SEBRING - In 2009, a Highlands County Housing Department employee received a $5,294 home repair loan.
The employee, unidentified in an audit released Tuesday by the Clerk of Courts' office, signed a promissory note.
However, since the loan was less than $10,000, monthly payments were deferred and the loan may be forgiven next year if the employee meets a five-year residency requirement.
That was one of a dozen troubling findings by the clerk's 22-page internal audit. Other findings included non-payments of mortgages over years, losing track of mortgages and not filing mortgages for months after loans were made.
"I'm extremely disappointed in the results," said Commissioner Don Elwell, who was an outspoken critic of the housing department. "That was a department that needed to be completely dismantled, and now it is being rebuilt."
Special Projects Manager Chris Benson has been placed in charge of community programs, and Elwell has been appointed to chair the Affordable Housing Committee.
"I have a lot more confidence that these problems are going to be fixed," Elwell said. "Chris is getting a handle on it."
However, the audit found, the housing employee did nothing wrong. "Presently, the Board of County Commissioners-approved Local Housing Initiatives Plan does not address providing Housing funds to County employees and there is not a defined process related to County employees receiving funds."
Likewise, Communications Director Cecka Rose Green said the Florida Housing Finance Corp. "does not preclude an employee from taking advantage of the program if they qualify."
Even so, Elwell said, "I certainly have problem with that. And there was a lot of money being funneled to certain neighborhoods, so that may have been 'insider trading,' so to speak."
The employee has a State Housing Initiatives Partnership loan, and there is no process in place to track mortgage loan balances, activity, delinquent payments or late fees, the first finding said.
The housing department provided state funds for down payments, home repairs and foreclosure assistance, so it accepted 589 second mortgages and promissory notes for the past eight years, the audit said. Of those loans, 473 to 493 remain outstanding.
"At present," Finding 1 said, "there is no process in place to effectively track and quantify all outstanding mortgages, balances of outstanding mortgages, individuals current on monthly payments, and individuals delinquent on payments. ... The data ... is particularly concerning since the past four years of monthly payments is on average only 96 payments and $5,652 per month.
"The current structure results in an inability to efficiently determine outstanding loan balances and mortgage liability," the second finding said. The auditor recommended that the county administration begin reviewing all files to obtain a list of outstanding mortgages and payment activity, then work with the clerk's office to evaluate the potential for automated payment receipts.
Because of high turnover, only one full-time employee remains in a housing department that did have seven. An outside consultant has been hired to validate reports sent to funding agencies. "The majority of all processes within the department were carried out by one individual with little secondary or supervisory review. This environment greatly impairs processes and controls," the audit said.
Although each of Florida's 67 counties has its own housing department, the third finding noted one $25,000 Housing Initiatives Partner Fund client lives in Glades County.
"But no mortgage was recorded," the audit said. The auditor encouraged the county "to determine whether the client is the current owner of the property and lives at the residence."
Finding 4 noted that one client produced an estimate of $5,400 for repairs, but the vendor was paid $6,525. Two mortgages were recorded, one on Aug. 4, 2011 for $5,400, and another on Sept. 14 for $6,525.
Before the audit was released, county management said the original $5,400 mortgage had been satisfied, but the $6,525 mortgage "remains outstanding until the residency requirement is met." If the property is no longer the primary residence, or is sold, then the mortgage must be paid.
Finding 5 determined that 47 percent of sampled mortgages took greater than 14 days to record. The average number of days to record a mortgage was 48 days. County management was "encouraged to evaluate the lending process and control structure, and remediate areas of weakness..."
The audit examined 49 SHIP mortgages to determine how many were delinquent. "Out of 39 delinquent mortgages, 11 have never made a payment."
Five of those 11 borrowed $10,000 in 2007-08; Client 45 borrowed $10,000 in 2012, Client 30 borrowed $5,400 in 2007, Client 42 borrowed $15,000 in 2008, Client 44 borrowed $7,544 in 2009, and Client 49 borrowed $9,332 in 2012.
Finding 7 reported a Florida Homebuyer Opportunity Program client received $5,600 that was required to be repaid by April 22, 2011. As of Sept. 30, 2012, however, only $1,577 was paid; a $4,022 balance remains outstanding. The auditor encouraged the county to contact the client.
Finding 8 showed that even though four clients were given from $46,000 to $85,750 in SHIP and Community Development Block Grants in 2007 for home rehabilitation, the clients didn't pay their property taxes. Tax certificates were issued on two houses, meaning a bidder paid those taxes and now the mortgagee must repay the certificate holder. Tax deeds were issued on two other houses, meaning the mortgagee didn't repay the bidder, so the certificate holder received title to the house.
Two "opportunities for improvement" were also noted: the second showed four individuals received almost $200,000 in SHIP money for repairs, down payment assistance and forecloser assistance. However, of those properties is currently in foreclosure, the audit said.
"It simply reinforces the stricter controls over the last year or so," Elwell said. "Back when the housing department had eight or nine people, it had fewer controls than it does today."
The department was guilty of "very spotty tracking of the dollars and where they went," Elwell said. "There are a lot of holes in the system, which the commission spent so much time fixing over the last few years."
Who is to blame? Elwell wasn't sure. The department counted six directors in the past six years. "There's only person left there," he said.
The county is double checking the loans on file, Elwell said. "From what I'm reading in the audit, the county did not know where every loan was that was out there... There was a lack of record keeping, and that made for a dangerous environment, and one that was certainly taken advantage of."
However, Elwell said, all five commissioners were briefed privately and individually on the audit, so the item may not appear for public discussion before the county commission.
The audit is available electronically at www.hcclerk.org. Click on Compliance and Internal Audit, then Scheduled Audits and Continuous Audits, then Scheduled Audits, then space down to the bottom of the page.