconclusion, but it does not appear that the City has contacted the applicant regarding thedefault.


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Case #2 - Down Payment Assistance - R/ SHIP

I ncome Bracket IModerate I

On 11/9/2006 a first mortgage was secured for $182,000 from Harbor Federal SavingsBank to purchase a home valued at $209,990. Another mortgage issued from the Cityfrom the HHR Program provided an additional $30,000 at 0% interest over a period ofthirty years. The loan was deferred eleven months until the first payment was due on10/15/2007. Additionally, a deferred mortgage and note from the SHIP Programprovided $6,000, which stipulated the mortgage be satisfied after a period of six yearsand would be forgiven if the residents did not rent or sell the property before that time.

These individuals were classified as having a moderate income level (the highestincome level that is provided assistance), and received a 0% interest loan. The CSD hasthe power to mandate an interest level up to 5 . There is no documentation in the fileindicating how the determination was made to provide these individuals with a 0%interest loan.

Contained in the file is a document labeled Exhibit A, Investor Addendum signed bythe borrowers on 10/2/2006 indicating that Lot A136 of Ben Creek Estates would notbe used as a primary residence. Also contained in the file is a ''Non-Investor Addendumalso signed by the borrowers, one signature of which is undated, and the other dated10/2/2006.


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Case 3 - Rehabilitation Program - SHIPI Income Bracket Very Low I

This individual obtained a deferred mortgage in the amount o 19,000 from the SHIPProgram on 5/19/2006 for rehabilitation o their residence. The terms o the mortgagestate it shall depreciate over a period o six years, and would be forgiven i the residentdid not rent or sell the property before that time. The individual also obtained anadditional mortgage from the SHIP Program on 11 20 2006 in the amount o 6,194depreciating over five years, for what appears to be financing o a change order. Thismortgage would be forgiven i the resident did not rent or sell the property before thattime.

The total charges incurred as a result o the rehabilitation were 38,609. The original bidfrom Innovative Construction was 19,000. At the end o the job, a change order wassubmitted on 10 2 2006 and approved for an additional 11,000. Inexplicably, on


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Vendor TotalInne;vative @onstrl lction 19,400M. R Browh Constrllctic m 19900JaQPSOIil G0f1S_liu.Gti0n

Terrc;lrnar Canstruetion, Inc. (Alternative) 37,100Bueno CDnstrouctien '5I4,6S0Tetrarnar ons ruclion. Inc. 85,800

On the applicant's request for funding, it lists accumulated assets are less than 5,000,but the amount shown on his savings account and certificates o deposit statements are

21,308.56.

Additionally, an individual who is closely linked to the subject received 3,400 for rentalassistance between 7 6 2006 and 9129/2006 This individual was also named on thesubject's power o attorney form submitted to the City. This was a questionable practiceand there is no indication in the file that the individual stayed at the linked individual'sresidence.

Kessler noted in the General Ledger o the City that on 3/912007 a check was issued to A.Thomas Construction in the amount o 3,850 on behalf o this individual. The fundswere disbursed from the account labeled Disaster Charges, but no documentation iscontained in the file concerning this disbursement.


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Case #4 - Rehabilitation Program - R

Income racket IModerate IThis applicant is a City employee. In this case, the original 0 interest mortgage forrehabilitation was filed on 3/17/2006 in the amount of $13,480 which had to be paid infull over a period of thirty years, but was reported as satisfied as of 1125/2007. The firstpayment was due on 8/17/2006. An amended deferred mortgage dated 3/1712006 wasfiled on 1124/2007 notarized by Tysha Williams which conveniently left the date off thenotarization language. Attached to this document is a Housing Rehabilitation Agreementwhich is signed and dated 12120/2006. This mortgage, in the amount of $16,380 statesthe terms as a deferred mortgage, depreciated over a ten year period, if the individualremains a resident of the property. t has come to Kessler's attention that beginning on3/13/2009 through payroll deductions, this applicant began making payments.Additionally, $8,956.35 in expenditures were not included in the mortgages whichaccounts for the cost of the title search, moving, storage and rental assistance paid to theDays Inn Midtown and Denise Mills.

