oversight

SAR 73 - Semiannual Report to Congress for period ending March 31, 2015

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-06-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

OFFICE OF INSPECTOR GENERAL


SEMIANNUAL REPORT TO CONGRESS
   FOR THE PERIOD ENDING MARCH 31, 2015




PUBLIC AND INDIAN HOUSING   COMMUNIT Y PLANNING AND DEVELOPMENT   MULTIFAMILY            SINGLE FAMILY




SERVING THE PUBLIC

                                                                                U.S. DEPARTMENT
                                                                                OF HOUSING
                                                                                AND URBAN
                                                                                DEVELOPMENT
OUR MISSION
        As the Office of Inspector General (OIG) for the
   U.S. Department of Housing and Urban Development (HUD),
we remain an independent and objective organization, conducting
 and supervising audits, evaluations, and investigations relating to
            the Department’s programs and operations.

      • We promote economy, efficiency, and effectiveness
     in these programs and operations as we also prevent and
            detect fraud, abuse, and mismanagement.

• We are committed to keeping the HUD Secretary, Congress, and
 our stakeholders fully and currently informed about problems and
deficiencies and the necessity for and progress of corrective action.
  OUR VALUES
    1       Collaboration: The commitment to work jointly with HUD,
     Congress, and our stakeholders for the benefit of all citizens.
        2   Accountability: The obligation and willingness to accept
            responsibility and account for our actions.   3   Integrity:
    The firm adherence to high moral and professional standards,
 honesty, and fairness in all that we do. Acting with integrity is a core
 job responsibility for every employee.      4   Stewardship: The careful
 and responsible management of that which has been entrusted to
  our care.      5   Diversity: The promotion of high standards of equal
employment opportunity for employees and job applicants at all levels
        so that our workforce is reflective of our country’s citizens.
     OUR VISION
     1   To promote fiscal responsibility and financial accountability in
HUD programs and operations,          2   To improve the execution of and
    accountability for grant funds,   3   To strengthen the soundness of
    public and Indian housing programs,       4   To protect the integrity of
                   housing insurance and guarantee programs,
5    To assist HUD in determining whether it is successful in achieving
 its goals,    6   To look ahead for emerging trends or weaknesses that
    create risk and program inefficiencies,       7   To produce innovative
work products that are timely and of high quality,             8   To benchmark
best practices as a means to guide HUD, and             9   To have a significant
             impact on improving the way HUD does business.
DIVERSITY AND EQUAL OPPORTUNITY
   The promotion of high standards and equal employment opportunity

for employees and job applicants at all levels. HUD OIG reaffirms its commitment

to nondiscrimination in the workplace and the recruitment of qualified employees

  without prejudice regarding their gender, race, religion, color, national origin,

 sexual orientation, disability, or other classification protected by law. HUD OIG

  is committed and proactive in the prevention of discrimination and ensuring

 freedom from retaliation for participating in the equal employment opportunity

       process in accordance with departmental policies and procedures.
PROFILE OF PERFORMANCE
 For the period October 1, 2014, to March 31, 2015
 AUDIT RESULTS1                                                                                                                     THIS REPORTING PERIOD

 Recommendations that funds be put to better use                                                                                              $1,195,397,959

 Recommended questioned costs                                                                                                                 $1,729,366,318

 Collections from audits                                                                                                                       $457,149,983

 Administrative sanctions                                                                                                                                2

 Civil actions                                                                                                                                           6

 Subpoenas                                                                                                                                              12

 Personnel action                                                                                                                                        1


 INVESTIGATION RESULTS1                                                                                                             THIS REPORTING PERIOD

 Total restitution and judgments                                                                                                               $176,969,680

 Total recoveries and receivables to HUD programs                                                                                               $38,496,636

 Arrests1                                                                                                                                              106

 Indictments and informations                                                                                                                          133

 Convictions, pleas, and pretrial diversions                                                                                                           179

 Civil actions                                                                                                                                          20

 Total administrative sanctions                                                                                                                        255

      Suspensions                                                                                                                                       74

      Debarments                                                                                                                                        92

      Limited denial of participation                                                                                                                    0

      Removal from program participation                                                                                                                58

      Evictions                                                                                                                                          6

      Other2                                                                                                                                            25

 Systemic implication reports                                                                                                                            5

 Search warrants                                                                                                                                        37

 Subpoenas                                                                                                                                             302


 JOINT CIVIL FRAUD RESULTS1                                                                                                         THIS REPORTING PERIOD
 Recoveries and receivables to HUD programs
                                                                                                                                               $396,935,478
 or HUD program participants
 Recoveries and receivables for other entities                                                                                                 $181,285,5223
 Civil actions                                                                                                                                           5
 Administrative sanctions                                                                                                                                1

1 The Offices of Audit and Investigation and the Joint Civil Fraud Division periodically combine efforts and conduct joint civil fraud initiatives. Outcomes from these initiatives are shown in the
   Joint Civil Fraud Results profile and not duplicated in the Audit Results or Investigation Results. These results include civil settlements of $968 million from Suntrust Mortgage, Inc.; $123.5
   million from MetLife Bank, N.A.; and $36.3 million from Golden First Mortgage Corporation and its owner. Results are further detailed in chapter 7.
2 Includes reprimands, suspensions, demotions, or terminations of the employees of Federal, State, or local governments or of Federal contractors and grantees as the result of OIG activities
3 This amount represents funds that relate to HUD programs but were paid to other entities rather than to HUD for its benefit, such as funds paid to the U.S. Treasury for general government
  purposes. This amount does not include $540 million from the Suntrust Mortgage settlement that was designated for general consumer relief.
DURING THIS REPORTING PERIOD, WE

HAD NEARLY $1.2 BILLION IN FUNDS PUT

TO BETTER USE, QUESTIONED COSTS OF

MORE THAN $1.7 BILLION, AND MORE THAN

$457 MILLION IN COLLECTIONS, RESULTING

FROM 38 AUDITS; OBTAINED MORE THAN

$38 MILLION IN RECOVERIES AND RECEIVABLES

DUE TO OUR INVESTIGATIVE EFFORTS; AND

CONTRIBUTED TO NEARLY $400 MILLION

IN CIVIL FRAUD SETTLEMENTS DIRECTLY

BENEFITING THE FEDERAL HOUSING

ADMINISTRATION INSURANCE FUND.
A M E S S AG E F R O M I N S P E C T O R G E N E R A L D AV I D A . M O N T OYA


                              It is my pleasure to submit the               Personnel Act (IPA) Mobility Program. The IPA Mobility Program
                              U.S. Department of Housing and                provides for the temporary assignment of personnel between
                              Urban Development (HUD), Office               the Federal Government and State and local governments,
                              of Inspector General’s (OIG)                  colleges and universities, Indian tribal governments, federally
                              Semiannual Report to Congress                 funded research and development centers, and other eligible
                              for the first half of fiscal year             organizations. HUD inappropriately used the IPA program to
                              2015. This report describes the               appoint an individual from the Council of Large Public Housing
                              extraordinary accomplishments                 Authorities (CLPHA – a housing industry group) as the Deputy
                              achieved by the talented public               Assistant Secretary for PIH’s Office of Policy, Program, and
                              servants of HUD OIG. By                       Legislative Initiatives. In doing so, a former PIH Assistant Secretary
                              promoting better stewardship and              (previously head of the CLPHA organization) created an inherent
accountability, HUD OIG staff continues to make a significant               conflict of interest because she placed the deputy director of
impact on the Department and our communities for the benefit                an industry group in charge of PIH’s policy-making division,
of all of our stakeholders and the public we serve.                         the division responsible for developing and coordinating the
   During the first reporting period of fiscal year 2015, the               regulations applicable to the entities that CLPHA represents. In
Office of Audit issued 38 highly impactful reports. They                    essence, HUD appointed someone who represented the regulated
resulted in the following:                                                  to be in charge of developing the regulations.
                                                                               Joint civil fraud investigations continue to be an area
• Nearly $1.2 billion in funds put to better use,
                                                                            of emphasis to combat fraud against FHA’s single-family
• Questioned costs of more than $1.7 billion, and
                                                                            programs. Through coordinated civil fraud efforts across
• More than $457 million in collections.
                                                                            the U.S. Government, HUD OIG substantively assisted in civil
   The most monetarily significant of these audits was our audit            investigations of FHA’s largest lenders, providing a direct benefit
of HUD’s fiscal year 2014 financial statements. We expressed a              to the FHA insurance fund of nearly $397 million.
disclaimer of opinion on HUD’s consolidated financial statements               I have also joined with Secretary Castro to stress the
because of the significant effects of certain unresolved audit              importance of a strong whistleblower protection program for
matters, which restricted our ability to obtain sufficient,                 all HUD employees. To build on these efforts and maximize
appropriate evidence to express an opinion. These unresolved                our impact on the people we serve, the Secretary and I signed a
audit matters related to (1) HUD’s improper use of cumulative and           letter of cooperation last year, setting out our goals for a more
first-in, first-out budgetary accounting methods of disbursing              transparent and accountable HUD for the future. Whistleblowers
community planning and development program funds and                        are a crucial source of information about waste, fraud, and
(2) $6.6 billion in Government National Mortgage Association                abuse. Employees need to better understand their specific
(Ginnie Mae) nonpooled loan assets that we could not audit                  rights and remedies, while managers need to better understand
because Ginnie Mae could not provide adequate support for us                prohibitions against retaliating against whistleblowers. To assist
to test these asset balances. We also expressed a disclaimer of             in this effort, HUD OIG has established a strong Whistleblower
opinion on Ginnie Mae’s stand-alone financial statements.                   Ombudsman Program that focuses on outreach and training.
   During the first half of fiscal year 2015, the Office of Investigation   In addition, we have worked with the Department to present
completed 156 investigations to improve departmental operations             whistleblower training in coordination with the Department’s
and address program abuses, recovering $38.5 million. We                    ethics training. All new and current HUD employees are required
continue to focus on HUD’s performance and accountability                   to attend whistleblower training.
in single-family and public and Indian housing, both significant               I would like to express my gratitude to Congress and the
concerns for the Department and taxpayers.                                  Department for their sustained interest and commitment
   In one single-family case, a vice president and two loan                 to improving HUD’s programs. I also want to express my
officers were sentenced to prison terms ranging from 24 to                  sincere admiration to the staff of HUD OIG for its outstanding
30 months, and a branch manager was sentenced to 2 years                    accomplishments and dedication to our mission. Through
probation following their conviction of mortgage fraud. They                our collective effort, HUD OIG has achieved its annual goals,
were also ordered to pay $24 million in restitution to HUD.                 fulfilled its mission and responsibilities to its stakeholders, and
These conspirators submitted false information involving                    had a significant and positive impact on the Department and
Federal Housing Administration (FHA) loans.                                 our communities.
     During a joint investigation between the Office of Investigation
and the Office of Audit, it was determined that HUD’s Office of
Public and Indian Housing (PIH) misused the Intergovernmental
                                                                                 David A. Montoya | Inspector General
TRENDING


WHISTLEBLOWER OMBUDSMAN PROGRAM

The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), continues
to stress the importance of a strong Whistleblower Protection Program and recognizes that whistleblowers are
a crucial source of information about waste, fraud, and abuse. Whistleblowing has become more high profile
in recent times, and the poor treatment suffered by whistleblowers has been highlighted in the press. HUD
OIG strives to create an environment in which allegations of waste, fraud, and abuse can be freely reported
without fear of reprisal. One important aspect of HUD OIG’s Whistleblower Protection Program ensures
that HUD employees are educated about prohibitions against retaliating against Federal whistleblowers
and that employees understand their specific rights and remedies. Within the last 6 months, the HUD OIG
Whistleblower Ombudsman Program has focused on outreach and training. All HUD employees were directed
to attend mandatory whistleblower training in October of 2014. The training was presented live and then
posted on our whistleblower Web page. HUD Secretary Julián Castro introduced the training and stressed its
importance. This same training is incorporated into HUD’s new employee training, with required viewing
within 30 days after coming onboard. It is also included in HUD’s supervisor training series. Our tracking of
complaints coming into our whistleblower mailbox and via telephone is captured. The following chart reflects
the volume and disposition of complaints received.


   Number of complaints received                                                                                                                80

   Number of complainants asserting whistleblower status4                                                                                       71

   Employee5 complaints referred for investigation to the HUD OIG Office of Investigation (OI)                                                  16

   Employee complaint investigations opened by OI                                                                                               10

   Complaints declined by OI                                                                                                                     3

   Complaints currently under review by OI                                                                                                       3

   Employee complaint investigations closed by OI                                                                                                1


HUD hosted an Open Government Open House for all of its employees in March of this year. The
Whistleblower Ombudsman Program hosted a booth and provided brochures for HUD employees.
      The Whistleblower Ombudsman Program continues to work to find opportunities to highlight how
whistleblower disclosures have the potential to save billions of taxpayer dollars. Whistleblowers play a critical
role in keeping our Government honest, efficient, and accountable.




4 Many complainants raise questions regarding treatment by housing authorities following alleged wrongdoing by the same housing authority. They define themselves
as whistleblowers. These complaints are referred to our hotline for appropriate referral and disposition.
5 Employee complaints are those complaints received from employees, potential employees, and former employees of HUD as well as employees of contractors,
subcontractors, and grantees.
TABLE OF CONTENTS
Chapter 1 – Single-Family Programs.............................................................................................................. 12
Audit........................................................................................................................................................................................... 12
Investigation............................................................................................................................................................................. 13



Chapter 2 – Public and Indian Housing Programs........................................................................................ 16
Audit...........................................................................................................................................................................................16
Investigation.............................................................................................................................................................................19



Chapter 3 – Multifamily Housing Programs.................................................................................................. 21
Audit........................................................................................................................................................................................... 21
Investigation.............................................................................................................................................................................22



Chapter 4 – Community Planning and Development Programs................................................................. 24
Audit...........................................................................................................................................................................................24
Investigation............................................................................................................................................................................ 26



Chapter 5 – Disaster Relief Programs............................................................................................................. 28
Audit.......................................................................................................................................................................................... 28
Investigation............................................................................................................................................................................ 29


Chapter 6 – Other Significant Audits and Investigations............................................................................ 31
Audit........................................................................................................................................................................................... 31
Investigation.............................................................................................................................................................................32


Chapter 7 – Joint Civil Fraud Initiatives........................................................................................................ 34

Chapter 8 – Evaluation Initiatives.................................................................................................................. 37

Chapter 9 – Legislation, Regulation, and Other Directives......................................................................... 38

Chapter 10 – Audit Resolution........................................................................................................................ 41

Appendix 1 – Peer Review Reporting............................................................................................................. 55

Appendix 2 – Audit Reports Issued................................................................................................................. 56

Appendix 3 – Tables.......................................................................................................................................... 57

OIG Telephone Directory................................................................................................................................. 82

Acronyms List.................................................................................................................................................... 85

Reporting Requirements.................................................................................................................................. 87
SEMIANNUAL REPORT TO CONGRESS




   ONE             SINGLE-FAMILY PROGRAMS




AUDIT

The Federal Housing Administration (FHA) single-family programs provide mortgage insurance to mortgage
lenders that, in turn, provide financing to enable individuals and families to purchase, rehabilitate, or construct
homes. Some of the highlights from this semiannual period are noted below:



STRATEGIC INITIATIVE 1: CONTRIBUTE TO THE REDUCTION OF FRAUD
IN SINGLE-FAMILY INSURANCE PROGRAMS

                  Key program results                                       Questioned costs                              Funds put to better use

         Audit                         2 audits6                              $ 1,486,544,478                                     $666,310,336




AUDIT OF FHA FISCAL YEARS 2014 AND 2013 FINANCIAL STATEMENTS
In accordance with the Chief Financial Officers Act of 1990 (Public Law 101-576) as amended, the U.S.
Department of Housing and Urban Development, Office of Inspector General (HUD OIG), is responsible for
conducting the annual financial statement audit of FHA.  This work includes the audit of FHA’s balance
sheets as of September 30, 2014 and 2013, and the related statements of net costs and changes in net
position, the combined statements of budgetary resources for the years then ended, and the related notes to
the financial statements. 

      HUD OIG conducted this audit in accordance with U.S. generally accepted government auditing standards
and Office of Management and Budget Bulletin 14-02 as amended, Audit Requirements for Federal Financial
Statements.  Those standards require that OIG plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for its findings and conclusions based on its audit objectives. 
      OIG believes that the evidence obtained provides a reasonable basis for its findings and conclusions based on
its audit objectives.  In OIG’s opinion, FHA’s fiscal years 2014 and 2013 financial statements were presented fairly, in
all material respects, in accordance with the generally accepted accounting principles for the Federal Government.


6 The statistics shown in this chapter highlight values related to the financial audits of the FHA and Government National Mortgage Association programs. All other
financial-related audits and their related statistics are located in Chapter 6, Other Significant Audits and Investigations.




