IRS audited Memphis board over financing for Global Ministries’ Serenity Towers
MEMPHIS, Tenn. — WREG has learned a third federal agency was looking into the finances of the troubled Global Ministries Foundation.
The Internal Revenue Service sent a “Notice of Audit” and “Information Document Request” to the group that helped GMF obtain financing for its properties in Memphis.
Records show the IRS notice sent to the Health, Educational and Housing Facility Board of the City of Memphis was dated January 27, 2017.
The audit was in connection to financing for Serenity Towers.
In a written response to WREG, the HEHFB said the “routine” audit was essentially over and no problems were found.
The Board said it was notified last week (by attorneys GMF hired to handle the audit) that the IRS was “satisfied with its legal and tax compliance review of the bonds.”
Furthermore, it learned the IRS would be issuing a “no charge” letter.
According to the Board, the “no charge” letter is an official indication that the IRS audit was satisfactory completed.
The Board says once it receives the letter, the audit will be closed.
The HEHFB is a group of nonelected officials, appointed by the Mayor.
The group quietly waives thousands of tax dollars every year in the form of PILOTS (payments in lieu of taxes) and helps developers focused on low-income, multifamily housing get tax-free bonds.
The HEHFB has facilitated more than $53 million in bond deals for GMF properties in Memphis, including $14.5 million for GMF’s purchase of Serenity Towers.
For a short period last year, the state’s top housing agency told the HEHFB to stop issuing bonds as it was in a “transition period” without an executive director. The board was also facing scrutiny because of GMF.
Last summer, the HEHFB changed its application process for bonds and PILOTS, requiring more information from applicants about HUD inspections.
Serenity Towers Had Numerous Problems
Local code enforcement officers conducted a sweep on Serenity Towers in February of 2016 and confirmed a bed bug infestation among other violations.
Serenity Towers scored a failing 57 during a HUD inspection a few months later in May of 2016 (records show an original score of 44). The News Channel 3 Investigators learned HUD issued GMF a Notice of Default in August, but that was cleared up after GMF reported it had made all the required repairs by October 2016.
The bank that represents bond holders subsequently sent GMF a letter of noncompliance dated February 10, 2017.
The IRS audit marks the third federal agency that has probed GMF’s financing.
Federal agents raided GMF’s Cordova headquarters last August. The HUD Office of Inspector General confirmed it worked with the U.S. Attorneys Office to execute those search warrants.
Serenity Towers is one of the GMF properties now being run by another group.
The Millennia Companies is set to purchase 37 of GMF’s Section 8 properties across the country, including Serenity, Madison Tower and Goodwill Village in Memphis.
While the sale isn’t final, Millennia has already taken over day-to-day property management at the complexes.
The sale is expected to be completed by the end of the year.
In a separate deal, Millennia has already purchased the now-vacant Warren Apartments and Tulane Apartments.
The group said it plans to renovate Tulane, and Warren will be demolished.
In early 2016, HUD pulled financing from GMF at Warren and Tulane, so residents received Section 8 vouchers to move.
WREG learned about the IRS audit after combing through annual financial records GMF submitted to regulatory authorities.
Audited financial statements for Goodwill Village have also been submitted.
Documents show during an inspection, called a Management and Occupancy Review (MOR), HUD gave the complex a “below average” rating.
HUD later conducted what’s called a REAC inspection in September of 2016, and Goodwill got a 66, which is considered a passing score.
Auditors also noted one finding related to tenants not properly being recertified, which is an annual requirement.
The same finding was noted in the financial reports for Serenity Towers.