During Kessler's review of the case file Kessler noted that the bid submitted by M.B.Brown Construction Co., Inc. was dated 212312006 and a change order for $2,900 fromBrown Construction was dated 7124/2006 and signed by Mason B. Brown, Jr. on8/912006. Based upon discussions with employees of the CSD, Kessler was informed thatprotocol for change orders is that they are reviewed and approved by employees withinthe CSD. There is no documentation in the file indicating that the change order was everapproved by CSD. A schedule of disbursements relative to this project is presentedbelow.


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Another discrepancy noted during Kessler's review related to work included in thechange order, which calls for knockdown texturing to be applied throughout the houseceilings and walls ( 1,000) and to remove tile from bathroom wall, repair structurebehind tile ( 1,900). This work to be completed appears to be double billing o items onthe bid (which includes painting o the walls and ceilings and replacement o the tiles inthe bathroom).

Additionally on 7127 2006 Arnoff Moving submitted an invoice for the unloading andplacement o furniture in the residence ( 540). t is unclear why a change order would besubmitted to conduct work (knockdown texturing) after the furniture has been movedback into the residence.


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Case 5 - Re-Entry Program - R

Income Bracket oderate

On the application for this individual $10,000 is listed as yearly gross income for thishousehold which had been changed from $16,000. On the Verification o Employmentform for two household members income is reported by the employer to total $36,400.Additionally, a third household member listed on the original application was redactedfrom the Florida Housing Finance Agency's Income Certification-Homeowner form, andnone o the member's income or assets was included when calculating income.

On many o the documents the individual's name has been spelled incorrectly and thefirst and surnames are juxtaposed by employees o the CSD. The applicant received$2,000 payable to the landlord on 712812 6 (check 206497).


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Case 6 - Re-Entry Assistance Program - R

Income racket ow

On two occasions within six months the applicant received funds from the Re-EntryAssistance Program. The initial assistance occurred on 111312 6 in the amount o $850(check #202537), made payable to the borrower and a different individual (to be calledIndividual X). The borrower had to endorse the check before it could be given to thelandlord for first month rent and security deposit. The individual who was named on

the lease agreement as the landlord was Brother Murphy , no address was provided forthis individual and it does not coincide with the individual who is named on the generalledger (Individual X). It should be noted that the file did include a statement citing thatthe property contained lead based paint, prior to the issuance o the housing assistancecheck, and subsequently the apartments were demolished by the City.

The second Re-Entry Assistance Program payment occurred on 61112 6 in the amounto $1,500 (check #205447) made payable to a landlord. The assistance was to provide asecurity deposit and also first and last month's rent. We have been advised that for anindividual to receive assistance from the same program within a period o three years, is aviolation o the rules and regulations.

Nowhere in any documents contained in the file does it show that the security deposit orthe last payment was remitted back to the city. Additionally, Kessler's review o thedocuments indicate that many o the signatures o the applicant, notarized by CSDemployee, do not even appear to match the signature contained on the Department oMotor Vehicle's Identification Card contained in the file .


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Case 7 - Rehabilitation Program - SHIPForeclosure Prevention - HHRHazard Prevention - HHR

Income Bracket Very Low IDuring Kessler's review o the applicant's file who is a relative o a CSD employee, itwas noted that a mortgage dated 12/20/2005 which was filed on 3/21/2006 was issued forwork performed with the hazard mitigation program in the amount o 3,175.62. Thenote states that the mortgage shall be satisfied after a period one year and one day. ASatisfaction o Mortgage document was filed on 6/27/2008. Kessler cannot comment onthis transaction in any further detail since the file was not made available.

Then on 3/31/2006 another mortgage was filed for an applicant who had received SHIPRehabilitation Program funds in the amount o 42,800. The mortgage listscontradictorily that it would be forgiven in two separate fashions. The worded section othe mortgage is listed s being forgiven after one year and the numerical section statesthat the debt will be satisfied after thirty years and one day. This mortgage was reportedsatisfied with the county on 6/27/2008. n amended mortgage was filed on 1/24/2007with the Clerk o the Circuit Court, for 42,800. The terms o the note stated that themortgage shall depreciate over a period fifteen years and one day i the resident did notrent or sell the property before that time. No explanation is provided in the files for theseunusual occurrences.