12
                                                                                  CHAPTER ONE SINGLE-FAMILY PROGRAMS



    Additionally, the audit disclosed one material weakness, two significant deficiencies in internal control,
and one instance of noncompliance with applicable laws and regulations. This audit resulted in nearly
$1.5 billion in questioned costs related to more than 57,000 paid partial claims, for which no corresponding
mortgage notes were obtained by FHA from the insured lenders to support the claim payments, and $5.5
million in funds to be put to better use, representing the amount of court settlement funds that FHA failed to
establish as accrued receivables. (Audit Report: 2015-FO-0001)




AUDIT OF GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS 2014
AND 2013 FINANCIAL STATEMENTS
HUD OIG audited the Government National Mortgage Association’s (Ginnie Mae) fiscal year 2014 financial
statements, including Ginnie Mae’s internal control and compliance with selected provisions of laws and
regulations applicable to Ginnie Mae.  OIG contracted with the independent certified public accounting firm
of CliftonLarsonAllen LLP to audit Ginnie Mae’s fiscal year 2013 financial statements.  CliftonLarsonAllen was
responsible for its audit report and the conclusions expressed in that report. 
    In regard to the fiscal year 2014 audit, OIG was unable to obtain sufficient, appropriate evidence to
express an opinion on the fairness of the $6.6 billion in nonpooled loan assets from Ginnie Mae’s defaulted
issuers’ portfolio and $735 million in liability for loss on the mortgage-backed securities program guaranty. 
Additionally, Ginnie Mae improperly accounted for FHA reimbursable costs as an expense instead of
capitalizing the costs as an asset. This error resulted in the misstatement of the asset and net income.  Overall,
the issues cited were tied to problems associated with the acquisition and management of a multi-billion-
dollar defaulted issuers’ portfolio, which is a noncore segment of Ginnie Mae’s business.  Due to the scope
limitation in OIG’s audit work and the effects of material weaknesses in internal control, OIG was not able to
obtain sufficient, appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s fiscal year 2014
financial statements.  Accordingly, it did not express an opinion on those statements.
    OIG’s review noted four material weaknesses and one significant deficiency regarding internal controls
over financial reporting. Its audit recommendations were directed toward strengthening Ginnie Mae’s
governance of its financial operations. (Audit Report:  2015-FO-0003)



INVESTIGATION

PROGRAM RESULTS

  Administrative-civil actions                                      91

  Convictions-pleas-pretrial diversions                             78

  Financial recoveries                                         $29,630,465




LOAN OFFICER SENTENCED FOR MORTGAGE FRAUD
A former loan officer was sentenced in U.S. District Court to 37 months incarceration and 2 years supervised
release and ordered to pay $410,000 in restitution to FHA following his conviction of making false statements
on mortgage loan applications.  From August 2009 through November 2010, the loan officer conspired with
others to provide false information on FHA loan documents to qualify borrowers.  This investigation was
conducted by HUD OIG, the Federal Bureau of Investigation (FBI), and the Indiana State Police. (Fort Wayne, IN)



                                                                                                                 13
SEMIANNUAL REPORT TO CONGRESS



DEVELOPER SENTENCED IN LARGE-SCALE MORTGAGE FRAUD CONSPIRACY
A developer was sentenced in U.S. District Court to 51 months incarceration followed by 60 months supervised
release following his conviction of conspiracy to commit bank fraud and wire fraud.  From mid-2006 through
December 2010, the developer, who owned or controlled several real estate properties in the Miami area, enlisted
mortgage brokers and other industry professionals to recruit straw buyers to fraudulently purchase condomini-
ums by providing false information on loan documents as well as advancing the borrowers cash to close through
third parties.  Many of those mortgages resulted in foreclosure. Losses to FHA totaled $1 million. This investiga-
tion was conducted by HUD OIG and the Federal Housing Finance Agency (FHFA) OIG. (Miami, FL)



CONSULTANTS SENTENCED IN LOAN MODIFICATION SCAM
The owners of a foreclosure rescue business, who are members of a sovereign citizen movement, were each
sentenced to 9 years incarceration and 5 years supervised release and ordered to pay $1.08 million in restitu-
tion, with $384,468 payable to FHA, following their convictions of conspiracy to commit wire fraud, mail fraud,
and Social Security fraud. From August 2010 through April 2012, the owners, who also fraudulently represent-
ed that they were lawyers, preyed on financially distressed homeowners throughout the country by claiming to
refinance existing home loans, conduct necessary legal processes, contact relevant parties, and implement
administrative procedures.  The owners convinced homeowners to stop making payments to their lenders,
make payments to them, and not communicate with their lenders.  Twenty-one of the properties involved in
this scheme were FHA-insured mortgages totaling approximately $2.4 million. Losses to FHA totaled $384,468. 
This investigation was conducted by HUD OIG, the FBI, the U.S. Secret Service (USSS), the Social Security
Administration (SSA) OIG, the Johnson County District Attorney’s Office, and the Kansas City, MO, Police
Department.  (Kansas City, MO) 



INVESTOR SENTENCED IN MORTGAGE FLIPPING SCHEME
An investor was sentenced in U.S. District Court to 97 months incarceration and 5 years supervised release and
ordered to pay $478,534 in restitution to HUD following his conviction of conspiracy to commit bank fraud,
mail fraud, and money laundering. The investor orchestrated a mortgage fraud scheme that resulted in losses
to lenders of approximately $5.7 million.  From June 2005 through July 2010, the investor and others conspired
to defraud banks and mortgage lenders by recruiting straw borrowers and providing false information in
support of the mortgage applications. The scheme involved more than 50 houses. The investor purchased
properties in either his own name, the name of a limited liability corporation in which he had an interest, or
the name of a co-conspirator. He then recruited borrowers to purchase the properties.  The investor also
engaged in a money laundering conspiracy with a closing attorney, who disbursed fraudulently obtained loan
proceeds to private lenders that had loaned the investor money to purchase the properties.  This investigation
was conducted by HUD OIG, the FBI, the Internal Revenue Service – Criminal Investigation (IRS-CI), and the
U.S. Postal Inspection Service (USPIS). (Hartford, CT)



$24 MILLION IN RESTITUTION ORDERED FOR MORTGAGE FRAUD SCHEME
A vice president, two loan officers, and a branch manager of a modular housing retailer were sentenced in
U.S. District Court following their convictions of conspiracy to defraud the United States through a mortgage
fraud scheme. The vice president was sentenced to 24 months incarceration and ordered to pay $24 million in
restitution to HUD. One loan officer was sentenced to 30 months incarceration and ordered to pay $6 million
in restitution to HUD. A second loan officer was sentenced to 24 months incarceration and ordered to pay $5
million in restitution to HUD. The branch manager was sentenced to 2 years probation and ordered to pay




14
                                                                                 CHAPTER ONE SINGLE-FAMILY PROGRAMS



$4 million in restitution to HUD. From February 2004 to 2009, the conspirators and others submitted false
information involving FHA loans to qualify borrowers, often without the borrowers’ knowledge.  As a result of
this scheme, HUD experienced losses of more than $23 million.  This investigation was conducted by HUD
OIG, USPIS, the U.S. Department of Agriculture OIG, the North Carolina Attorney General’s Office, the North
Carolina State Bureau of Investigation, the North Carolina Commissioner of Banks, and the North Carolina
Department of Justice. (Statesville, NC)

BUSINESS OWNER SENTENCED FOR MORTGAGE FRAUD
A real estate business owner was sentenced in U.S. District Court to 6 years incarceration and 3 years
supervised release and ordered to pay $1.53 million in restitution, with more than $700,000 payable to FHA,
following a conviction of wire fraud, money laundering, and theft of government funds. From 2007 through
2009, the business owner engaged in a mortgage fraud scheme in which mortgage lenders loaned cash to
borrowers to obtain cashier’s checks for closings. The loan applications were falsified to reflect that the
borrowers were making the downpayment, although the funds were supplied by the business owner. As part of
the scheme, the business owner received funds for her fee and reimbursement for the funds advanced, neither
of which was disclosed to the lenders. The investigation identified 45 fraudulent loans, which included 21
FHA-insured loans. This investigation was conducted by HUD OIG, IRS-CI, and SSA OIG. (Kansas City, MO)



MULTIPLE DEFENDANTS SENTENCED IN MORTGAGE FRAUD CONSPIRACIES
Three real estate agents and an associate were sentenced in U.S. District Court for their roles in two separate
mortgage fraud schemes involving multiple co-conspirators. One real estate agent was sentenced to 57
months incarceration and 5 years supervised release and ordered to pay more than $2.4 million in restitution,
with $337,418 payable to FHA. Another real estate agent was sentenced to 5 months incarceration, 5 months
home confinement, and 3 years supervised release and ordered to pay $352,091 in restitution, with $164,090
payable to FHA. The third real estate agent was sentenced to 33 months incarceration and 5 years supervised
release and ordered to pay $999,726 in restitution, with $168,055 payable to FHA. The associate was sentenced
to 21 months incarceration and 24 months supervised release and ordered to pay $999,726 in restitution, with
$168,055 payable to FHA. From March 2007 through November 2008, several of the conspirators were involved
in two separate schemes to defraud FHA, the Federal Home Loan Mortgage Corporation (FHLMC), and
lenders. The first scheme involved the use of false information, including stolen or false identities, to secure
mortgage loans. The other scheme involved the use of a straw purchaser to obtain financing as an owner-oc-
cupant when the properties were immediately rented out to HUD-subsidized tenants. The false information
used in both conspiracies was supplied by the owner of a real estate company, who was convicted of financial
fraud. The owner would sell false credit histories with backdated lines of credit that were used to convince
lenders to issue mortgage loans. The total loss involving the individuals charged in the two conspiracies was
approximately $3.36 million and involved 14 properties, 7 of which were FHA insured. Three of the FHA-in-
sured loans were indemnified, and FHA suffered a loss of $501,508 on the remaining four properties. FHLMC
suffered a loss of more than $330,000, and lenders suffered losses of more than $2.5 million. This investigation
was conducted by HUD OIG, FHFA OIG, the U.S. Department of Homeland Security OIG, the U.S. Department
of the Treasury OIG, and USSS. (Greenbelt, MD)




                                                                                                                   15
SEMIANNUAL REPORT TO CONGRESS




 TWO          PUBLIC AND INDIAN
              HOUSING PROGRAMS



AUDIT

The U.S. Department of Housing and Urban Development (HUD) provides grants and subsidies to more than
3,100 public housing agencies (PHA) nationwide. Many PHAs administer both public housing and Section 8
programs. HUD also provides assistance directly to PHAs’ resident organizations to encourage increased resident
management entities and resident skills programs. Programs administered by PHAs are designed to enable
low-income families, the elderly, and persons with disabilities to obtain and reside in housing that is safe, decent,
sanitary, and in good repair. Some of the highlights from this semiannual period are noted below.



AUDITS

STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF
ERRONEOUS PAYMENTS IN RENTAL ASSISTANCE

              Key program results                    Questioned costs                Funds put to better use

      Audit                8 audits                      $2,042,018                       $455,876,648




SECTION 8 HOUSING CHOICE VOUCHER PROGRAM
HUD’s Office of Inspector General (OIG) audited the Housing Choice Voucher program of the Chicago Housing
Authority’s Moving to Work (MTW) program, in Chicago, IL, to determine whether the Authority complied
with its MTW agreement, HUD’s requirements, and its own policies for the use of exception payment stan-
dards for its Housing Choice Voucher program.

     The Authority lacked documentation to support that its policy increasing the exception payment
standards up to 300 percent of HUD’s 50th percentile rents was reasonable and cost effective.  As a result,
HUD and the Authority lacked assurance that the housing assistance paid for program households using the
exception payment standard amounts was appropriate.  The Authority could pay nearly $5 million in housing
assistance over the next year for households that exceed 110 percent of HUD’s 50th percentile rents.




16
                                                                     CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS



    OIG recommended that HUD require the Authority to (1) conduct an analysis to determine whether its
exception payment standards exceeding 110 percent of HUD’s 50th percentile rents were reasonable and cost
effective and provide the results of the analysis, along with support, to HUD for review and approval and (2)
reimburse its program from non-Federal funds for the excess housing assistance paid for these households.
(Audit Report:  2015-CH-1001)




PUBLIC HOUSING
HUD OIG audited the Housing Authority of the City of Taylor, TX, to determine whether the Authority
operated its public housing and related grant programs in accordance with HUD requirements and whether a
complainant’s allegations were valid.  Specifically, the complainant alleged that the former executive director
gave away, sold, or transferred Authority-owned properties to other entities.  HUD identified additional
concerns regarding ineligible Section 8 Homeownership Voucher Program participants, unsupported salaries
for employees working at multiple properties, and improper expenditures by a former executive director.
    The Authority did not implement adequate policies and procedures and did not properly manage its
public housing and related grant programs in accordance with HUD requirements. Specifically, it (1) did
not properly account for its funds, (2) allowed director 1 to improperly transfer assets, (3) paid unsupported
salaries to employees who worked on multiple activities, (4) allowed director 1 to transfer funds to lease and
purchase a parking lot the Authority already owned, and (5) allowed director 2 to circumvent financial and
procurement controls.  In addition, the Authority violated the conflict-of-interest provisions of the Section 8
Homeownership Voucher Program and the HOME Investment Partnerships Program (HOME). As a result, it
lost control and possession of a $255,000 property it owned, lost control of two component units with net asset
values of more than $1.7 million, and incurred more than $392,000 in questioned costs.
    OIG recommended that HUD’s Office of Public Housing require the Authority to (1) implement
controls, policies, and procedures; (2) correct its books and records; (3) take action to reclaim properties;
and (4) support or repay questioned costs totaling more than $392,000. OIG also recommended that HUD’s
Departmental Enforcement Center take appropriate administrative sanctions.  OIG further recommended
that HUD’s Associate General Counsel for Program Enforcement determine whether legal sufficiency exists
to pursue remedies under the Program Fraud Civil Remedies Act (31 U.S.C. (United States Code) 3801-3812),
civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against director 1 and the Section
8 program manager for submitting false claims for Section 8 Homeownership Voucher Program and HOME
program assistance payments. (Audit Memorandum: 2015-FW-1801)




HUD OIG audited the Freeport Housing Authority in Freeport, NY, regarding the administration of its low-rent
housing and home-ownership programs to determine whether the Authority administered the programs in
accordance with HUD’s regulations.
    The Authority did not administer its low-rent housing and home-ownership programs in accordance with
HUD’s regulations.  Specifically, former Authority officials did not (1) maintain adequate records to support
the proper procurement of services, including justifications for not using customary procurement procedures;
(2) administer its home-ownership program in compliance with the HUD-approved home-ownership plan;
(3) comply with admissions and occupancy administrative requirements; and (4) implement financial and
general administrative practices that were consistent with requirements.  As a result, officials could not provide
documentation to show that they spent more than $1 million in Federal funds for properly procured services.




                                                                                                                  17
SEMIANNUAL REPORT TO CONGRESS



     Further, officials could not ensure the proper use of more than $1.25 million in home-ownership sale
proceeds.  Therefore, some proceeds may have been improperly spent, depriving the Authority of funds
that could have been used to complete the sale of all scattered-site properties under the program.  Former
Authority officials also lacked records to support the integrity of the Authority’s tenant selection process and
financial controls to ensure the proper allocation and disbursement of nearly $271,000 in Federal funds.           
     OIG recommended that HUD require Authority officials to (1) implement controls to ensure that the
emergency procurement procedures in the Authority’s procurement policy comply with Federal regulations
and are consistently followed, (2) provide supporting documents for the use of home-ownership program sale
proceeds, (3) maintain records to show the proper selection of applicants from the Authority’s waiting lists,
and (4) develop and implement financial controls to ensure the proper allocation and disbursement of funds.
(Audit Report: 2015-NY-1002)




LOBBYING ACTIVITIES
HUD OIG audited HUD’s oversight of PHAs’ lobbying activities to determine whether it was adequate to
ensure that PHAs complied with Federal lobbying disclosure requirements and restrictions.
     HUD policies generally did not ensure that the PHAs that lobbied complied with Federal lobbying disclosure
requirements and restrictions.  Only 12 of about 3,300 PHAs were reported to have engaged in lobbying activities
during the audit period.  However, of the 12 PHAs reported to have engaged in lobbying activities, 9 spent $2.5
million on lobbying activities that they failed to disclose as required.  Four of the nine PHAs were participants in
HUD’s MTW program and spent $1.5 million on undisclosed lobbying activities.  Therefore, the risk of violations
appeared to be greater at PHAs participating in the MTW program.  Three of the MTW PHAs incorrectly certified
that they had not used Federal funds for lobbying.  Also, HUD could not provide all of the required lobbying
certifications and disclosures for the 12 PHAs on which lobbyists had reported during the review period.  Because
HUD failed to implement adequate policies to monitor PHAs’ compliance with lobbying requirements, (1) three
PHAs improperly spent nearly $129,000 in Federal funds on lobbying activities, (2) HUD lacked assurance that
other PHAs did not spend Federal funds on lobbying activities or violate other lobbying-related requirements,
and (3) HUD risked creating an appearance of a lack of transparency.
     OIG recommended that HUD require corrective action and pursue administrative sanctions, as
appropriate, to address PHAs’ violations of Federal lobbying disclosure requirements and restrictions and
implement additional control policies or procedures to ensure that PHAs comply with lobbying disclosure
requirements and restrictions. (Audit Report: 2015-PH-0001)




COMMUNITY SERVICE AND SELF-SUFFICIENCY REQUIREMENT
HUD OIG audited HUD’s monitoring of the community service and self-sufficiency requirement (CSSR) to
determine the extent to which HUD subsidized public housing units occupied by noncompliant tenants and
housing for tenants whose CSSR status was misreported.
     Of nearly 550,000 potentially CSSR-eligible units nationwide, HUD subsidized housing for 106,000 units
occupied by noncompliant tenants.  Of the nearly 740,000 adult tenants living in these units, HUD’s system
contained incorrect CSSR status codes for 201,000.  As a result, HUD paid more than $37 million in monthly
subsidies for public housing units occupied by noncompliant tenants that otherwise could have housed
compliant households.




18
                                                                      CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS



    OIG recommended that HUD develop and implement a written monitoring policy for CSSR to ensure that
PHAs comply with the Quality Housing and Work Responsibility Act of 1998 so that more than $448.5 million
in public housing operating subsidies will be put to better use over the next year.  OIG also recommended that
HUD create clarifying guidance for PHAs, develop training, apply penalties or sanctions against PHAs that
house ineligible households, produce improved monitoring reports for field offices, and fix the error codes
resulting from form HUD-50058 submissions. (Audit Report:  2015-KC-0001)




REVIEW OF INTERGOVERNMENTAL PERSONNEL ACT APPOINTMENT
HUD OIG reviewed whether a conflict of interest existed within the HUD Office of Public and Indian Housing
(PIH). Specifically, former Assistant Secretary for Public and Indian Housing Sandra B. Henriquez appointed
Debra Gross, a former lobbyist and the deputy director of the Council of Large Public Housing Authorities
(CLPHA), a housing industry group, to be responsible for PIH’s Office of Policy, Program, and Legislative
Initiatives. The audit objectives were to determine whether (1) HUD complied with requirements in obtaining
the services of the deputy director, (2) a conflict of interest existed under this arrangement, and (3) HUD took
appropriate actions to mitigate the apparent conflict of interest.
    Assistant Secretary Henriquez inappropriately used the Intergovernmental Personnel Act (IPA) to appoint
CLPHA’s deputy director as HUD’s Deputy Assistant Secretary for Policy, Program, and Legislative Initiatives.
In doing so, she created an inherent conflict of interest because she placed the deputy director of an industry
group in charge of PIH’s policy-making division, the division responsible for developing and coordinating the
regulations applicable to the entities that CLPHA represents. HUD’s lack of oversight in the IPA agreement
process allowed this inherent conflict of interest to occur without a prior ethical review by HUD’s Office of
General Counsel. Additionally, HUD did not obtain required financial disclosure reports from the deputy
director, failed to provide the deputy director with required ethics training, and allowed her to hire permanent
HUD employees. In her HUD policy-making role, it appeared that the deputy director supported the public
housing industry’s regulation relief agenda at HUD while retaining her job at CLPHA. Apparent lobbying
efforts by CLPHA and other housing industry groups during this period further complicated the matter. Due
to the inherent conflict of interest and HUD’s failure to recognize and mitigate it, HUD cannot know whether
the policy decisions enacted during the deputy director’s tenure were inappropriately influenced or in the best
interest of HUD and all of its stakeholders.
    OIG recommended that HUD (1) establish and implement procedures to use IPA agreements responsibly
and ensure that conflicts of interest do not exist and (2) perform an independent review of the deputy
director’s actions regarding policy making to determine whether they compromised HUD’s integrity or
objectivity in managing, monitoring, and evaluating PIH programs. (Audit Memorandum: 2015-FW-0801)




INVESTIGATION

  Administrative-civil actions                                          70

  Convictions-pleas-pretrial diversions                                 86

  Financial recoveries                                               $4,367,194




                                                                                                                 19
SEMIANNUAL REPORT TO CONGRESS



MAN SENTENCED FOR HIS ROLE IN IDENTITY THEFT CONSPIRACY
The husband of the former onsite manager of the Clinton-Peabody Public Housing Complex was sentenced in
U.S. District Court to 30 months incarceration and 36 months supervised release and ordered to pay $16,000 in
restitution following his conviction of conspiracy to commit identity theft and aggravated identity theft.  The former
onsite manager was previously sentenced to 12 months and 1 day incarceration and 3 years supervised release
and ordered to pay $113,000 in restitution.  From December 2011 through May 2012, the former manager of the
Complex, who was under contract employment by the St. Louis Housing Authority, used her position to steal Social
Security numbers and other personally identifying information of Authority public housing applicants and tenants,
which were then used to file false tax returns and obtain the tax refunds.  This investigation was conducted by HUD
OIG and the Internal Revenue Service – Criminal Investigation. (St. Louis, MO)



FINANCIAL ANALYST SENTENCED FOR EMBEZZLEMENT
A financial analyst for a company contracted to administer the Housing Choice Voucher program for the Mi-
ami-Dade Housing Agency was sentenced in U.S. District Court to 30 months incarceration and 2 years super-
vised release and ordered to pay $83,944 in restitution following her conviction of theft of government funds and
aggravated identity theft. From June 2013 through February 2014, the financial analyst, who was responsible for
distributing program-funded debit cards to landlords, took two debit cards issued in the names of landlords who
had recently left the program. The financial analyst then funded the cards, as if the landlords were still active
participants, and used them for personal gain. This investigation was conducted by HUD OIG. (Miami, FL)



FORMER INSPECTOR PLEADS GUILTY TO THEFT
A former inspector with the Union City Community Development Agency pled guilty in U.S. District Court to
conspiracy to commit theft of government funds. Between April 2007 and July 2011, the inspector conspired
with contractors to submit higher, phony bids from fictitious construction competitors so that the collusive
contractors would win the bid for the Agency projects. HUD’s losses exceeded $400,000. This investigation
was conducted by HUD OIG and the Federal Bureau of Investigation.  (Newark, NJ)




20
                                                                         CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS




  THREE          MULTIFAMILY HOUSING PROGRAMS




In addition to multifamily housing developments with U.S. Department of Housing and Urban Development
(HUD)-held or HUD-insured mortgages, HUD subsidizes rents for low-income households, finances the
construction or rehabilitation of rental housing, and provides support services for the elderly and handicapped.
Some of the highlights from this semiannual period are shown below.



AUDIT

STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF
ERRONEOUS PAYMENTS IN RENTAL ASSISTANCE

             Key program results                   Questioned costs               Funds put to better use

     Audit                3 audits                      $619,889                        $10,036,763



REVIEW OF GLENBROOK MANOR MANAGEMENT ACTIVITIES
HUD’s Office of Inspector General (OIG) audited the multifamily project, Glenbrook Manor, in Stamford,
CT, to determine whether it spent project funds for eligible activities and for costs that were reasonable and
supported. OIG also wanted to determine whether surplus cash was properly calculated and deposited into
the project’s residual receipts account.
    Glenbrook Manor could not always show that project costs were eligible and supported in accordance
with HUD requirements.  Specifically, its management agent did not ensure that project costs paid through the
agent’s revolving fund and salaries paid in 2011 were supported.  In addition, surplus cash was not properly
calculated and deposited into the project’s residual receipts account as required by its regulatory agreement. 
As a result, officials paid nearly $497,000 in unsupported costs and did not deposit more than $61,000 in
surplus cash into the residual receipts account as required.
    OIG recommended that HUD require Glenbrook Manor officials to (1) provide support showing that the
nearly $240,000 liability to the agent’s revolving fund and the $200,000 transferred to the agent’s revolving fund
represented expenses for eligible project costs or repay the transferred funds and remove the liability from the
project’s books, (2) provide documentation to support that more than $57,000 spent in 2011 was for eligible
project salaries and repay any unsupported amounts from non-Federal funds, and (3) deposit the surplus cash
into the residual receipts account. (Audit Report: 2015-BO-1001)




                                                                                                                 21
SEMIANNUAL REPORT TO CONGRESS




INVESTIGATION
  Administrative-civil actions                                          14

  Convictions-pleas-pretrial diversions                                  5

  Financial recoveries                                              $1,231,054



OWNER OF A MORTGAGE SUBSERVICING COMPANY SENTENCED
FOR MONEY LAUNDERING
The owner of a mortgage company was sentenced to 97 months incarceration and 5 years supervised release
and ordered to pay $7.8 million in restitution to the trustee and investors following his conviction of wire fraud
and money laundering. From January 2008 through July 2010, the owner was responsible for the day-to-day
management of mortgage loan accounts, including the receipt and crediting of mortgage payments, handling
of escrow accounts, and forwarding of payments to investors in mortgage pools. Two of these mortgage pools
contained seven Federal Housing Administration (FHA) commercial mortgages (under the Rental Assistance
Payment Program, Section 236) in which investors purchased shares. The owner misappropriated funds
provided to him by the borrowers of the FHA-insured loans in the mortgage pools and concealed this misappro-
priation by producing and transmitting fraudulent remittance reports to the trustee and investors in these two
pools, which reflected that payments had been made. In addition to not passing monthly payments through the
pool of investors, the owner received payoff funds for several of the properties and did not forward those payoff
funds to investors. The owner continued to make monthly payments to investors as if monthly mortgage
payments were being received from borrowers. The owner used some proceeds from the two mortgage pools
to pay off a personal home equity line of credit. This investigation was conducted by HUD OIG and the
Federal Bureau of Investigation. (Davenport, IA)

MULTIFAMILY PROPERTY OWNER SENTENCED FOR EQUITY SKIMMING
The former owner of an identity-of-interest HUD management agent was sentenced in U.S. District Court to
78 months incarceration and ordered to pay $543,000 in restitution to HUD and more than $1.2 million to
other victims following a conviction of equity skimming for diverting more than $500,000 in rents, assets,
proceeds, and income derived from an FHA-insured multifamily housing development. From February 2008,
through June 2009, the owner violated HUD’s regulatory agreement by using project funds for a luxury car
purchase, a personal PayPal account, and other non-HUD project expenses in lieu of paying the HUD-insured
mortgage. The owner further admitted to violating terms of his pretrial release when he obtained a new
passport and fled the country for the United Kingdom before his March 2013 trial. This investigation was
conducted by HUD OIG. (Chicago, IL)



SECTION 8 MANAGER CAUGHT EMBEZZLING FUNDS FROM MULTIPLE VICTIMS
A former manager of three Section 8 project-based properties was sentenced in U.S. District Court to 366
days incarceration and 3 years probation and ordered to pay approximately $180,000 in restitution to HUD
following a conviction of embezzlement and theft of public funds. From October 2011 through October
2013, the manager falsified tenant income and asset information on tenant recertifications, which caused
HUD to make a greater housing assistance payment than should have been required.  While HUD was
making maximum housing assistance payments on the tenants’ behalf, the manager continued to accept
full monthly payments from each tenant, which she deposited into her personal bank account. The manag-




22
                                                                    CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS



er embezzled approximately $180,000 by depositing 534 tenant checks into her personal accounts before her
employment was terminated because of the theft. Immediately thereafter, the manager gained employment
at another apartment complex, where her employment was terminated when she embezzled approximately
$6,000 between November 2013 and January 2014. She altered rent payments from residents and deposited
them into her personal bank account.  The manager gained employment at a third apartment complex, but
her employment was terminated after officials learned of her history. This investigation was conducted by
HUD OIG. (Omaha, NE)




                                                                                                          23
SEMIANNUAL REPORT TO CONGRESS




  FOUR                COMMUNIT Y PL ANNING AND
                      DEVELOPMENT PROGRAMS


The Office of Community Planning and Development (CPD) seeks to develop viable communities by promoting
integrated approaches that provide decent housing, suitable living environments, and expanded economic
opportunities for low- and moderate-income persons. The primary means toward this end is the development of
partnerships among all levels of government and the private sector. Some of the highlights from this semiannual
period are shown below.



AUDIT

STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

                  Key program results                                      Questioned costs                             Funds put to better use

        Audit                         9 audits7                               $224,633,280                                      $63,043,774



The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited the
HOME Investment Partnerships Program (HOME), Section 108 Loan Guarantee Program, and Neighborhood
Stabilization Program (NSP).



HOME INVESTMENT PARTNERSHIPS PROGRAM
HUD OIG audited the HOME program of Rhode Island Housing in Providence, RI, to determine whether
Rhode Island Housing officials awarded HOME funds to grantees in a reasonable and supported manner and
whether HOME funds were disbursed in accordance with HUD rules and regulations.

      Rhode Island Housing officials disbursed HOME funds for questionable expenditures. Specifically,
they disbursed HOME funds for (1) expenses incurred before the HOME agreement was executed, (2)
expenses not included in the HOME agreement, (3) expenses that exceeded the budget allocation, and (4)
an activity for which they did not obtain a deed restriction and support all of the costs incurred.  In addition,
officials executed a HOME agreement that did not comply with Federal regulations and approved a HOME
application with inaccurate costs.  As a result, they could not assure HUD that reasonable and necessary
costs were charged to the HOME program, and more than $2.3 million in HOME funds was questioned.  In

7 The total community planning and development area audits, questioned costs, and funds put to better use amounts include any disaster recovery (two audits) type
audits conducted in the community planning and development area. The writeups for these audits may be shown separately in chapter 5 of this semiannual report.




24
                                                           CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS



addition, officials did not always properly award and support HOME funds disbursed to community housing
development organizations (CHDO).  As a result, they could not assure HUD that nearly $84,000 in HOME
funds was allocated and disbursed in compliance with HOME requirements.
    OIG recommended that HUD require Rhode Island Housing officials to reimburse HUD nearly $888,000
from non-Federal funds for ineligible costs and provide support for more than $1 million in costs.  If sufficient
support cannot be provided, officials should seek reimbursement from non-Federal funds and redistribute
$500,000 in HOME funds to other eligible HOME activities. (Audit Report:  2015-BO-1002)




SECTION 108 LOAN GUARANTEE PROGRAM
HUD OIG audited the Section 108 Loan Guarantee program of the Office of the Commissioner for Municipal
Affairs in San Juan, PR, to determine whether Section 108 funds were effectively used to meet a Community
Development Block Grant (CDBG) program national objective and provide the intended benefits and whether
borrowers complied with loan contract and HUD requirements.
    Municipal Affairs did not ensure that borrowers completed three Section 108 Loan Guarantee activities
that showed signs of slow progress.  As a result, HUD had no assurance that more than $21 million awarded
and disbursed for three Section 108-funded activities met a national objective of the CDBG program and fully
provided the intended benefits. Further, (1) borrowers used more than $1 million for ineligible expenditures
and did not support the eligibility of more than $367,000 in program disbursements, (2) loan proceeds
were not disbursed within the established timeframe, (3) borrowers did not provide HUD the required
loan collateral or establish a financial management system in accordance with HUD requirements, and (4)
investments were not fully collateralized.  As a result, HUD lacked assurance that funds were adequately
accounted for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.
    OIG recommended that HUD (1) determine the eligibility of the unsupported Section 108 program costs
and activities that showed signs of slow progress and (2) require the repayment of the ineligible expenditures.
(Audit Report: 2015-AT-1001)




NEIGHBORHOOD STABILIZATION PROGRAM
HUD OIG audited the State of Rhode Island’s NSP to determine whether the State properly administered its
program and ensured that costs incurred complied with HUD regulations.
    The State did not properly administer its NSP and ensure that costs incurred complied with HUD
regulations.  Specifically, State officials did not ensure that their subrecipients (1) had an adequate process
for selecting and approving applicants for NSP funding, (2) always funded activities that were eligible and
supported program costs, and (3) charged only eligible and supported administrative costs directly related to
NSP.  Additionally, OIG found instances of potential conflicts of interest.  As a result, HUD had no assurance
that more than $6.3 million in NSP funds was effectively and efficiently used.
    OIG recommended that HUD require State officials to (1) repay more than $1.4 million in ineligible costs,
(2) provide adequate documentation to support or repay more than $4.5 million in NSP costs, (3) support
the necessity and reasonableness of nearly $490,000 in unexpended NSP funds or reallocate the funds for
other eligible NSP activities, (4) ensure that proper affordability restrictions are put in place, (5) establish an
agreement between the State and Rhode Island Housing to define responsibilities, and (6) properly monitor
and oversee the State’s subrecipients. (Audit Report:  2015-BO-1003)




                                                                                                                      25
SEMIANNUAL REPORT TO CONGRESS




AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
HUD OIG audited HUD’s NSP to provide an overall assessment of the program, including assessing the
sufficiency of HUD’s controls and determining whether HUD had improved its controls as a result of its own
monitoring efforts as well as audits or reviews by OIG or other entities.
      HUD failed to take appropriate action regarding more than $22 million in unexpended NSP1 and NSP38
initial funding allocations. Since HUD had no assurance that these funds were used to help reduce the effects
of the foreclosure crisis in a timely manner as Congress intended, the overall effectiveness of the program may
have been lessened. 
      HUD had generally implemented sufficient controls and improvements, including providing guidance and
technical assistance, as a result of its own assessments.  However, it could improve its administration of NSP and
similar programs by effectively using OIG reports on individual grantees to identify trends programwide. 
      HUD did not effectively use trends identified from OIG reports on individual grantees that highlighted
common problems or regulatory gaps on which it could base national policy guidance or other directives.  As a
result, HUD may not have always recognized recurring issues or provided grantees the most effective guidance
for improving overall program performance.
      OIG recommended that HUD (1) provide support showing that it took action regarding more than $22
million in unexpended funds or provide adequate support showing that grantees did not miss the expenditure
deadlines, (2) work with grantees to ensure that the information reported is accurate and up to date, and (3)
adopt a best practice to use OIG audit reports to help identify potential areas for improvement programwide
for NSP and similar programs. (Audit Report:  2015-AT-0001)



INVESTIGATION
   Administrative-civil actions                                                                       31

   Convictions-pleas-pretrial diversions                                                             10

   Financial recoveries                                                                        $2,365,596




CONTRACTORS SENTENCED IN CONSPIRACY TO COMMIT THEFT OF FUNDS
Two contractors were sentenced in U.S. District Court following their convictions of conspiracy to commit
theft of government funds from New Orleans Affordable Homeownsership, an agency that received HUD
CDBG funds. One contractor was sentenced to 6 months home confinement and 12 months supervised
release and ordered to pay $173,424 in restitution to HUD. The other contractor was sentenced to 36 months
probation and ordered to pay $133,872 in restitution to HUD. From January 2005 through August 2008,
the contractors conspired with the executive director of the agency to overbill or bill for work that was not
performed and provide a kickback to the executive director.  The City of New Orleans administered the CDBG
funds disbursed by HUD.  This investigation was conducted by HUD OIG, the Federal Bureau of Investigation,
the Internal Revenue Service - Criminal Investigation, the U.S. Postal Inspection Service, and the City of New
Orleans OIG. (New Orleans, LA)




8 HUD, through CPD, provided money to local governments, nonprofits, and all 50 States through three rounds of NSP funding totaling approximately $6.82 billion. 
The three rounds of NSP funding were for stabilizing communities through the purchase and redevelopment of foreclosed-upon and abandoned homes and
residential properties.




26
                                                         CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS



CONTRACTOR SENTENCED FOR BRIBERY
A home construction contractor was sentenced in U.S. District Court to 3 years probation following his
conviction of bribery of officials of a HOME grantee.  From 2009 through 2011, the contractor had entered into
an agreement with a senior property developer to “kick back” cash payments totaling $9,600 to her in exchange
for contract awards for HOME-funded property rehabilitation work.  This investigation was conducted by
HUD OIG. (Bristol, PA)



EXECUTIVE DIRECTOR SENTENCED FOR EMBEZZLEMENT
The former executive director of the defunct CHDO, East Orange Revitalization and Development Corpora-
tion, was sentenced in Essex County Court to 5 years incarceration following her conviction of theft. From
2006 through 2009, the executive director submitted falsified invoices, acquired from a private developer, for
payment as if they were expenses incurred for the project. The executive director then routed the funds to
accounts that she controlled.  She also used her relatives, former Internal Revenue Service agents, to prepare
fraudulent financial statements for the CHDO to conceal the theft.  She used the embezzled HOME funds to
finance a lavish lifestyle that included refurnishing a former residence, taking trips to casinos and the Baha-
mas, and buying jewelry. (Essex County, NJ)




                                                                                                                  27
SEMIANNUAL REPORT TO CONGRESS




  FIVE             DISASTER RELIEF PROGRAMS


In response to disasters, Congress may appropriate additional funding as Disaster Recovery grants to rebuild the
affected areas and provide crucial seed money to start the recovery process. Since fiscal year 1993, Congress has
appropriated $47 billion to the U.S. Department of Housing and Urban Development (HUD), from which HUD
provides flexible grants to help cities, counties, and States recover from presidentially declared disasters. The
active disaster grants nationwide were allocated $44.2 billion and had nearly $32.7 billion obligated and $28.7
billion disbursed as of March 31, 2015.