Kessler's review o the documents indicates the total amount spent on the rehabilitationo this individual's home is 51,196. The mortgage amount o 42,800 only includes thedisbursements to the contractor M.B. Brown Construction Co, Inc. Additional costs o


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On 8/6/2008 a check was made payable by the City to National City Bank for 5,000 toaid in foreclosure prevention o this property. Kessler was informed that as o 8/15/2008a letter from a bank stated that 2,260.14 needed to be paid by July 1 2008. On the8/6/2008 check a notation was noted as past due as 2,974.81. t is unclear why the citywould pay 2,025.19 above what is needed to bring the mortgage current, and is notexplained in the file.


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Case #8 - Rehabilitation Program - S IP

Income Bracke t Low

The mortgage dated 3 2112008 and filed on 3 28 2008 with the Clerk of the Circuit Courtdoes not document an amount, while a draft mortgage in the case file shows the amountof $48,611.38 (depreciating over fifteen years) which is the exact amount that of the J.B.Florida Contractors bid.

The total expenditures for this project were $65,162.26 during the rehabilitation of thishome. While reviewing the file Kessler noted a red flag in that the final inspection wascompleted on 7/28/2008, and on the same date a request for the final payment in theamount of $8,517.76 (check #220667) was submitted by J.B. Florida Contractors. On9 4 2008 an invoice was submitted for items not detailed in the original bid for anadditional $2,475 for remove 3 existing windows and install e-gress windows .

ccount CheckDate ccount # Description Payable To mount #Miscellalilelus711112007 1 5 - ~ 5 @ 2 5 Q 4 . 4 9 9 0 ~ ~ s Universal Land 75.


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Case 9 - Eviction Program - R

Income racket Very Low

In a 10 5 2005 letter from the landlord it states that this individual s past due on herrental payment in the amount of $509.18. A check was issued to the landlord in theamount of$1,509 (check 201726) on 12 9 2005 by the CSD.

This grant should have never been awarded since the file was incomplete because a copyof the social security card s required according the CSD guidelines. Kessler found thaton 12 9 2005 a letter in the file from the Social Security Administration states that aroommate of the borrower had requested a copy of his social security card and wouldtake two to four weeks to receive a new copy of the social security card.


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Case 10 - Down Payment Assistance - R/ S IP

I ncome racket IVery Low I

On 511312008 the borrowers received two mortgages one from the SHIP Program and theother from the HHR Program. The HHR Program mortgage was recorded for $40,000with interest at 0 and repayment over a period of thirty years. The terms of the HHRmortgage state that the first payment is to commence on 5 1512011 in the amount of$123.35. The SHIP Program mortgage was for $15,000 and depreciates over a period offifteen years.

The purchase price of the home was $156,700. A first mortgage in the amount of$101,700 was secured from National City Bank f/k/a Harbor Federal Savings Bank, inspite of the fact that a Prequalification document in the file indicates that the applicant'smortgage borrowing potential was only $82,000.

Two of the three applicants live in the residence. The third individual who does not livein the residence, is handwritten into the two City Mortgage filings and does not have anyincome listed on the grant calculation sheets. The other two applicants do not show anyemployment income and the only income shown is from SSI. The alleged combinedincome for all three individuals is $20,004. There is nothing in the file indicating that inorder for the applicant to qualify for the first mortgage the City mortgage had to bedeferred for three years, it is unclear why this deferment occurred.


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Case 11 - Down Payment Assistance - SHIP HHRForeclosure Prevention - HHR

ncome Bracket Low

The individual purchased a home for 199,559 on 1112712006 A first mortgage wassecured for 119,400 from Harbor Federal Savings Bank, which was sold to US BankNA on 1117/2007 This mortgage had the borrowers named as husband and wife. nadditional subordinate 50 year deferred mortgage was also secured on 11127/2006 fromFlorida Housing Finance Corporation for 24,659 in both names.

Also on 11/2712006 two additional City mortgages, one in the amount of 40,000 wasobtained only under the husband's name from the HHR Program. The note states thatonly 9,000 of the 40,000 is to be repaid at 0% interest over thirty years. The remaining

31,000 shall be exonerated upon repayment of the principal and interest of the 9,000.The note also states that the first payment will commence on 5 15 2009 at 25 per month.