                                                                                                                   Funds                   Percentage of
              Disaster                       Funds allocated                Funds obligated
                                                                                                                disbursed                     funds used

        Hurricane Sandy                         $14.2 billion                   $3.2 billion                   $2.8 billion                         20

      Hurricanes Katrina,
                                                $19.6 billion                  $19.5 billion                   $18.4 billion                        94
           Rita & Wilma

         Hurricanes Ike,
                                                 $6.1 billion                   $6.0 billion                   $4.0 billion                         66
         Gustav & Dolly

                 9-11                            $3.5 billion                   $3.4 billion                    $3.1 billion                        89

                Other                            $0.8 billion                   $0.6 billion                   $0.4 billion                         50



Keeping up with communities in the recovery process can be a challenging position for HUD. HUD’s Office
of Inspector General (OIG) continues to take steps to ensure that the Department remains diligent in assisting
communities with their recovery efforts.




AUDIT

STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

                Key program results                                       Questioned costs                             Funds put to better use

        Audit                        2 audits9                               $194,671,037                                      $40,000,000

9 The total disaster-related audits consist of community planning and development audits. The questioned costs and funds put to better use amounts relate only to
disaster-related costs.




28
                                                                                CHAPTER FIVE DISASTER RELIEF PROGRAMS




HUD OIG audited the City of New York, Office of Management and Budget’s administration of the Community
Development Block Grant Disaster Recovery (CDBG-DR) funds awarded to the City as a result of damages
caused by Hurricane Sandy to determine whether the City (1) disbursed CDBG-DR funds in accordance with the
guidelines established under the HUD-approved action plan and HUD rules and regulations and (2) maintained
effective program and financial management controls.
    City officials did not always disburse CDBG-DR funds in accordance with Federal regulations.  Specifically,
they disbursed $183 million to the City’s subrecipient for unsupported salary and fringe benefits and
unreasonable and unnecessary expenses and did not adequately monitor their subrecipient and sufficiently
document national objectives.  In addition, the City had weaknesses in its financial management controls and
allowed the disbursement without a proper review to support the claim.  As a result, City officials could not
assure HUD that the CDBG-DR funds were disbursed for eligible, reasonable, and necessary program expenses
in compliance with HUD rules and regulations.  Further, the remaining allocation of $40 million would be
considered funds put to their intended use if City officials establish adequate monitoring controls.
    OIG recommended that HUD instruct City officials to (1) provide documentation to justify the
unsupported salary and fringe benefits and associated expenses charged to the grant and (2) strengthen
controls over disbursements to ensure that all costs charged to the program are eligible and adequately
supported with source documentation in compliance with Federal regulations. (Audit Report: 2015-NY-1001)




HUD OIG audited the City of Minot, ND’s CDBG-DR program to determine whether the City complied with
Federal and local procurement requirements.
    The City did not fully comply with Federal and local procurement requirements.  It did not prepare
independent cost estimates before receiving bids or proposals for two grant administration and project
delivery services contracts and the five amendments to those contracts or for the change orders for four
construction projects.  In addition, the City did not perform debarment checks before awarding three
contracts.  The mayor of Minot signed two amendments for the 2012 grant administration and project delivery
services contract before the city council authorized the mayor to sign the documents on the City’s behalf. 
Further, one construction contract was not dated and did not have an effective date of services.
    OIG recommended that HUD (1) require the City to provide documentation demonstrating that the
overall contract price for the two grant administration and project delivery services contracts and the five
amendments to those contracts totaling more than $11.5 million was fair and reasonable and if not, require
the City to repay HUD from non-Federal funds any amount that it cannot support; (2) require the City to
provide documentation demonstrating that the overall price for the change orders for the four construction
projects totaling nearly $122,000 was fair and reasonable and if not, require the City to repay HUD from non-
Federal funds any amount that it cannot support; and (3) monitor the City to ensure that it follows its revised
Federal grant procurement policy and newly adopted procurement checklist. (Audit Report:  2015-KC-1002)




                                                                                                                 29
SEMIANNUAL REPORT TO CONGRESS




INVESTIGATION10
   Administrative-civil actions                                                                         6

   Convictions-pleas-pretrial diversions                                                                1

   Financial recoveries                                                                            $12,043



FORMER EXECUTIVE DIRECTOR SENTENCED FOR RECEIVING KICKBACKS
A former executive director of New Orleans Affordable Homeownership, an agency that received HUD CDBG
funds, was sentenced in U.S. District Court to 60 months incarceration and 36 months probation, ordered to
pay $424,107 in restitution to HUD, and fined $50,000 following a conviction of conspiracy to receive kickbacks
from an agency receiving Federal funds.  From January 2005 through August 2008, the former executive
director conspired with contractors to overpay or pay for work not done and received kickbacks from those
contractors.  The former executive director also created and provided false invoices for at least one contractor
to submit to the grand jury in an attempt to justify the overpayments.  This investigation was conducted by
HUD OIG, the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the U.S.
Postal Inspection Service, and the City of New Orleans OIG.  (New Orleans, LA)




10 Figures included in Office of Public and Indian Housing and Office of Community Planning and Development statistics




30
                                                                   CHAPTER SIX OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS




   SIX        OTHER SIGNIFICANT
              AUDITS AND INVESTIGATIONS



AUDIT

STRATEGIC INITIATIVE 4: CONTRIBUTE TO IMPROVING HUD’S EXECUTION OF
AND ACCOUNTABILITY FOR FISCAL RESPONSIBILITIES AS A RELEVANT AND
PROBLEM-SOLVING ADVISOR TO THE DEPARTMENT

              Key program results                     Questioned costs                  Funds put to better use

      Audit                 11 Audits                          -                                $119,500



The U.S. Department of Housing and Urban Development, Office of Inspector General’s (HUD OIG) more
significant audits are discussed below.



AUDIT OF HUD’S FISCAL YEARS 2014 AND 2013 FINANCIAL STATEMENTS
In accordance with the Chief Financial Officers Act of 1990 as amended, HUD OIG is required to annually audit HUD’s
consolidated financial statements and the stand-alone financial statements of the Federal Housing Administration
(FHA) and the Government National Mortgage Association (Ginnie Mae). OIG’s objective was to express an opinion
on the fairness of the financial statements in accordance with U.S. generally accepted accounting principles applica-
ble to the Federal Government.  OIG’s audit of HUD’s fiscal years 2014 and 2013 consolidated financial statements
included reviewing HUD’s internal controls and compliance with applicable laws and regulations.

    OIG expressed a disclaimer of opinion on HUD’s fiscal year 2014 consolidated financial statements because
of the significant effects of certain unresolved audit matters, which restricted OIG’s ability to obtain sufficient,
appropriate evidence to express an opinion.  These unresolved audit matters related to (1) HUD’s improper use
of cumulative and first-in, first-out budgetary accounting methods of disbursing Office of Community Planning
and Development program funds and (2) $6.6 billion in nonpooled loan assets from Ginnie Mae’s stand-alone
financial statements that OIG could not audit because Ginnie Mae could not provide adequate support for OIG
to test these asset balances. OIG identified another matter regarding unvalidated grant accrual estimates that
would have required a modification to the opinion due to materiality.  However, this matter was not pervasive.




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SEMIANNUAL REPORT TO CONGRESS




     OIG found eight material weaknesses, eight significant deficiencies in internal controls, and five instances
of noncompliance with applicable laws and regulations.  The most significant findings related to
       (1) The Office of Community Planning and Development’s noncompliance with generally accepted
          accounting principles regarding its formula grant accounting,
       (2) Continued weaknesses in the Office of Public and Indian Housing’s cash management process,
       (3) The lack of validation of grant accrual estimates,
       (4) HUD’s continued financial management system weaknesses,
       (5) FHA’s failure to recognize accounts receivable when claims to cash were established,
       (6) Material asset balances related to nonpooled loans not being auditable,
       (7) Weaknesses in Ginnie Mae’s internal controls over financial reporting, and
       (8) HUD’s and Ginnie Mae’s ineffective financial management governance.


     OIG’s recommendations on its findings were included in Audit Report 2015-FO-0002, Interim Report on
HUD’s Internal Controls Over Financial Reporting, issued December 8, 2014; Audit Report 2015-FO-0001,
Federal Housing Administration Financial Statements Audit, issued November 14, 2014; and Audit Report
2015-FO-0003, Government National Mortgage Association Financial Statement Audit, issued February 27,
2015. These audit reports included more than $1.4 billion in questioned costs and more than $666 million in
funds put to better use. (Audit Reports:  2015-FO-0004 and 2015-FO-0002)




REVIEW OF HUD’S PROCUREMENT AND ADMINISTRATION OF ITS MULTIFAMILY
SERVICING CONTRACT
HUD OIG audited HUD’s procurement and administration of its multifamily mortgage loan and property
management servicing and accounting contract to determine whether HUD officials (1) ensured that
the contract scope of services was appropriate and necessary, (2) maximized competition, (3) provided
sufficient oversight and monitoring, and (4) provided adequate communication and coordination among the
departments involved.
     While HUD officials ensured that the scope of services was appropriate and necessary, they did not always
follow applicable requirements or use best practices in the procurement and administration of HUD’s contract
for multifamily mortgage loan and property management servicing and accounting.  Specifically, HUD
officials did not sufficiently track contract payments, identify and deobligate excess funds at contract closeout,
or ensure adequate communication and coordination with the departments involved with this contract.  Also,
HUD officials did not obtain sufficient bidders, ineffectively selected the procurement method used, and did
not maximize vendor awareness and visibility for this contract.
     OIG recommended that HUD (1) deobligate nearly $10 million in excess obligations in HUD’s most recent
award of the contract for these services and ensure that these funds are put to better use and (2) implement
procedures to ensure that obligated amounts are tracked and are consistent with funding needs; consistent
oversight, accountability, and communication are promoted; best practices are followed to provide maximum
competition; and decisions are made with input from all parties involved. (Audit Report: 2015-NY-0001)




32
                                                                                 CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES




INVESTIGATION

LOAN GUARANTEE SPECIALIST SENTENCED FOR FRAUD
A former HUD Office of Native American Programs loan guarantee specialist was sentenced in U.S. District
Court to 26 months incarceration, 36 months supervised release, and 400 hours community service and
ordered to pay $843,400 in restitution to HUD following his conviction of wire fraud involving a HUD real
estate-owned property fraud scheme.  From April 2013 to April 2014, the loan guarantee specialist, in his
official capacity as a HUD employee, sold five Section 184 real estate-owned properties in California and
Florida and directed settlement agents handling the closings to send $843,400 in HUD sales proceeds to his
personal bank accounts or accounts that he controlled.  This investigation was conducted by HUD OIG and
the U.S. Postal Inspection Service. (Washington, DC)



HUD EMPLOYEE RESIGNS AFTER INVESTIGATION
A HUD multifamily realty specialist resigned his employment with HUD while under investigation after it was
discovered that he provided false information on his hiring documents, which concealed a prior termination
of employment from the New York City Housing Authority. The employee was employed by the Authority from
July to September 2010 as the director of leased housing for its public housing program. When interviewed by
HUD OIG, the employee admitted that he purposely concealed the termination because of the unfavorable
circumstances surrounding his departure. This investigation was conducted by HUD OIG. (Fort Worth, TX)



HUD OIG CONDUCTS SEX OFFENDER INITIATIVE
HUD OIG conducted a sex offender initiative, which involved the cross-referencing of HUD databases with the
Virginia and West Virginia State Police’s violent sex offender records to determine whether registered sex offenders
were receiving Federal housing assistance from HUD.  The initiative resulted in one arrest for failure to register as
a sex offender, the removal of 36 Housing Choice Voucher program recipients from HUD-assisted units, and six
referrals to the State Police for potential false statements made on recertification paperwork. (Richmond, VA)




                                                                                                                        33
SEMIANNUAL REPORT TO CONGRESS




SEVEN                 JOINT CIVIL FRAUD INITIATIVES




In recent years, the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD
OIG), has enhanced its efforts to identify and investigate civil fraud and pursue civil actions and administrative
sanctions, frequently combining efforts from its multiple disciplines to create teams of auditors, special agents,
attorneys, and data analysts to conduct civil investigations. The central hub of these efforts is HUD OIG’s Joint
Civil Fraud Division, a distinct team of forensic auditors and special agents dedicated to investigating fraud and
pursuing civil and administrative remedies.
      HUD OIG’s joint civil fraud teams work closely with the U.S. Department of Justice (DOJ), U.S. Attorney’s
Offices, HUD’s Office of General Counsel, and local prosecutors to pursue civil remedies under a variety of statutes
and regulations, including the False Claims Act; Program Fraud Civil Remedies Act; and Financial Institutions
Reform, Recovery, and Enforcement Act. HUD OIG also works with HUD’s Departmental Enforcement Center to
pursue debarments, suspensions, and limited denials of participation when appropriate.
      HUD OIG’s internal joint efforts, in conjunction with partnerships with other enforcement groups, result in
civil outcomes that are meant to help HUD recover from unwarranted damages sustained due to fraud. Some of
the highlights from this semiannual period, resulting from these joint civil fraud efforts, are noted below.



STRATEGIC INITIATIVE 1: CONTRIBUTE TO THE REDUCTION OF FRAUD
IN SINGLE-FAMILY INSURANCE PROGRAMS

PROGRAM RESULTS
   Recoveries and receivables to HUD programs or HUD program participants                                                              $396,935,478

   Recoveries and receivables for other entities                                                                                      $181,285,52211

   Civil actions                                                                                                                                 5

   Administrative sanctions                                                                                                                      1




11 This amount represents funds that relate to HUD programs but were paid to other entities rather than to HUD for its benefit, such as funds paid to the U.S. Treasury
for general government purposes. This amount does not include $540 million from the Suntrust Mortgage settlement that was designated for general consumer relief.




34
                                                                                CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES



SINGLE FAMILY


SUNTRUST MORTGAGE, INC., SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH
FHA LOAN REQUIREMENTS
HUD OIG assisted DOJ in conducting an investigation of SunTrust Mortgage, Inc.’s underwriting practices for
Federal Housing Administration (FHA)-insured loans.  SunTrust, based in Richmond, VA, has participated in
the FHA program as a direct endorsement lender since 1984.
    On June 17, 2014, DOJ and the Consumer Financial Protection Bureau, along with 49 State attorneys
general and the District of Columbia’s attorney general, filed suit against SunTrust for misconduct related
to the origination and servicing of single-family residential mortgages, based in part on OIG’s review of the
underwriting of FHA loans.  The lawsuit alleged that during the period January 2006 through March 2012,
SunTrust knowingly failed to comply with HUD regulations and requirements of the direct endorsement
lender program governing the origination and underwriting of FHA-insured loans.  FHA insured loans based
on annual and per loan certifications submitted by SunTrust that it had complied with FHA requirements. 
When the borrowers defaulted on the loans, FHA incurred substantial losses. 
    On the same day, June 17, 2014, SunTrust entered into a settlement agreement to pay $968 million to end
the lawsuit.  Of the settlement total, the FHA insurance fund was to receive $300 million, and the remaining $668
million was to be remitted to other entities involved in the suit.  As part of the settlement, SunTrust admitted certain
conduct, including endorsing for FHA insurance particular loans that did not meet underwriting requirements
and self-reporting to FHA fewer deficient loans than required based on its internal quality control reports.  On
September 30, 2014, the United States District Court for the District of Columbia entered the consent judgment,
which made SunTrust liable to pay the agreed settlement. (Memorandum: 2015-PH-1802; Office of Audit Region 3,
Joint Civil Fraud Division, and Office of Investigation Region 3 with the assistance of other offices)




METLIFE BANK, N.A., SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA
LOAN REQUIREMENTS
HUD OIG assisted DOJ, Washington, DC, and the U.S. Attorney’s Office, District of Columbia, in the civil
investigation of MetLife Bank, N.A.  MetLife has its principal place of business in Convent Station, NJ. 
MetLife became an approved direct endorsement lender under HUD-FHA’s direct endorsement program on
April 5, 2007.  The program authorizes private-sector mortgage lenders to approve mortgage loans for FHA
insurance.  Lenders approved for the program must follow various FHA requirements.  When a borrower
defaults on an FHA-insured loan underwritten and endorsed by a direct endorsement lender, the lender (or its
representative) has the option of submitting a claim to HUD to compensate the lender for any loss sustained
as a result of the default.  Therefore, once a mortgage loan is endorsed for FHA insurance, HUD insures the risk
of the borrower’s defaulting on that mortgage, which is realized if an insurance claim is submitted.
    On February 25, 2015, MetLife entered into a settlement agreement with the Federal Government to pay
$123.5 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation of certain civil
claims the Government contended that it had against MetLife.  As part of the settlement, MetLife agreed that
it engaged in certain conduct in connection with its origination; underwriting; quality control; self-reporting
of loans with unacceptable risk, fraud, or other serious violations; certification of compliance with program
requirements; and endorsement of certain single-family residential mortgage loans insured by FHA.  As a
result of MetLife’s conduct, HUD insured hundreds of loans approved by MetLife that were not eligible for
FHA mortgage insurance under the direct endorsement program and that HUD-FHA would not otherwise
have insured.  HUD incurred substantial losses when it paid insurance claims on the loans covered by the




                                                                                                                       35
SEMIANNUAL REPORT TO CONGRESS




settlement agreement.  Of the total settlement of $123.5 million, FHA will receive about $60.3 million, and
other Federal entities will receive the remaining $63.2 million. (Memorandum:  2015-CF-1803; Joint Civil
Fraud Division and Office of Investigation Region 8 with the assistance of other offices)



GOLDEN FIRST MORTGAGE CORPORATION SETTLED ALLEGATIONS OF FAILING TO
COMPLY WITH FHA LOAN REQUIREMENTS
HUD OIG assisted in an investigation into alleged violations of FHA regulations applicable to the direct
endorsement program by Golden First Mortgage Corporation and its owner.  Golden First is a former FHA-
approved mortgage lender, with its principal place of business located in Great Neck, NY.  Golden First
participated in the direct endorsement program from 1989 to 2010.  As a direct endorsement lender, Golden
First had the authority to approve mortgage loans for FHA insurance.  On April 4 and August 13, 2013, the U.S.
Attorney’s Office of the Southern District of New York filed a complaint and an amended complaint, respectively,
against Golden First and its owner for not complying with FHA requirements.  The Government alleged that from
2002 to 2010, Golden First and its owner submitted false certifications to FHA and HUD concerning compliance
with program rules and endorsed loans in violation of these rules.  As a result, the Government incurred
substantial losses in connection with loans that Golden First underwriters, including the owner, endorsed for
FHA insurance during the covered period.  The Government’s complaint further alleged that Golden First and its
owner were liable under the False Claims Act, 31 U.S.C. (United States Code) 3729 et seq.
     On December 31, 2014, the U.S. District Judge approved a settlement, in which Golden First and its
owner admitted, acknowledged, and accepted responsibility for failing to follow certain requirements of the
direct endorsement program.  To settle the matter, Golden First and its owner agreed to a judgment of $36
million against Golden First and a $300,000 payment from the owner.  Additionally, the owner is permanently
debarred from conducting business with the Federal Government. (Memorandum:  2015-CF-1802; Joint Civil
Fraud Division and Office of Investigation Region 2)



GROUP ONE MORTGAGE, INC., SETTLED ALLEGATIONS OF FAILING TO COMPLY
WITH FHA LOAN REQUIREMENTS
HUD OIG assisted the U.S. Attorney’s Office, Southern District of Florida, in the civil investigation of Group
One Mortgage, Inc.  Group One’s principal place of business is located in Jupiter, FL.  Group One has
participated in the FHA insurance program since 2004 and became a direct endorsement lender in 2005. 
     Based on OIG’s review of FHA loans underwritten by Group One, the United States contended that it had
certain civil claims against the lender arising from false claims that Group One had made to FHA as a direct
endorsement lender.  The United States alleged that Group One approved four loans for FHA insurance but
did not underwrite the loans in accordance with HUD-FHA regulations.  It further alleged that Group One did
not use due diligence to comply with HUD handbook requirements and ensure that the loans it approved on
behalf of HUD were eligible for FHA insurance.  Group One denied the allegations. 
     On November 19, 2014, Group One entered into a settlement agreement to pay $406,000 to settle
allegations that it had submitted false claims to FHA in violation of the False Claims Act, 31 U.S.C. 3729-3733,
and common law causes of action.  Of the settlement total, the FHA insurance fund was to receive nearly
$377,000, and the remaining more than $29,000 was to be paid to other Federal entities.  The parties to the
settlement agreement entered into the agreement to avoid the delay, uncertainty, inconvenience, and expense
of lengthy litigation of the alleged claims.  The parties also agreed that the settlement was neither an admission
of liability by Group One nor a concession by the United States that its claims were not well founded.
(Memorandum:  2015-CF-1801; Joint Civil Fraud Division)




36
                                                                                       CHAPTER EIGHT EVALUATION INITIATIVES




  EIGHT           EVALUATION INITIATIVES

During this reporting period, the U.S. Department of Housing and Urban Development, Office of Inspector General
(HUD OIG), Office of Evaluation (OE), expanded its capacity to evaluate HUD programs. The Integrated Data Analytics
Division was realigned within OE to allow for greater integration between data analysis specialists and evaluators.
This combination of personnel will better enable OE to use data from HUD’s major program management information
systems to identify areas of interest and conduct detailed assessments to determine the root causes of trends and
patterns. Ultimately, this joining of forces will increase OE’s operational intelligence concerning HUD programs and
associated data systems, thereby accelerating and expanding OIG’s predictive analytic capability.
     OE is headed by an Assistant Inspector General, and the office consists of three divisions and an internal quality
assurance evaluator. The Integrated Data Analytics Division, Information Technology Evaluations Division, Program
Evaluation Division, and Management Assistance Review together form a robust office focused on identifying, assessing,
and making recommendations to address some of the greatest challenges and risks facing HUD.
     OE uses a multidisciplinary, collaborative approach to review specific issues in HUD programs and operations.
Evaluation results will help HUD improve the efficiency and effectiveness of its programs and operations and
contribute to its success.



ADDITIONAL RESPONSIBILITIES OF OE INCLUDE
       • Providing data statistical sampling and analytics to support audits, evaluations, and investigations;
       • Conducting HUD’s annual Federal Information Security Management Act evaluation;
       • Evaluating HUD’s information technology (IT) initiatives;
       • Evaluating HUD’s privacy program;
       • Monitoring departmental conference spending;
       • Evaluating disaster recovery efforts;
       • Reviewing and commenting on draft departmental issuances of policy and guidance; and
       • Performing internal reviews of OIG products and processes to ensure that they follow standards,
         policies, and procedures.


HUD’s IT security and privacy programs continue to have significant noncompliance with Federal guidance,
and the vulnerabilities impose risks to the HUD mission. OE has an evaluation in progress to determine
the accuracy of the IT investment information reported by HUD on the Office of Management and Budget’s
public-facing IT dashboard Web site. OE found that the HUD processes were not consistently followed and
the reported information was not verifiable. Additionally, OE evaluated HUD’s IT modernization efforts and
identified weaknesses in its enterprise architecture, IT capital planning, and investment control processes.
Those deficiencies compound the complexity of HUD’s efforts to modernize its infrastructure and hinder its
ability to address duplicative and legacy applications supporting HUD programs and operations.
     As of the end of this reporting period, OE had completed preliminary research on the departmental
acquisition process. HUD’s Office of the Chief Procurement Officer (OCPO) has been working with program
offices to improve the acquisition process. During fieldwork, OE will compare OCPO’s ongoing acquisition
initiatives to program offices’ concerns, identify gaps, and make recommendations to increase the likelihood
that efforts to improve the acquisition process will be successful.
     During its preliminary review of public housing agencies’ (PHA) needs following a disaster, OE identified
five options for future fieldwork. The anticipated outcome of those evaluations will be to improve the
resilience, preparedness, and mitigation activities of PHAs.



                                                                                                                          37
SEMIANNUAL REPORT TO CONGRESS




  NINE         LEGISL ATION, REGUL ATION,
               AND OTHER DIRECTIVES


Reviewing and making recommendations on legislation, regulations, and policy issues is a critical part of
the Office of Inspector General’s (OIG) responsibilities under the Inspector General Act. During this 6-month
reporting period, OIG has committed approximately 623 hours to reviewing 99 issuances. The draft directives
consisted of 47 notices, 21 mortgagee letters, and 31 other directives. OIG provided comments on 28 (or 28
percent) of the issuances, provided 5 nonconcurrences, and was able to resolve 3. A summary of selected reviews
for this 6-month period is below.



NOTICES, POLICY ISSUANCES, AND FINAL RULES

SINGLE-FAMILY HOUSING
Reverse mortgages – The Federal Housing Administration (FHA) has been making needed changes to the
reverse mortgage program to strengthen the Mutual Mortgage Insurance Fund. FHA issued various mortgagee
letters, (1) requiring lenders to perform a financial assessment of prospective borrowers for all reverse mortgage
transaction types and announcing property charge funding options for the payment of certain property charges,
(2) addressing the due and payable status when there is a nonborrowing spouse at the time of closing, (3)
prohibiting misleading or deceptive advertising, (4) limiting the insurability of fixed interest rate mortgages with
the single disbursement lump-sum payment option, and (5) announcing new principal limit factors.
     Of these five program changes, FHA used the authority granted to it in the Reverse Mortgage Stabilization
Act of 2013 to immediately implement protections to a nonborrowing spouse and also limited the insurability
of fixed rate mortgages. Since the inception of the reverse mortgage program, FHA has interpreted provisions
of the National Housing Act to require the reverse mortgage to be due and payable upon the death of the
last surviving borrower, sale of the home, and other conditions, including failure to reside in the property
and failure to pay required taxes and insurance. Mortgagee Letter 2014-07 was issued to provide another
interpretation of the Act to extend the mortgage insurance eligibility requirements to any nonborrowing
spouse of the borrower at the time of origination. This measure eliminated the need for these nonborrowing
spouses, including common law spouses, to refinance the reverse mortgage upon the death of the borrower.
     In January 2015, FHA issued Mortgagee Letters 2015-02 and 2015-03 regarding requirements for a
nonborrowing spouse. Mortgagee Letter 2015-02 defined an ineligible nonborrowing spouse and provided
guidance and model certification language. Mortgagee Letter 2015-03 provided an alternative option for
claim payment for an eligible reverse mortgage with an eligible surviving nonborrowing spouse. Through
the clearance process, OIG recommended that FHA require certifications from both the borrower and
the nonborrowing spouse at closing and annually thereafter to ensure that the interests of both the U.S.
Department of Housing and Urban Development (HUD) and the lender are adequately protected. OIG




38
                                                            CHAPTER NINE LEGISLATION, REGULATION, AND OTHER DIRECTIVES



continues to monitor FHA’s changes in this program.
    Single-family lender handbook – OIG reviewed FHA’s updated and consolidated single-family housing
policy handbook. This update is part of an FHA initiative to provide borrowers with greater access to credit
and to make working with FHA more efficient and effective for lenders. This handbook reconciled more than
900 mortgagee letters and other policy guidance into a single, authoritative document to serve as the definitive
guide on all aspects of FHA’s single-family programs.
    During this period, OIG reviewed handbook sections “Doing Business with FHA,” “Origination through
Post Closing and Endorsement,” and “Quality Control, Oversight and Compliance.” It nonconcurred on
several issues. For example, OIG disagreed on the description of how an employee’s misconduct is attributed
to the lender as a whole. OIG was concerned that the handbook made references to multiple enforcement
actions and also did not define the term “seriously improper conduct.” HUD maintained that the description
was already contained in Handbook 4155.2. OIG lifted the nonconcurrence based on HUD’s agreeing to
modify the current handbook to expressly limit the enforcement action to administrative sanctions. Further,
HUD will clarify that in addition to imposing administrative sanctions, it may refer findings to the Mortgagee
Review Board and the U.S. Department of Justice.
    In another example, OIG did not agree with several subsections of chapters stating “Pending, Under
Construction.” OIG was concerned about whether it and other offices would have the opportunity to review
and comment on those sections before issuance and, more importantly, what policies and requirements are
to be used while those subsections are pending. The nonconcurrence was resolved by inserting the current
requirements while the subsections are under construction. These sections were published March 18, 2015,
with an implementation date of June 15, 2015, which was later extended to September 14, 2015.


PUBLIC AND INDIAN HOUSING
Standards for internal controls – On September 10, 2014, the U.S. Government Accountability Office (GAO)
issued its revision of Standards for Internal Control in the Federal Government (Green Book). The revision
superseded the standards issued in November 1999. The Federal Managers’ Financial Integrity Act (FMFIA)
requires that Federal agency executives periodically review and annually report on the agency’s internal
control systems. FMFIA requires the Comptroller General to prescribe internal control standards for both
program and financial management. The standards may also be adopted by State, local, and quasi-govern-
mental entities, as well as public housing agencies, as a framework for their internal control system. GAO’s
2014 revision will be effective for fiscal year 2016 and the FMFIA reports covering that year. Management, at its
discretion, may elect early adoption. OIG has suggested, but HUD has not agreed that the Office of Public and
Indian Housing should issue a policy statement directing the use of the new internal control process to
improve the effectiveness of implementing the programs and as a means to safeguard limited resources.


MULTIFAMILY HOUSING
Required actions for projects receiving failing inspection scores – In March 2015, HUD issued Notice H 2015-2,
which applies to insured and noninsured projects with project-based assistance under Section 8 of the United
States Housing Act of 1937 or a contract for similar project-based assistance. The Notice states that Section
230 of the Consolidated Appropriations Act of 2014 and Section 226 of HUD’s Fiscal Year 2015 Appropriations
Act require HUD to take certain steps in cases when a multifamily housing property receives a score of 59 or
below on a Real Estate Assessment Center physical inspection report. In addition to the actions imposed in
this Notice, HUD may consider proceeding with assignment or foreclosure of the loan or capital advance or
may exclude the owner from further participation in HUD programs using a limited denial of participation, a
suspension, or a debarment.




                                                                                                                  39
SEMIANNUAL REPORT TO CONGRESS



COMMUNITY PLANNING AND DEVELOPMENT
Various waivers – OIG reviewed two Federal Register notices related to the allocation of disaster funding.
The first notice was the Third Allocation, Waivers, and Alternative Requirements for Grantees Receiving
Community Development Block Grant Disaster Recovery Funds in Response to Hurricane Sandy. HUD
published this Federal Register notice on October 16, 2014, announcing additional allocations for assisting
recovery in the most impacted and distressed areas identified in major disaster declarations due to Hurricane
Sandy and other eligible events in calendar years 2011, 2012, and 2013. This allocation provided $2.5 billion
to assist Hurricane Sandy recovery, including $930 million to implement projects from the HUD-sponsored
Rebuild by Design competition. Rebuild by Design was a planning and design competition to increase
resilience in the Sandy-affected region as part of recovery from the storm. This third allocation brings total
funding to recover from the impacts of Hurricane Sandy and other eligible events in the Sandy-affected region
to $13 billion.
     OIG also reviewed the Third Allocation, Waivers, and Alternative Requirements for Grantees Receiving
Community Development Block Grant Disaster Recovery Funds in Response to Disasters Occurring in 2013.
HUD published this Federal Register notice on January 8, 2015, announcing additional allocations for assisting
recovery in the most impacted and distressed areas identified in major disaster declarations in calendar year
2013. Based on further review of the impacts from presidentially declared disasters that occurred in 2013 and
estimates of remaining unmet need, this notice allocated more than $89.7 million in funding to the State of
Colorado, State of Illinois, City of Chicago, IL, Cook County, IL, Du Page County, IL, State of Oklahoma, and
City of Moore, OK.


FAIR HOUSING AND EQUAL OPPORTUNITY
Increasing awareness of the Equal Access Rule requirements – In February 2015, HUD published a notice to
increase the awareness of Office of Housing program participants and stakeholders of the requirements of the
HUD Equal Access Rule for actual or perceived discrimination based on sexual orientation, gender identity, or
marital status. The Equal Access Rule ensures that housing across HUD programs is open to all eligible
individuals, regardless of actual or perceived sexual orientation, gender identity, or marital status. HUD’s
general program requirements now provide, at 24 CFR (Code of Federal Regulations) 5.105(a)(2), that a
determination of eligibility for housing that is assisted by HUD or subject to a mortgage insured by FHA must
be made in accordance with the eligibility requirements provided for such program by HUD; such housing
must be made available without regard to actual or perceived sexual orientation, gender identity, or marital
status; and no owner or administrator of HUD-assisted or FHA-insured housing, approved lender in an FHA
mortgage insurance program, or any other recipient or subrecipient of HUD funds may inquire about the
sexual orientation or gender identity of an applicant for or occupant of HUD-assisted or FHA-insured housing
for purposes of determining eligibility or otherwise making such housing available. However, inquiries into
sex are permissible for temporary, emergency shelter with shared sleeping areas or bathrooms or to determine
the number of bedrooms to which a household may be entitled.




40
                                                                                          CHAPTER TEN AUDIT RESOLUTION




  TEN         AUDIT RESOLUTION




In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing and
Urban Development (HUD) management agree upon needed actions and timeframes for resolving audit
recommendations. Through this process, OIG strives to achieve measurable improvements in HUD programs and
operations. The overall responsibility for ensuring that the agreed-upon changes are implemented rests with HUD
managers. This chapter describes significant management decisions with which OIG disagrees. It also contains a
status report on HUD’s implementation of the Federal Financial Management Improvement Act of 1996 (FFMIA).
In addition to this chapter on audit resolution, see appendix 3, table B, “Significant Audit Reports for Which Final
Action Had Not Been Completed Within 12 Months After the Date of the Inspector General’s Report.”



AUDIT REPORTS ISSUED BEFORE THE START OF PERIOD
WITH NO MANAGEMENT DECISION AS OF MARCH 31, 2015

ADDITIONAL DETAILS TO SUPPLEMENT OUR REPORT ON HUD’S FISCAL YEARS 2013
AND 2012 (RESTATED) FINANCIAL STATEMENTS, ISSUE DATE: DECEMBER 16, 2013
HUD OIG audited the Office of Public and Indian Housing’s (PIH) implementation of U.S. Department of the
Treasury cash management regulations as part of the annual audit of HUD’s consolidated financial statements
for fiscal years 2013 and 2012. The OIG report found that HUD’s implementation of the new cash management
process for the Housing Choice Voucher program departed from Treasury cash management requirements and
Federal generally accepted accounting principles. HUD OIG also reported that the internal controls over the
process in place were not sufficient to ensure accurate and reliable financial reporting. The weaknesses in the
process failed to ensure that material financial transactions were included in HUD’s consolidated financial
statements and allowed public housing agencies (PHA) to continue to hold funds in excess of their immediate
disbursing needs, which is in violation of Treasury cash management regulations.
    The OIG report included a recommendation that HUD PIH implement a cost-effective method for
automating the cash management process to include an electronic interface of transactions to the standard
general ledger.
    Since the report’s issuance, HUD issued three proposals on how to address recommendation 2C on March
31, April 17, and May 28, 2014. However, OIG rejected all three proposals because they were too vague and did
not include a high-level plan showing the actions PIH will take from now until the final action date to imple-
ment corrective action. Further, the proposals included several contingencies; therefore, OIG has no reason-
able way to determine PIH’s progress in addressing the recommendation.