A second City mortgage from the SHIP Program also provided 15,000 for downpayment assistance only under the husband's name. The terms state that this deferredmortgage will be satisfied after a period of fifteen years, if the resident does not sell orrent the property.Almost a year after the husband received down payment assistance from the City he


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property. On 1115 2008 that notice was dismissed as a result o the assistance from theCity.

The wife o the borrower appears to work for the City, but her income is not on theapplication for down payment assistance. Kessler s review has determined that her nameis on the deed, mortgage and notes filed with the Clerk o the Circuit Court. This callsinto question whether the applicant would have qualified for down payment assistance ithe spouse s income was included in the calculation oftotal household income.


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Case #12 - Down Payment Assistance - R/ SHIP

I ncome Bracket IVerx ow I

This couple purchased property on 3/31/2006. Their annual gross income is listed as$17,345.76. The sale price of the property was $86,500. A first mortgage was securedfrom Harbor Federal Savings Bank in the amount of $39,500. The SHIP Programprovided $10,000 and the HHR Program provided $40,000 in additional funding. nadditional mortgage in the amount of $1,500 was provided from Federal Home LoanBank of Atlanta ( FHLB ).

The SHIP mortgage of$10,000 depreciates over a period often years if the owners residefull time on the property. Assistance provided by the HHR Program ($40,000) followsthe same guidelines as the SHIP Program, but the property owners must reside on theproperty for forty years. The FHLB loan for $1,500 was to be satisfied by the continuousresidency and ownership of the property for five years.

The City of Fort Pierce Hurricane Housing Recovery Program Down Payment AssistanceNote contains conflicting information in regards to repayment and satisfaction terms. Onthe note it is typewritten that the mortgage shall be satisfied over a period of thirty years.In the deferral and/or forgiveness section, hand written notes indicate that the mortgagecannot he sold or transferred within a forty year period. A clause in the note states, In


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Case 13 - Down Payment Assistance - HHR / SHIP

I ncome racket Low

The borrower and her spouse purchased a home on 11110/2005 in the amount o$160,000. A first mortgage was secured from Harbor Federal Savings Bank in theamount o $110,000. SHIP provided down payment assistance o $10,000 and the HHRProgram provided $40,000. No application for the HHR or SHIP Program is maintainedin the file.

The terms o the SHIP Program mortgage indicate that the property owners must resideon the property for a time period o ten years. The mortgage note from the HHR Programis unlike any other case Kessler reviewed. The $40,000 provided is broken down intothree separate amortization schedules as follows: $5,000 shall be forgiven when principaland interest payments have been made in full. $30,500 is amortized at 1 interest over aperiod o twenty - five years, first payment shall commence on 1115/2011 (five yearsdeferred) at a monthly payment o $114.95 . The remaining $4,500, shall be paid inmonthly payments o $75 commencing on 1/15/2006 for a period o five years.

It is unclear why these applicants would receive a 1% interest loan when so many othersin the same Low income category received a 0% interest loan. Additionally, manypeople have had a portion o the HHR Programs funding be a deferred loan, satisfied by


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Case 14 - Down Payment Assistance - R

I ncome racket IModerate I

This couple purchased a home for $180,000 on 3/2/2007. The couple had an annualgross income of $50,084. The first mortgage on the home was provided by HarborFederal Savings Bank in the amount of $148,300. Down payment assistance wasprovided by the HHR Program, in the amount of $30,000. The terms of the note statethat the loan is to be repaid over thirty years at 1% interest. The first payment of themortgage was to occur on 8 15 2007 with a monthly payment of $96.49.

At the closing the couple received $1,629 cash back as a result of Harbor Federal SavingsBank providing assistance with the closing costs. t is questionable why this was notreturned to the City.


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Case 15 - Down ayment Assistance - SHIP

I ncome racket IVery Low I

On 7 6 2007 a mortgage was secured from National City Bank f/kla Harbor FederalSavings Bank in the amount of $65,300. The applicants list yearly income from wagesand public assistance of only $20,909.04. A second mortgage was secured from theSHIP Down Payment Assistance program, which provided $14,690.61. The terms of thenote indicate that $1,000 would be forgiven every year if the property owners reside atthe property for a period of fifteen years. t should also be noted that the individualreceived $750 cash back at the closing.


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Case 16 - Replacement Assistance Program - HHR

I ncome Bracket xtremely LowThis individual applied for the Replacement Assistance Program, and on 112912007 amortgage was issued in the amount o $104,527.63. The terms o the note indicate thatmortgage would be due in full after thirty years, i the property owner resides in theproperty for a period o thirty years. The book and the page reference the property butthe legal description used on the satisfaction o mortgage is wrong. t is for a propertynever owned by the applicant. On 11812008 this mortgage was satisfied by the City. Thereason for the satisfaction o the mortgage was due to the homeowner being placed in anursing home during the demolition. During her stay it was determined that she was unfitto take care o herself, and would be best to remain in the nursing home. To ourknowledge, no construction has taken place on the property and it is currently an emptylot.

To recuperate the cost o the demolition, an amended mortgage was placed on theproperty on 118 2008 in the amount o $6,326.75. The terms o the note indicate,Borrower must reside full time on the property for a period o 5 years from the date oMortgage. Failure to comply with the requirements specified herein constitutes a defaultby which the recapture provision requires that the City collect the remaining balance othe loan at 0 interest . There is no home on the property in which one could reside,accordingly this individual would be considered in defaulted o the mortgage, and theamount of$6,326.75 should have been recovered by the City.


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Case #17 - Disaster Relief Home Assistance Program - Home AgainReplacement Assistance Program - RI ncome racket IVery Low I

This individual was approved for a mortgage from the Home Again Program and HHRPrograms on 4/4/2006 The HHR Program provided a mortgage through the City for$75,000 and repayment over a period of thirty years. The mortgage was deferred fivemonths until 9/1/2006 The mortgage was calculated at 5% interest with a monthlypayment of $402.62. An additional mortgage was filed with the Florida Housing FinanceCorporation in the amount of $50,000. The terms of the note indicate that if the propertyowner is a resident of the property for more than five years that the mortgage is forgiven.

This case file contains very little documentation reflecting the bid or the contract price ofthe construction nor are there any copies of checks cut to the contractor. t appears thatthree checks issued within a day of each other were payments for 2n draw . t should


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The total amount spent by the city is 131,862.67, including demolition costs, deposit forutilities and rental assistance for the Savannah Palms apartments.


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Case #18 - Down Payment Assistance - R/ SHIPI ncome Bracket IVery Low ILendingDate Institution Type mount Terms Interest

' 123/2007 Bank Uhitec;j Con.ventional $61 ,


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Case 19 - Down Payment Assistance - HHR / SHIP\ ncome Bracket Low

On 12/29/2006 a check ( 209582) was cut from the City for $2,000. This check wasissued to the seller from the housing re-entry account. No supporting documentationcould be produced by the CSD to support this issuance o funds.

The individual then purchased a home on 3/23/2007 for a purchase price o $113,000.Two mortgages were secured from the City from the HHR and SHIP Programs. TheSHIP Program provided $15,000 towards the down payment o the property andstipulates depreciation over a period o fifteen years i the property owner resides in thedwelling. The HHR Program provided $40,000 to the individual and stated that only$18,000 o the $40,000 must be repaid. The remaining $22,000 shall be forgiven whenprincipal and interest payments have been made in full. The terms o the mortgage statethat the first payment was to be received on 7/15/2007 in the amount of$50 . Based uponKessler's review this appears to another example o a lack o any guidelines o makingawards.

On 8/26/2009 a notice was filed indicating that the first mortgage holder was seekingforeclosure on the applicant. Additionally, on 11111/2009 the individual died. Nodocumentation is provided in the file indicating a resolution to the notice o foreclosure.