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SEMIANNUAL REPORT TO CONGRESS



     This issue was referred to the Assistant Secretary on June 19 and September 30, 2014; however, a new
proposal had not been made as of March 31, 2015. Therefore, this issue was referred to the Deputy Secretary
on March 31, 2015. (Audit Report: 2014-FO-0003)




U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, WASHINGTON, DC,
IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2012, ISSUE DATE:
APRIL 15, 2014
     HUD OIG audited HUD’s fiscal year 2013 compliance with the Improper Payments Information Act
of 2002 as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA). The OIG
report found that HUD did not comply with IPERA reporting requirements because it did not sufficiently
and accurately report its (1) billing and program component improper payment rates; (2) actions to recover
improper payments; (3) accountability; or (4) corrective actions, internal controls, human capital, and
information systems as required by IPERA. In addition, HUD’s supplemental measures and associated
corrective actions did not sufficiently target the root causes of its improper payments because they did not
track and monitor processing entities to ensure prevention, detection, and recovery of improper payments due
to rent component and billing errors, which are root causes identified by HUD’s contractor studies.
     The OIG report included several recommendations that required the Office of the Chief Financial Officer
(OCFO) to work with PIH and the Office of Multifamily Housing Programs to ensure sufficient and accurate
IPERA reporting in its agency financial report. The report also recommended that OCFO conduct a current
billing study and if it is not performed annually in future years, report the reason in the agency financial
report and update the previous study to reflect program and inflationary changes. Similarly, the report
recommended a study to assess improper payments arising from the Housing Choice Voucher program.
Finally, the report recommended that OCFO report on multifamily, public housing, and Section 8 program
improper payment rates separately in the agency financial reports.
     OCFO disagreed with several of OIG’s recommendations, citing (1) funding issues to conduct current billing
studies, which it believes do not produce tangible results; (2) disagreement regarding the need to determine
whether improper payments exist due to changes in the funding of the Housing Choice Voucher program;
and (3) management’s position that formal policies and procedures for the IPERA reporting process are not
necessary. OIG generally disagrees with OCFO’s management decisions because they disregard IPERA reporting
requirements and Office of Management and Budget (OMB) guidance and the management decisions do not
reflect OCFO’s responsibility as the lead official for directing and overseeing HUD’s actions to address improper
payments. OIG sent a referral memorandum to the Acting Chief Financial Officer on September 23, 2014,
regarding its disagreement, along with an untimely referral memorandum for two recommendations that had
not had management decisions entered. Following OIG’s memorandum, OCFO entered management decisions
for seven of its nine recommendations, of which OIG agreed with only one. The remaining six recommendations,
along with two recommendations for which management had not entered a management decision, were referred
to the Deputy Secretary on March 31, 2015. (Audit Report: 2014-FO-0004)




HUD COULD NOT SUPPORT THE REASONABLENESS OF THE OPERATING AND
CAPITAL FUND PROGRAMS’ FEES AND DID NOT ADEQUATELY MONITOR CENTRAL
OFFICE COST CENTERS, ISSUE DATE: JUNE 30, 2014
HUD OIG audited HUD’s Public Housing Operating and Capital Fund program asset management safe harbor
fees and HUD’s monitoring of central office cost centers.




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                                                                                      CHAPTER TEN AUDIT RESOLUTION



The OIG report found that HUD could not adequately support the reasonableness of the Operating Fund
management, bookkeeping, and asset management fees and Capital Fund management fee limits. Since HUD
determined that the fee income earned by PHAs was not Federal funds, around $353 million in public housing
operating funds was defederalized annually. HUD also lacked adequate justification for allowing PHAs to
charge an asset management fee, resulting in more than $81 million of the above amount being unnecessary.
Finally, HUD did not adequately monitor PHAs’ central office cost center fee charges.
    Among other things, the OIG report included recommendations that PIH revise its asset management fee
policy to refederalize the Operating Fund program’s management and bookkeeping fees and the Capital Fund
program’s management fees (recommendation 1A), eliminate the asset management fee (recommendation
1B), and implement written procedures to ensure that fees and central office cost center expenses are used to
support HUD’s mission (recommendation 1H).
    Since the report’s issuance, management has issued two responses to address the three recommendations,
with the latest issued on February 13, 2015. OIG rejected the latest management decisions proposed by
the Office of Public Housing to address the recommendations on March 23, 2015. Although the proposed
management decisions appeared to agree with some aspects of the OIG’s recommendations, they did not fully
and clearly explain how PIH will address the recommendations. OIG referred this issue to the Deputy Secretary
on February 12, 2015, and had not received a decision as of March 31, 2015. (Audit Report: 2014-LA-0004)




THE DATA IN CAIVRS DID NOT AGREE WITH THE DATA IN FHA’S DEFAULT AND
CLAIMS SYSTEMS, ISSUE DATE: JULY 2, 2014
HUD OIG audited the Credit Alert Verification Reporting System (CAIVRS) to determine whether the default
and claims data in CAIVRS agreed with the data in the Federal Housing Administration’s (FHA) default
and claim systems. OIG determined that CAIVRS did not contain information on all borrowers’ default,
foreclosure, and claim activity. It would incorrectly return accept codes for more than 260,000 borrowers
who had been in default, foreclosure, or claim within the past 3 years. In addition, CAIVRS did not contain
information for FHA borrowers with claims older than 3 years. Therefore, HUD did not provide other Federal
agencies with sufficient information on FHA borrowers with delinquent Federal debt to meet the requirements
of the Debt Collection Improvement Act of 1996 (DCIA).
    Among other things, OIG recommended that HUD notify the users of CAIVRS that the system may
have incomplete information for FHA delinquent debtors. In its October 17, 2014, management decision,
HUD disagreed in part with this recommendation; however, it agreed to consult with the users of CAIVRS to
determine their need for information on individuals with defaults or claims on FHA loans that do not result
in delinquent Federal debt. On February 2, 2015, HUD submitted another management decision, stating that
CAIVRS was being updated to ensure that it reports all delinquent Federal debt resulting from FHA insurance
claims until such debt is resolved as provided for in DCIA. In connection with this revision to the system, the
Office of Single Family Program Development agreed that it should consult with the users of CAIVRS, including
Treasury, to ensure that they were aware that CAIVRS was being updated and would no longer report credit
worthiness information – the mere existence of defaults and claims on FHA-insured loans – in addition to
any actual delinquent Federal debt that has resulted from such defaults and claims. HUD will revise FHA’s
computer matching agreements with relevant agency users of CAIVRS to ensure that these agreements
accurately reflect the delinquent Federal debt being reported by FHA and the revised period for such reports.
    OIG also recommended that HUD obtain a determination from the Secretary of the Treasury of whether
defaulted FHA-insured loans meet the definition of delinquent Federal debt that should be reported in
CAIVRS. In its October 17, 2014, management decision, HUD disagreed with this recommendation. After
discussions with OIG, HUD submitted another management decision on February 2, 2015, stating that HUD




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SEMIANNUAL REPORT TO CONGRESS



believes DCIA and pertinent regulations provide for the Secretary of HUD to determine the existence of any
debt owed to the agency. HUD believes it is clear that it is not left to the Secretary of the Treasury to make this
determination. HUD believes it has significant discretion in determining whether money owed to HUD is a
debt, whether the debt is delinquent, and whether the debt must be repaid.
     OIG rejected these management decisions because they do not resolve the recommendations. Since HUD
has not indicated that it will identify all past claims that constitute unresolved delinquent Federal debt and
update the system accordingly, certain Federal delinquent debts may be omitted based on HUD’s prior policy.
Therefore, OIG continues to recommend that HUD notify the users of CAIVRS that the system may have
incomplete information for FHA delinquent Federal debtors so that these users do not unknowingly violate
DCIA. For the second recommendation, OIG disagrees with HUD’s position and continues to recommend
that HUD seek a determination from the Secretary of the Treasury of whether FHA-insured loans meet the
definition of delinquent Federal debt for the purposes of including or excluding them from CAIVRS. On March
23, 2015, OIG referred the recommendations to the Deputy Secretary because OIG could not resolve them with
the Office of Housing. (Audit Report: 2014-KC-0002)




THE NIAGARA FALLS HOUSING AUTHORITY DID NOT ALWAYS ADMINISTER ITS HOPE
VI GRANT PROGRAM AND ACTIVITIES IN ACCORDANCE WITH HUD REQUIREMENTS,
ISSUE DATE: JULY 10, 2014
HUD OIG audited the Niagara Falls Housing Authority’s HOPE VI grant program based on an OIG risk analysis
and the amount of funding the Authority received. The objectives of the audit were to determine whether the
Authority administered its HOPE VI grant program and activities in accordance with HUD and HOPE VI grant
program requirements.
     The Authority did not always administer its HOPE VI grant program and activities in accordance with
requirements. Specifically, contrary to Federal regulations and the HOPE VI grant agreement, Authority
officials drew more HOPE VI funds from HUD’s Line of Credit Control System than were needed to cover
project expenditures.
     OIG recommended that HUD instruct Authority officials to (1) reimburse Treasury for nearly $1.5 million
in HOPE VI funds drawn in excess of need to cover project expenditures and (2) establish procedures to ensure
that program funds are drawn in accordance with the grant agreement and regulations.
     The Office of Public Housing Investments (OPHI) disagreed with recommendations 1A, 1B, and 1C and
believed the funds questioned by OIG were non-Federal cost savings, which could be better used for HOPE
VI-eligible activities in the Center Court neighborhood. OPHI believed there was no authority to require non-
Federal cost savings to be returned to Treasury. OIG disagrees with the proposed management decisions for
recommendations 1A, 1B, and 1C and believes that all of the questioned funds should be returned to Treasury
absent a suitable legal opinion. As a result of November 25, 2014, discussions with OIG, OPHI agreed to obtain
a legal determination from the Office of General Counsel regarding the proposed management decisions. On
March 26, 2015, OIG referred the disagreement to the Acting Assistant Secretary for Public and Indian Housing
as a legal determination had not been provided. (Audit Report: 2014-NY-1007)




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                                                                                        CHAPTER TEN AUDIT RESOLUTION



HUD DID NOT ALWAYS RECOVER FHA SINGLE-FAMILY INDEMNIFICATION LOSSES
AND ENSURE THAT INDEMNIFICATION AGREEMENTS WERE EXTENDED, ISSUE DATE:
AUGUST 8, 2014
HUD OIG audited HUD’s controls over its FHA loan indemnification recovery process to determine whether
HUD had adequate controls in place to monitor indemnification agreements and recover losses on FHA
single-family loans.
    HUD did not always bill lenders for FHA single-family loans that had an indemnification agreement
and a loss to HUD. Specifically, it did not bill lenders for any loans that were part of the Accelerated Claims
Disposition (ACD) program or the Claims Without Conveyance of Title (CWCOT) program or loans that went
into default before the indemnification agreement expired but were not in default on the expiration date.
There were a total of 486 loans from January 2004 to February 2014 that had enforceable indemnification
agreements and losses to HUD but were not billed. This condition occurred because HUD’s Financial
Operations Center was not able to determine loss amounts for loans that were part of the ACD program, was
not aware of the CWCOT program, and considered the final default date for billing only. As a result, HUD did
not attempt to recover a loss of $37.1 million for 486 loans that had enforceable indemnification agreements.
    In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that
were streamline refinanced. As a result, HUD incurred losses of more than $373,000 for 5 loans, and 16 loans
had a potential loss to HUD of nearly $1 million. The remaining 43 loans were either terminated or did not go
into delinquency before the indemnification agreement expired, or the agreement did not state that it would
extend to loans that were streamline refinanced.
    OIG rejected three management decisions proposed by the Offices of Single Family Housing and Finance
and Budget because they did not follow the plain language explicitly stated in signed indemnification
agreements. The Offices of Single Family Housing and Finance and Budget disagree with OIG’s determination
that HUD should have billed lenders for FHA loans that either were in default or went into default during the
indemnification agreement period.
    OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on
January 8, 2015. OIG met with the HUD Offices of General Counsel, Housing, Single Family Housing, and
Finance and Budget on January 30, 2015. The meeting ended in disagreement; however, the HUD Office of
General Counsel and OIG Office of Legal Counsel continued discussions.
    The Office of Single Family Housing received two legal opinions from HUD’s Office of General Counsel,
dated January 26 and February 24, 2015, respectively. Combined, the legal opinions support the Offices of
Single Family Housing and Finance and Budget’s position that they have collected in a manner consistent
with longstanding policy that emphasized the definition of the “date of default.” The Office of Single Family
Housing maintains that its collection practice is consistent with FHA’s regulatory definition of “date of default”
found in 24 CFR (Code of Federal Regulations) 203.331, which refers to the first “uncorrected” failure and the
first failure to pay that is not satisfied by later payments.
    OIG disagrees and believes that the Offices of Single Family Housing and Finance and Budget have
adopted a collection practice not supported by the plain language of the indemnification agreements or
required by HUD regulations. Based on the plain language explicitly stated in signed indemnification
agreements, OIG believes that the indemnification agreement should be enforced for any loan that “goes into
default” during the indemnification agreement term, regardless of whether the loan emerged from a default
status after the agreement expired. In response to HUD’s legal opinions, OIG received its own legal opinion
from the OIG Office of Legal Counsel that supports OIG’s position.
    OIG has had discussions with HUD’s Offices of General Counsel, Single Family Housing, and Finance and
Budget regarding the recommendations in question but has not reached agreeable management decisions.
On March 31, 2015, OIG referred the recommendations to the Deputy Secretary for a decision. (Audit Report:
2014-LA-0005)




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SEMIANNUAL REPORT TO CONGRESS




THE STATE OF NEW JERSEY, TRENTON, NJ, COMMUNITY DEVELOPMENT BLOCK
GRANT DISASTER RECOVERY-FUNDED TOURISM MARKETING PROGRAM, ISSUE
DATE: AUGUST 29, 2014
HUD OIG audited the State of New Jersey’s Community Development Block Grant Disaster Recovery (CDBG-
DR)-funded tourism marketing program to determine whether the content of the marketing campaign was
proper and whether the State procured services and products for its tourism marketing program in accordance
with applicable Federal procurement and cost principle requirements. 
      While the audit found nothing improper in the content of the State’s marketing campaign, the State did
not procure services and products for its tourism marketing program in a manner that fully met the intent of
the Federal procurement requirements.  It did not address the need for a required independent cost estimate
and cost analysis before awarding a contract with a budget of up to $25 million for marketing and outreach
services.  The regulations required the State to make independent estimates before receiving bids or proposals. 
They also required the State to perform a cost analysis.  Also, the State could not demonstrate that purchases
of marketing services and products were made competitively and that the winning contractor had timesheets
to support wages and salaries it charged to the program.  These deficiencies occurred because the State was
not fully aware of Federal procurement and cost principle requirements.  As a result, the State needed to fully
demonstrate that the budgeted contract amount was fair and reasonable and that $23 million it had disbursed
under the contract was adequately supported.  The State began taking corrective actions at the end of the
audit and began providing some documentation to resolve these deficiencies.  HUD needed to assess the
documentation to determine the appropriateness of all contract costs. 
      OIG recommended that HUD (1) determine whether the documentation the State provided was adequate
to show that the overall contract price was fair and reasonable and if not, direct the State to repay HUD
from non-Federal funds any amount that it cannot support (excluding any amounts repaid as a result of
recommendations 1B and 1C) (recommendation 1A); (2) determine whether the documentation the State
provided was adequate to show that $19.5 million disbursed for marketing costs was fair and reasonable
and if not, direct the State to repay HUD from non-Federal funds any amount that it cannot support
(recommendation 1B); and (3) determine whether the documentation the State provided was adequate to
support $3.5 million disbursed for wages and salaries charged to the program by the contractors’ employees
and if not, direct the State to repay HUD from non-Federal funds any amount that it cannot support
(recommendation 1C). OIG also recommended that HUD direct the State to update its procurement processes
and standards to ensure that they are fully aligned with applicable Federal procurement and cost principle
requirements (recommendation 1D).
      HUD disagreed with OIG on recommendations 1A, 1B, 1C, and 1D. Regarding recommendation 1A,
HUD stated that it concurred with the State’s position that the provisions of 24 CFR 85.36 did not apply,
specifically the requirement to perform a cost estimate as required by 24 CFR 85.36(f). HUD contended that
the State’s contract price for tourism marketing services appeared fair and reasonable based on the open
competitive process that it used to select the winning bidder. There were four bids within a similar range,
and the State selected the lowest bidder. HUD also said that the cost estimate supplied by the State to OIG
and HUD in response to the audit confirmed the four bids and the State’s selection of the lowest bidder. HUD
recommended that OIG close the recommendation. OIG maintains the position that the State needed to
perform a cost estimate and cost analysis. For this disaster recovery effort, unlike previous efforts, a HUD
notice12 required the State to either adopt the specific procurement standards identified in 24 CFR 85.36 or
have a procurement process and standards that were equivalent to the procurement standards at 24 CFR
85.36. The State certified that its policies and procedures were equivalent to the procurement standards at
24 CFR 85.36.

12 78 FR 14336, dated March 5, 2013




46
                                                                                       CHAPTER TEN AUDIT RESOLUTION



    While it made this certification, it also acknowledged in its procurement policy for CDBG-DR grants that
it was required as a grantee to follow the requirements at 24 CFR 85.36. Further, a HUD monitoring letter from
its March 2014 onsite monitoring review noted that the State had adopted 24 CFR 85.36 with regard to Federal
procurement standards.
    Federal regulations at 24 CFR 85.36(f) state that a cost analysis is necessary when price competition
is lacking; however, the regulations also state that a cost analysis must be performed when the offeror is
required to submit the elements (for example, labor, materials, etc.) that make up the offeror’s total cost
proposal to determine whether they are allowable, directly related to the requirement, and reasonable. In
this case, the bids the State received from contractors included the elements of their total costs. Therefore,
the State should have performed a cost analysis. Ultimately, the State was responsible for the accuracy of its
certification to HUD and needed to ensure that its alternate policies and procedures met the intent of the
Federal requirements. Therefore, it needed to demonstrate that it had developed a measure for evaluating the
reasonableness of contractors’ proposed costs or prices and evaluate the separate elements that made up the
contractors’ total costs.
    HUD stated that the independent cost estimate supplied by the State confirmed its selection of the
lowest bidder. However HUD did not provide details on how it assessed the adequacy of the cost estimate.
Therefore, to close the audit recommendation, HUD needs to provide the details on how it determined that
the independent cost estimate the State provided was adequate to show that the overall contract price was fair
and reasonable.
    Regarding recommendation 1B, HUD maintains that States are not required to follow the standards at 24
CFR 85.36(b) through (i). While the State’s contract with the vendor originally called for three quotes when
submitting invoices for payment, the State waived this requirement when it determined that requiring that
number of quotes was a higher standard than State law required. Pursuing additional quotes would have also
precluded the State from advertising in areas with smaller populations that did not have a sufficient number
of advertising firms in the region. Further, the marketing venues were procured by a vendor chosen by the
State specifically for its ability to procure these venues in a cost-effective manner. HUD recommended that
OIG close the recommendation since there was no requirement for the State to adopt the provisions of 24
CFR 85.36(b) through (i). OIG maintains its position regarding the audit recommendation. For this disaster
recovery effort, HUD required the State to either adopt the specific procurement standards identified in 24
CFR 85.36 or have a procurement process and standards that were equivalent. HUD implemented these new
requirements because of prior OIG recommendations that were based on lessons learned from prior audits of
disaster recovery activities and a review of program data. The State certified that its policies and procedures
were equivalent to the procurement standards at 24 CFR 85.36.
    Regulations at 24 CFR 85.36(c) required the State to conduct all procurement transactions in a manner
providing full and open competition. Also, regulations at 24 CFR 85.36(d) required the State to obtain bids
from an adequate number of sources regardless of the procurement method unless the noncompetitive
proposal method was selected.
    The State failed to properly document justifications for deviating from key requirements during its
procurement process. Since the State did not perform a prebid cost estimate or postbid cost analysis
in relation to its tourism marketing program, it is particularly important for HUD to assess whether the
documentation the State provided at the end of the audit and any additional documentation it provides after
the audit are sufficient to demonstrate that the prices the contractor paid for marketing services and products
were fair and reasonable.
    Regarding recommendation 1C, HUD stated that it had reviewed signed timesheets for the State’s
contractor and subcontractor and repeated to the State that timesheets should be signed and submitted
weekly. HUD also stated that the State had described its voucher review process and that it noted that the
vouchers were subjected to three levels of review before the State made payment. HUD stated that it was in




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SEMIANNUAL REPORT TO CONGRESS



the process of acquiring and reviewing the invoices and source documentation associated with the timesheets
that were submitted to the State to ensure that the invoices met the requirements of Federal cost principles.
HUD stated that it would provide a status update to OIG by March 30, 2015. OIG maintains that HUD needed
to fully address the audit recommendation by indicating what action it would take if the documentation the
State provided was not adequate to support the $3.5 million disbursed for wages and salaries charged to the
program by the contractors’ employees. HUD also needed to indicate what evidence it proposed to submit for
closure of the audit recommendation and the related final action target date. HUD did not provide the status
update by March 30, 2015.
     Regarding recommendation 1D, HUD stated that it had reviewed the State’s procurement policies and
procedures as part of a statutorily required certification before execution of the State’s grant agreement
and found those policies and procedures to comply with all applicable procurement and cost principle
requirements. Also, HUD stated that it monitors the State’s procurements to ensure that those policies and
procedures are followed. HUD recommended that OIG close the recommendation since it had certified that
the State had proficient financial controls and procedures, including procurement. OIG maintains its position
regarding the audit recommendation. The State certified that its policies and procedures were equivalent to
the procurement standards at 24 CFR 85.36. The State was responsible for the accuracy of its certification
to HUD. The audit found that that the State did not procure services and products for its tourism marketing
program in a manner that met the intent of all Federal procurement requirements because its procedures were
not fully aligned with those requirements. Therefore, the State needs to develop and implement procedures to
ensure that it complies with all applicable procurement and cost principle requirements.
     HUD stated that it had reviewed the State’s procurement policies and procedures as part of a statutorily
required certification before execution of the State’s grant agreement and found those policies and procedures
to comply with all applicable procurement and cost principle requirements. If the State’s policies and
procedures had complied with all applicable procurement and cost principle requirements and it had followed
them, the State would have conducted an independent cost estimate and had documentation to demonstrate
that the prices the contractor paid for marketing services and products were fair and reasonable.
     Since management decisions could not be reached, these issues were referred to the Acting Assistant
Secretary for Community Planning and Development. (Audit Report: 2014-PH-1008)




THE STATE OF NEW JERSEY, TRENTON, NJ, COMMUNITY DEVELOPMENT BLOCK
GRANT DISASTER RECOVERY-FUNDED HOMEOWNER RESETTLEMENT PROGRAM,
ISSUE DATE:  SEPTEMBER 5, 2014
HUD OIG audited the State of New Jersey’s CDBG-DR-funded Homeowner Resettlement program to
determine whether the State used CDBG-DR funds for its Homeowner Resettlement program to assist eligible
homeowners in accordance with applicable HUD and Federal requirements. 
     The State demonstrated that it used CDBG-DR funds to assist eligible homeowners for its program. 
Although the State obtained and provided documentation to demonstrate that homeowners in OIG’s sample
occupied damaged residences as their primary residence at the time of the storm, it can strengthen its controls
over this requirement for future homeowner grants.
     OIG recommended that HUD require the State to strengthen its controls over homeowner eligibility for
future homeowner grants by maintaining documentation in its files to fully demonstrate compliance with the
primary residency requirement before disbursing funds.
     HUD provided a proposed management decision via email on January 15, 2015.  On January 21, 2015,
OIG informed HUD of concerns that the proposed management decision was not fully responsive to the audit
recommendation.  The proposed management decision did not indicate what action HUD would take if, based




48
                                                                                          CHAPTER TEN AUDIT RESOLUTION



on its review of sample files, it determined that the State’s process for determining residency was not adequate. 
Further, it did not indicate whether any changes it required of the State would apply to future homeowner
grants in all relevant programs or only for grants through the State’s Homeowner Resettlement program. 
Lastly, the proposed management decision did not address the evidence necessary to provide closure of the
audit recommendation and include a final action target date. 
    As of March 31, 2015, HUD had not provided a responsive proposed management decision.  Since a
timely management decision could not be reached, this issue was referred to the Acting Assistant Secretary for
Community Planning and Development.  (Audit Report:  2014-PH-1009)



SIGNIFICANTLY REVISED MANAGEMENT DECISIONS

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information concerning
the reasons for any significantly revised management decisions made during the reporting period. During the
current reporting period, there were significantly revised management decisions on six audits.




THE LAFAYETTE PARISH HOUSING AUTHORITY VIOLATED HUD PROCUREMENT
REQUIREMENTS AND EXECUTED UNREASONABLE AND UNNECESSARY CONTRACTS,
ISSUE DATE: JUNE 22, 2011
OIG issued an audit report entitled “The Lafayette Parish Housing Authority Violated HUD Procurement
Requirements and Executed Unreasonable and Unnecessary Contracts.” For recommendation 1K, the New
Orleans Office of Public Housing agreed with the recommendation that the Authority should remain under
HUD receivership for at least a year or until it can demonstrate to HUD that its procurement and other
practices consistently meet Federal requirements. After the HUD receivership was lifted and an executive
director was hired, HUD agreed to place the Authority on a zero dollar threshold for at least a year or until it
can demonstrate to HUD that its procurement and other practices consistently meet Federal requirements.
In September of 2012, HUD placed the Authority under HUD receivership with HUD staff assigned as the
receiver, and the Authority hired a chief operating officer.   It was the intent that the chief operating officer
would benefit from the receiver’s presence and ultimately be considered as the potential executive director of
the Authority when it was returned to local control.  However, resolution had not been reached by September
of 2012, and HUD requested OIG approval to extend the final action target date until September 30, 2014. OIG
denied this request due to a lack of adequate information to justify an extension.
    In March of 2013, HUD again requested OIG approval to extend the final action target date until
December 31, 2013. At that time, the next board of commissioners could not be appointed by the mayor of
Lafayette until after a court hearing, scheduled for March 27, 2013. The purpose for the hearing was for the
court to render a decision on the mayor’s appeal to a contempt of court citation against him by the deciding
judge. The court’s decision was needed to determine whether the mayor would be required to reappoint the
removed board members or to appoint new board members. After the court hearing, HUD planned to request
that the mayor appoint a new board and require the board to participate in 3 months of training before HUD
could determine when the Authority would be released from receivership. OIG agreed to extend the final
action target date to December 31, 2013.
    By December 24, 2013, HUD’s many attempts to get the parish president or mayor to appoint a new
board had failed, thereby making it impossible for HUD to return the Authority to local control and meet the
December 31, 2013, final action target date. Therefore, on December 27, 2013, HUD proposed to change the
management decision to (1) request that HUD’s Assistant Secretary-General Deputy Assistant Secretary reach




                                                                                                                    49
SEMIANNUAL REPORT TO CONGRESS



out to the parish president to discuss the urgency of making the appointments and give the parish president
60 days to have the advisory board in place and (2) if the parish president continues to refuse to appoint
the advisory board, notify the parish president that HUD may consider taking alternate actions, such as
withholding HUD funding, including CDBG and HOME Investment Partnerships Program funding, or merging
the PHA with another PHA. HUD also proposed extending the final action target date to December 31, 2014.
OIG concurred with the revised management decision and extended the final action target date to December
31, 2014, effective December 31, 2013.
     By December 16, 2014, HUD’s many attempts to get the parish president or mayor to appoint a new
board had failed, thereby making it impossible for HUD to return the Authority to local control and meet the
December 31, 2014, final action target date. HUD stated that the appointment of a board was outside of HUD’s
authority. The appointment of the board is under the authority of the appointing official of the jurisdiction,
which is the Lafayette Parish government. The current appointing official term is set to expire within 2 years,
and HUD believed that it would receive the cooperation of the newly elected official. Therefore, on January 26,
2015, HUD submitted a revised management decision, proposing to await the appointment of the new mayor
to influence the appointment of a board and extend the management decision to May 31, 2016, to allow the
new mayor to take office, HUD to engage in conversation regarding the appointment of a board, and a new
board to be seated. OIG concurred with the revised management decision and extended the final action target
date to May 31, 2016, effective January 27, 2015. (Audit report: 2011-AO-0001)




THE MANAGEMENT AND BOARD OF COMMISSIONERS OF THE HARRIS COUNTY
HOUSING AUTHORITY MISMANAGED THE AUTHORITY, ISSUE DATE: JUNE 19, 2013
OIG issued an audit report entitled “The Management and Board of Commissioners of the Harris County
Housing Authority Mismanaged the Authority.” For recommendation 3G, OIG recommended that the Director
of the Houston Office of Community Planning and Development (CPD) recapture $320,000 in Neighborhood
Stabilization Program (NSP) funds that was to be spent for a local development using an ineligible cost plus
contract. CPD agreed to recapture the funds if it determined that they were ineligible. CPD reviewed all of the
development invoices and determined that the Authority spent only $315,000 in NSP funds for the property.
Further, more than $74,000 was used as an ineligible contract incentive, while the remaining nearly $241,000
was an eligible use of the funds. CPD recaptured the more than $74,000 and submitted a revised management
decision requesting reversal of the remaining funds. OIG concurred with the revised management decision on
March 31, 2015. (Audit report: 2013-FW-1006)




THE CITY OF BRACKETTVILLE HOUSING AUTHORITY, BRACKETTVILLE, TX, FAILED
TO PROPERLY OPERATE ITS LOW-RENT PROGRAM BUT GENERALLY OVERSAW ITS
CAPITAL FUND GRANTS PROPERLY, ISSUE DATE: SEPTEMBER 18, 2013
The September 2013 audit memorandum on the City of Brackettville Housing Authority, Brackettville, TX,
found that the Authority failed to properly operate its low-rent program.  The memorandum contained 12
recommendations and questioned costs and funds put to better use totaling nearly $32,000.  After working
with the Authority, the San Antonio Office of Public Housing asked OIG in January 2015 to write off more than
$16,000 for three recommendations (1C, 1E, and 1F) since the Authority lacked non-Federal funds to repay
the remaining questioned amounts after it had taken recovery actions.  Since the former executive director
and maintenance employee had left the Authority, OIG agreed to the reductions in the outstanding finding
balances.  As of January 2015, the Office of Public Housing had taken action to close all recommendations on
the memorandum. (Audit memorandum: 2013-FW-1803)




50
                                                                                            CHAPTER TEN AUDIT RESOLUTION




THE KENNER HOUSING AUTHORITY, KENNER, LA, DID NOT ADMINISTER ITS
HOUSING CHOICE VOUCHER PROGRAM IN COMPLIANCE WITH PORTABILITY
REQUIREMENTS, ISSUE DATE: SEPTEMBER 24, 2013
OIG issued an audit report entitled “The Kenner Housing Authority Did Not Administer Its Housing Choice
Voucher Program in Compliance With Portability Requirements.” For recommendation 1A, the New Orleans
Office of Public Housing agreed with the recommendation that the Authority should repay its program more
than $13,000 from non-Federal funds for ineligible housing assistance paid on behalf of one family. For
recommendation 1B, the New Orleans Office of Public Housing agreed with the recommendation that the
Authority support or repay its program nearly $172,000 from non-Federal funds for unsupported housing
assistance paid on behalf of four program families. The concurrence date on these recommendations was
December 31, 2013, and the final action target date was December 31, 2014.
    In December of 2014, OIG met with HUD, and HUD agreed that the Authority incurred these questioned costs
and should repay.  However, HUD’s initial review of the Authority’s ability to repay the questioned costs showed that
the Authority had neither non-Federal funds nor assets that could be sold in an effort to repay a portion or all of the
questioned costs. HUD considered requesting a writeoff of the funds but did not submit the request to OIG.
    On March 25, 2015, HUD submitted a revised management decision, stating that it had issued a demand letter
to the Authority for all ineligible funds. In response, the Authority agreed to repay all ineligible and unsupported
funds. HUD stated that once it received an official response from the Authority, it would enter into a repayment
agreement with the Authority. The final action date proposed for these recommendations is June 30, 2015. OIG
concurred with the revised management decision, effective March 25, 2015. (Audit memorandum: 2013-FW-1804)




THE MALAKOFF HOUSING AUTHORITY, MALAKOFF, TX, DID NOT HAVE SUFFICIENT
CONTROLS OVER ITS PUBLIC HOUSING PROGRAMS, INCLUDING ITS RECOVERY
ACT FUNDS, ISSUE DATE: SEPTEMBER 26, 2013
OIG’s September 2013 audit memorandum on the Malakoff Housing Authority found that it did not have
sufficient controls over its public housing programs, including its American Recovery and Reinvestment Act
funds.  The Authority incurred more than $577,000 in questioned costs and could not support that it properly
spent or managed the more than $981,000 in HUD funds provided.  The Fort Worth Office of Public Housing
agreed with the 14 recommendations. Public Housing worked with the Authority and recovered funds from
various sources, such as the Authority’s bonding company.   In January 2015, five recommendations (1A, 1B,
1C, 1D, and 1G) with questioned costs totaling more than $500,000 remained unresolved, and the Authority
does not have non-Federal or other sources of funds to repay the amounts to HUD.  Since the individuals
who caused the ineligible amounts had left, Public Housing revised the remaining management decisions in
February 2015 to indicate that it would seek permission to write off the remaining balances as nonrecovered
from HUD’s Chief Financial Officer and OIG’s Assistant Inspector General for Audit.  OIG concurred with the
revised management decisions.  (Audit memorandum: 2013-FW-1805)




THE COLFAX HOUSING AUTHORITY, COLFAX, LA, DID NOT PROPERLY ADMINISTER
ITS PROGRAMS, INCLUDING ITS 2009 AMERICAN RECOVERY AND REINVESTMENT
ACT GRANT, ISSUE DATE: NOVEMBER 13, 2013
OIG issued an audit report entitled “The Colfax Housing Authority, Colfax, LA, Did Not Properly Administer Its
Programs, Including Its 2009 American Recovery and Reinvestment Act Grant.” Effective February 5, 2015, OIG
and HUD concurred on the proposed management decision for recommendations 1A, 1B, 1D, 1E, 1F, 1G, and 1K.



                                                                                                                       51
SEMIANNUAL REPORT TO CONGRESS



     The final action target date on these recommendations was October 31, 2014, for recommendation 1A and
December 31, 2014, for the remaining recommendations.
     In December 2014, OIG met with HUD, and HUD requested an extension of the final action target
date on recommendations 1D, 1F, 1G, and 1K.  HUD stated that it had made many attempts to resolve the
recommendations to no avail and requested that OIG extend the final action target date from December 31, 2014,
to March 31, 2015, in an effort to resolve the recommendations or take further action against the Authority, the
executive director, or both. However, since the original management decision agreement date was February 5,
2014, HUD had until February 5, 2015, to resolve the recommendations and still meet its goal of completing final
actions within 1 year. Therefore, OIG believed that HUD had ample time to determine what action it planned to
take against the Authority, based upon its noncompliance, and denied the extension request.
     On March 13, 2015, HUD proposed to revise the recommendations. HUD stated that it had worked with
the Authority to resolve the recommendations.  However, the Authority was not able to produce records to
show that proper procedures were followed before the award of contracts. HUD also stated that it knew that
in many cases, otherwise eligible work items were completed using these funds.  In its revised management
decision for recommendations 1A, 1B, 1D, 1E, 1F, 1G, and 1K, HUD proposed having its staff or another third
party approved by HUD perform an after-the-fact cost estimate to identify a conservative estimate of the value
of the actual work completed.  Thereafter, HUD will work with HUD headquarters staff to take action to offset
future funding for any funds spent in excess of the value of work completed or any other expenditures deemed
unsupported or ineligible. The third-party procurement review is applicable to 1F, 1G, and 1K.  However, the
offset of funds applies to all recommendations, which, in effect, revised the management decision from repay
to offset.  The amounts to be offset for the recommendations would be finalized based upon the third-party
review and the review of additional documentation provided by the Authority. The final action target date
proposed for the recommendations is September 30, 2015. OIG concurred with the revised management
decision, effective March 17, 2015. (Audit memorandum: 2014-FW-1801)




SIGNIFICANT MANAGEMENT DECISION WITH WHICH OIG DISAGREES

During the reporting period, OIG did not have any reports in which OIG disagreed with the significant
management decision.



FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996

HUD did not substantially comply with FFMIA during fiscal year 2014.  HUD’s continued noncompliance is
largely due to a reliance on legacy financial systems and information security weaknesses. While HUD has
continued to work toward financial management system modernization and FFMIA compliance, significant
challenges remain. Section 803(A) of FFMIA requires that each agency establish and maintain financial
management systems that comply with (1) Federal financial management system requirements, (2) Federal
accounting standards, and (3) the U.S. Standard General Ledger at the transaction level. While OIG has
long reported on HUD’s lack of an integrated “core financial system” as FFMIA noncompliance, OMB made
substantial changes to the FFMIA framework, which took effect in 2014, eliminating the term. With its
issuance of appendix D to Circular A-123, OMB noted the need to reduce the cost, risk, and complexity of
financial system modernizations and add flexibility to a burdensome framework, which often led to costly and
ineffective solutions.