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Case #20 - Down Payment Assistance - S IPI ncome racket I Very Low I

On 10126/2007 this individual, a City employee, purchased a home for $110 ,000. A firstmortgage was secured by Washington Mutual for $80,000. The City provided fundingfor an additional $30,000 from the HHR Program. The terms of the mortgage providedby the City indicate that the applicant must repay $25,000 over a period of twenty-fiveyears. The first payment of$83.33 was deferred until 9/15/2012 The remaining $5,000will be exonerated when repayment of the principal and interest is made in full. Noexplanation was contained in the file as to how 2012 was selected to commence paymentof the loan.

Kessler's review of the case file disclosed that the HUD Settlement Statement filed on10126/2007 shows the individual only received $28,858.75 from the SHIP Program forclosing, not the $30,000 denoted in the mortgage documents. The applicant paid$7,661.38 from their own funds at closing.

On 10/312008 a letter was sent by a CSD employee erroneously indicating that $40,000had been provided by the City from the HHR Program, when in fact only $28,858.75 hadbeen provided. The letter continues to state, Please contact this office by October 10,2009 at (772) 460-2200 ext.253 or 224 to make an appointment to complete your revisedplan or to verify that your payment is current. If no arrangements are made, the loan willbe considered in default. On 10/812008 an amended letter was sent to the individual


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the note was never delivered to the Finance Department and Kessler found no measuresin place to ensure that payment would be properly recaptured commencing 2012


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Case 21 - Down Payment Assistance - SHIP / HHRForeclosure Prevention - HHR

ncome racket ow

This applicant who is a City employee in the MIS department purchased property in FortPierce in the amount o 200,000 on 11129/2006. The first mortgage taken by thisborrower and his wife was for 152,000, taken from Harbor Federal Savings Bank.

On the second and third mortgages from the City, only the husband's name is indicated sthe borrower, in spite o the fact that the wife was named s the co-applicant on theoriginal application on file with the City. They received a total o 55,000 in DownPayment Assistance through the SHIP and HHR Programs. The terms o the 40,000HHR loan indicated that the first payment was to begin on 1115 2008 for a period othirty years. The SHIP Program loan o 15,000 indicated that the loan would besatisfied after fifteen years o continuous residence in the property. Kessler has beeninformed that none o the City mortgages were ever reported to the Finance Departmentand only came to light in the fall o 2008 when a Finance Department employeecommenced an inquiry o irregularities into mortgages generated by the City. At thattime a revised note was issued indicating that payment was to commence on 6/15/2009Additionally, the CSD employees spelled the husbands name wrong on the mortgagesand many other documents provided in the file. These mortgages were not filed with theClerk o the Circuit Court until 4/24/2009 t is unclear why the mortgages weren'toriginally filed in a timely manner and were then delayed more than two and a half years


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Case 22 - HOM Again ProgramI ncome Bracket Extremely Low

moff nnrl l l nn


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This applicant, who is deceased, (DOD 3/3/2008) had a home rebuilt beginning on11127/2006 A Quit Claim Deed dated 212/2006 and signed by the applicant transfers thisproperty to Betty Hunt and the applicant. This document was filed with the Clerk o theCircuit Court on 11/212009 years after the construction was completed, and after theapplicant's death. This document was witnessed by John Rogers, the contractor whoconducted the renovation on the property. According to Finance Department records, on11/15/2006 a disbursement in the amount o 927.78 was made payable to AbbiejeanRussel Care Center. According to an invoice from Abbiejean Russel Care Center theapplicant was living at the center since 2005. n Unemployment Affidavit was alsomaintained in the case file which appears to contain a forged signature o the applicant.This signature was notarized by Aziza Boyd. Kessler also noted that a Title Affidavitapplicable to the property indicates that the applicant personally appeared before thenotary, a CSD employee, this document is also contained in the case file. This documentis not filed but is notarized.

Also in this case file was a memorandum from a Rehab Specialist indicating that on1112/2005 the Specialist allegedly went to the property and did a walk through todetermine what was needed to bring the house up to handicap standards. Thememorandum indicates that during the process o working on the write-up the applicant'sniece Betty Hunt submitted an application for HHR funding and replacement o site builthousing to replace the structure. The Rehab Specialist concurred with Hunt.

On 7/26/2006 a letter was sent by CSD to the applicant at the property address, despit

Fort Pierce - Community Services Report

Documents

Transcript of Fort Pierce - Community Services Report