52
                                                                                        CHAPTER TEN AUDIT RESOLUTION



    Like many other agencies, HUD struggled to modernize its legacy financial systems within the context of
the previous FFMIA framework. HUD’s financial systems, many of which were developed and implemented
before the issue date of current standards, were not designed to provide the range of financial and
performance data currently required.  HUD has been working to modernize its legacy financial management
system since fiscal year 2003. The previous project, the HUD Integrated Financial Management Improvement
Project, was based on plans to implement a solution that replaced two of the applications currently used for
core processing. In March 2012, work on the project was stopped, and it was later canceled. HUD spent more
than $35 million on the failed project. In the fall of 2012, the New Core Project was created to move HUD
forward in implementing a new core financial system. The project migrates HUD’s financial transactions and
systems to a shared service provider, Treasury’s Bureau of Fiscal Services’ Administrative Resource Center.
The Center will provide support for (1) funds management, (2) purchasing, (3) accounts payable, (4) accounts
receivable, (5) cash management, (6) cost accounting, (7) the core financial system, (8) the general ledger, (9)
financial reporting, (10) grants management, and (11) loans management.
    The project includes three phases. Phase 1 of the project has been separated into four different releases.
Each release defines a particular function that will be transferred to Treasury’s shared services platform.
Release 1 transferred the travel and relocation functions to Treasury on October 1, 2014. Release 2, which
covers time and attendance, was implemented on February 8, 2015. Release 3 will cover migration of the core
financial services that are owned by OCFO. This release includes the migration of accounting system services
associated with budget execution, accounting, finance, data warehouse reporting, and an interface solution.
Release 3 is scheduled for implementation in the fourth quarter of fiscal year 2015 or the first quarter of fiscal
year 2016. Release 4 will address HUD’s grant and loan accounting systems. Details regarding this release
have not been finalized, and there is no scheduled date for implementation. Phase 2 of the project will address
managerial cost accounting, budget formulation, and a fixed assets system. Phase 3 of the project will address
the consolidation of FHA and the Government National Mortgage Association as well as the migration of the
functionality of HUD’s Line of Credit Control System. Details regarding phases 2 and 3 have not been finalized,
and there are no scheduled dates for implementation.
    FFMIA requires OIG to report in its Semiannual Reports to the Congress instances and reasons when
an agency has not met the intermediate target dates established in its remediation plan required by FFMIA. 
At the end of 2014, HUD reported that 4 of 40 financial systems were not in substantial compliance with
FFMIA.  These four systems are the (1) Integrated Disbursement and Information System (IDIS), (2) Facilities
Integrated Resources Management System (FIRMS), (3) HUD Procurement System (HPS), and (4) Small
Purchase System (SPS). 
    IDIS does not comply with applicable Federal accounting standards or the U.S. Standard General Ledger
at the transaction level. IDIS uses the first-in, first-Out (FIFO) method to account for the disbursement
of formula grant obligations and lacks key data elements essential to properly track or account for grant
disbursement. In addition to eliminating FIFO for fiscal year 2015 grant year funds and later, HUD plans
to add new data elements and configure new automated controls and accounting logic to achieve FFMIA
compliance.
    The FIRMS application does not comply with Federal financial management systems requirements.
While HUD had identified FIRMS as FFMIA noncompliant since 2010, technical issues, including a lapsed
maintenance contract, have rendered FIRMS nonfunctional. As a result, HUD did not have a functional,
automated property management system during fiscal year 2014. While HUD had initially hoped to remediate
the issue by February 2014, resource constraints have resulted in significant delays. To achieve eventual
FFMIA compliance and meet business requirements regarding property management, HUD plans to




                                                                                                                 53
SEMIANNUAL REPORT TO CONGRESS



decommission FIRMS and transition to a shared service provider, the Federal Aviation Administration.
     HUD’s legacy procurement applications, HPS and SPS, do not comply with Federal financial management
systems requirements. During fiscal year 2012, the Office of the Chief Procurement Officer (OCPO)
implemented a new procurement system, the HUD Integrated Acquisition Management System (HIAMS), to
replace these noncompliant systems. With the implementation of HIAMS in January 2012, no new contract
actions were entered into HPS, but modification and deobligation actions were being created to perform
closeout of the contracts in the system. SPS was still being used by HUD to modify purchase orders open as of
January 2012, while HIAMS was enabled to use the contracting number system for the few existing purchase
orders. In fiscal year 2014, OCPO was working to migrate the data in HPS and SPS to the HIAMS Enterprise
Acquisition Reporting Tool so that historical data can be reported. HUD hopes to decommission the HPS and
SPS procurement applications once technical issues associated with the migration have been addressed and
the data transfer is complete.
     In fiscal year 2014, OIG determined that HUD’s information security program had significant deficiencies
and many areas of the program did not comply with the Federal Information Security Management Act
(FISMA). Collectively and in the aggregate, systems deficiencies continued to exist.
     In addition to the information security deficiencies (such as FISMA) and specific financial system
weaknesses identified above, financial process weaknesses will need to be remediated for HUD to achieve
FFMIA compliance; for example, manual cash management processes implemented by PIH that do not
comply with FFMIA requirements. OIG will continue to assess HUD’s ongoing efforts to modernize its legacy
systems and financial processes.




54
                                                                                   APPENDIX 1 PEER REVIEW REPORTING




  APPENDIX 1              PEER REVIEW REPORTING

OFFICE OF AUDIT

BACKGROUND

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law No. 111-203), section 989C,
requires inspectors general to report the latest peer review results in their semiannual reports to Congress.
The purpose in doing so is to enhance transparency within the government. Both the Office of Audit and
Office of Investigation are required to undergo a peer review of their individual organizations every 3 years.
The purpose of the review is to ensure that the work completed by the respective organizations meets the
applicable requirements and standards. The following is a summary of the status of the latest round of peer
reviews for the organization.




PEER REVIEW CONDUCTED ON HUD OIG

The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), received
a grade of pass (the highest rating) on the peer review report issued by the U.S. Department of Education
Inspector General on September 28, 2012.  There were no recommendations included in the System Review
Report. The report stated:

    In our opinion, the system of quality control in effect for the year ended March 31, 2012, for the
    audit organization of the HUD OIG has been suitably designed and complied with to provide the
    HUD OIG with reasonable assurance of performing and reporting in conformity with applicable
    professional standards in all material respects. Federal audit organizations can receive a rating of
    pass, pass with deficiencies, or fail. The HUD OIG has received a peer review rating of pass.



PEER REVIEW CONDUCTED BY HUD OIG ON DOD

HUD OIG conducted an external peer review of the U.S. Department of Defense (DoD), OIG’s Office of Audit
and issued a final report November 13, 2012. DoD OIG received a peer review rating of pass (with a scope
limitation). There are no outstanding recommendations. A copy of the external quality control review report
can be viewed at www.dodig.mil/pubs/reviews.html.




                                                                                                                 55
SEMIANNUAL REPORT TO CONGRESS




  APPENDIX 1              PEER REVIEW REPORTING                                               (CONCLUDED)




OFFICE OF INVESTIGATION


PEER REVIEW CONDUCTED BY HUD OIG ON SSA OIG

HUD OIG conducted an external peer review of the U.S. Social Security Administration (SSA) OIG, Office of
Investigation, and issued a final report on August 12, 2013. HUD OIG determined that SSA OIG complied with
applicable quality standards.




PEER REVIEW CONDUCTED ON HUD OIG BY DOJ OIG

The U.S. Department of Justice (DOJ) OIG conducted a peer review of HUD OIG’s Office of Investigation and
issued a final report on April 28, 2014. DOJ OIG determined that HUD OIG was in compliance with the
quality standards established by the Council of Inspectors General on Integrity and Efficiency and the
Attorney General’s guidelines.




56
                                                                                          APPENDIX 2 AUDIT REPORTS ISSUED




 APPENDIX 2          AUDIT REPORTS ISSUED


INTERNAL REPORTS
AUDIT REPORTS

CHIEF FINANCIAL OFFICER

2015-DP-0004     Office of the Chief Financial Officer Loan Accounting System, 12/09/2014.

                 Interim Report on HUD’s Internal Controls Over Financial Reporting, 12/08/2014. Better use:
2015-FO-0002
                 $660,810,336.

                 Independent Auditor’s Report on HUD’s Consolidated Financial Statements and Reports on
2015-FO-0004     Internal Controls Over Financial Reporting and Compliance With Laws and Regulations,
                 03/06/2015.

CHIEF INFORMATION OFFICER

                 Fiscal Year 2014 Review of Information Systems Controls in Support of the Financial Statements
2015-DP-0005
                 Audit, 02/24/2015.

CHIEF PROCUREMENT OFFICER

                 HUD Did Not Always Follow Applicable Requirements or Use Best Practices in the Procurement
2015-NY-0001
                 and Administration of Its Multifamily Servicing Contract, 12/02/2014. Better use: $9,975,696.

COMMUNITY PLANNING AND DEVELOPMENT

                 HUD’s Office of Community Planning and Development Did Not Always Pursue Remedial Actions
2015-AT-0001     but Generally Implemented Sufficient Controls for Administering Its Neighborhood Stabilization
                 Program, 03/31/2015. Better use: $22,054,256.


2015-DP-0002     Information System Control Weaknesses Identified in the Ginnie Mae Financial Accounting
                 System, 10/29/2014.

2015-FO-0003     Fiscal Years 2014 and 2013 Financial Statements Audit, 02/27/2015.




                                                                                                              57
  HOUSING

                          Information System Control Weaknesses Identified in the Single Family Housing Enterprise Data
  2015-DP-0001
                          Warehouse, 10/21/2014.

  2015-DP-0003            Information System Control Weaknesses Identified in the FHA Subsidiary Ledger, 11/07/2014.

                          Audit of the Federal Housing Administration’s Financial Statements for Fiscal Years 2014 and
  2015-FO-0001            2013, 11/14/2014. Questioned: $1,486,544,478; unsupported: $1,486,544,478; better use:
                          $5,500,000.

  PUBLIC AND INDIAN HOUSING

                          HUD Subsidized More Than 106,000 Noncompliant Households, 02/13/2015. Better use:
  2015-KC-0001
                          $448,580,654.

                          HUD Lacked Adequate Oversight To Ensure That Public Housing Agencies Complied With
  2015-PH-0001
                          Federal Lobbying Disclosure Requirements and Restrictions, 01/30/2015.

  AUDIT-RELATED MEMORANDUMS13

  DEPUTY SECRETARY

                          Intergovernmental Personnel Act Appointment Created an Inherent Conflict of Interest in the
  2015-FW-0801
                          Office of Public and Indian Housing, 01/20/2015.


  EXTERNAL REPORTS
  AUDIT REPORTS

  COMMUNITY PLANNING AND DEVELOPMENT

                          The Office of the Commissioner for Municipal Affairs Needs To Make Improvements in
  2015-AT-1001            Administering Its Section 108 Loan Guarantee Program, San Juan, PR, 12/05/2014. Questioned:
                          $21,301,734; unsupported: $20,221,492.

                          Rhode Island Housing Did Not Always Adequately Support HOME Fund Expenditures,
  2015-BO-1002            Providence, RI, 02/04/2015. Questioned: $1,967,220; unsupported: $1,084,128; better use:
                          $500,000.

                          The State of Rhode Island Did Not Always Operate Its NSP in Compliance With HUD
  2015-BO-1003            Regulations, Providence, RI, 03/04/2015. Questioned: $5,907,800; unsupported: $4,501,345;
                          better use: $489,518.

                          The City of Minot Did Not Fully Comply With Federal and Local Procurement Requirements,
  2015-KC-1002
                          Minot, ND, 03/13/2015. Questioned: $11,671,037; unsupported: $11,671,037.




13 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted
government auditing standards, to close out assignments with no findings and recommendations, to respond to requests for
information, or to report the results of civil or administrative outcomes from civil fraud efforts.




       58
                                                                                                            APPENDIX 2 AUDIT REPORTS ISSUED




                           New Image Emergency Shelter Did Not Adequately Support HOPWA Salary and Operating
  2015-LA-1001
                           Expenses, Long Beach, CA, 01/30/2015. Questioned: $266,205; unsupported: $266,205.

                           The City of New York Did Not Always Disburse CDBG Disaster Recovery Assistance Funds to Its
  2015-NY-1001             Subrecipient in Accordance With Federal Regulations, New York, NY, 11/24/2014. Questioned:
                           $183,000,000; unsupported: $183,000,000; better use: $40,000,000.

                           The County of Beaver Did Not Always Administer Its HOME Program in Accordance With
  2015-PH-1001             Applicable HUD and Federal Requirements, Beaver Falls, PA, 01/30/2015. Questioned:
                           $519,284; unsupported: $519,284.

  HOUSING

                           Glenbrook Manor Could Not Always Show That Project Costs Were Eligible and Supported in
  2015-BO-1001             Accordance With HUD Requirements, Stamford, CT, 12/16/2014. Questioned: $496,980;
                           unsupported: $496,980; better use: $61,067.

                           Breakthrough Living Program Did Not Administer Its Program in Accordance With HUD Rules
  2015-KC-1001
                           and Regulations, Topeka, KS, 03/05/2015. Questioned: $122,909.

  PUBLIC AND INDIAN HOUSING

                           The Chicago Housing Authority Moving to Work Housing Choice Voucher Program, Chicago, IL,
  2015-CH-1001
                           02/24/2015. Better use: $4,877,592.

                           The Freeport Housing Authority Did Not Administer Its Low-Rent Housing and Homeownership
  2015-NY-1002             Programs in Accordance With HUD’s Regulations, Freeport, NY, 12/01/2014. Questioned:
                           $1,270,102; unsupported: $1,270,102; better use: $3,919.

                           The Buffalo Municipal Housing Authority Did Not Always Adequately Support Legal Expenses
  2015-NY-1003             and Police Service Cost Allocation, Buffalo, NY, 02/24/2015. Questioned: $290,460;
                           unsupported: $290,460.

  AUDIT-RELATED MEMORANDUMS14

  COMMUNITY PLANNING AND DEVELOPMENT

                           The City of Albuquerque Generally Administered Its Continuum of Care Program in Accordance
  2015-FW-1803
                           With Applicable HUD Regulations and Grant Agreements, Albuquerque, NM, 01/13/2015.

  GENERAL COUNSEL

                           Group One Mortgage, Inc., Settled Allegations of Failing To Comply With Federal Housing
  2015-CF-1801
                           Administration Underwriting Requirements, Jupiter, FL, 03/27/2015. Questioned: $376,523.

                           Golden First Mortgage Corporation and Its Owner Settled Alleged Violations of Failing To
  2015-CF-1802             Comply With Federal Housing Administration Underwriting Requirements (FHA #34475), Great
                           Neck, NY, 03/27/2015. Questioned: $300,000.


14 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted government
auditing standards, to close out assignments with no findings and recommendations, to respond to requests for information, or to report the
results of civil or administrative outcomes from civil fraud efforts.



                                                                                                                                59
SEMIANNUAL REPORT TO CONGRESS




                         MetLife Home Loans, LLC, Settled Allegations of Failing To Comply With HUD’s Federal Housing
  2015-CF-1803           Administration Loan Requirements, Convent Station, NJ, 03/27/2015. Questioned:
                         $60,258,955.

                         Borrower Settled Allegations of Not Complying With the Primary Residence Requirement of the
  2015-CF-1804
                         Federal Housing Administration Program, Tempe, AZ, 03/27/2015. Questioned: $15,000.

                         Wells Fargo Bank, NA, Lender Settled Alleged Violations of Home Equity Conversion Mortgage
  2015-PH-1801
                         Program, Washington, DC, 10/21/2014. Better use: $7,500.

                         SunTrust Mortgage, Inc., Settled Allegations of Failing To Comply With HUD’s FHA Loan
  2015-PH-1802
                         Requirements, Washington, DC, 12/09/2014. Questioned: $300,000,000.

                         Borrower Settled Alleged Violations of Home Equity Conversion Mortgage Program,
  2015-PH-1803
                         Washington, DC, 01/30/2015. Better use: $3,000.

                         Court Ordered a Former Executive Director of the Philadelphia Housing Authority To Pay Civil
  2015-PH-1804           Penalties for Violating Federal Lobbying Disclosure Requirements and Restrictions, Washington,
                         DC, 02/19/2015. Better use: $75,000.

                         Civic Construction, LLC, Settled Allegations of Making False Claims to the Seattle Housing
  2015-SE-1801
                         Authority, Portland, OR, 03/30/2015. Better use: $34,000.

  PUBLIC AND INDIAN HOUSING

                         The Management of the Housing Authority of the City of Taylor Did Not Exercise Adequate
  2015-FW-1801           Oversight of Its Programs, Taylor, TX, 10/02/2014. Questioned: $392,059; unsupported:
                         $272,256; better use: $2,032,266.

                         The Rotan Housing Authority Did Not Administer Its Public Housing and Recovery Act Programs
  2015-FW-1802           in Accordance With Regulations and Other Requirements, Rotan, TX, 10/31/2014. Questioned:
                         $89,397; unsupported: $89,397; better use: $382,217.




       60
                                                                                                  APPENDIX 3 TABLES




      APPENDIX 3                   TABLES



TABLE A

Audit reports issued before the start of period with no management
decision at 03/31/2015

*Significant audit reports described in previous semiannual reports


                                                                      REASON FOR LACK OF
  REPORT NUMBER & TITLE                                                                         ISSUE DATE
                                                                      MANAGEMENT DECISION

  * 2014-FO-0003 Additional Details To Supplement Our Report on
                                                                      See chapter 10, page 41   12/16/2013
  HUD’s Fiscal Years 2013 and 2012 (Restated) Financial Statements

  * 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the
                                                                      See chapter 10, page 42   04/15/2014
  Improper Payments Elimination and Recovery Act of 2010

  * 2014-LA-0004 HUD Could Not Support the Reasonableness
  of the Operating and Capital Fund Programs’ Fees and Did Not        See chapter 10, page 42   06/30/2014
  Adequately Monitor Central Office Cost Centers

  * 2014-KC-0002 The Data in CAIVRS Did Not Agree With the Data
                                                                      See chapter 10, page 43   07/02/2014
  in FHA’s Default and Claims Systems

  * 2014-NY-1007 The Niagara Falls Housing Authority Did Not
  Always Administer Its HOPE VI Grant Program and Activities in       See chapter 10, page 44   07/10/2014
  Accordance With HUD Requirements

  * 2014-LA-0005 HUD Did Not Always Recover FHA Single-
  Family Indemnification Losses and Ensure That Indemnification       See chapter 10, page 45   08/08/2014
  Agreements Were Extended

  2014-PH-1008 The State of New Jersey Did Not Fully Comply
  With Federal Procurement and Cost Principle Requirements in         See chapter 10, page 46   08/29/2014
  Implementing Its Tourism Marketing Program

  2014-PH-1009 The State of New Jersey Demonstrated
                                                                      See chapter 10, page 48   09/05/2014
  Homeowner Eligibility for Its Homeowner Resettlement Program




                                                                                                       61
SEMIANNUAL REPORT TO CONGRESS




       TABLE B

       Significant audit reports for which final action had not been completed within
       12 months after the date of the Inspector General’s report


         REPORT                                                                 ISSUE        DECISION     FINAL
                                REPORT TITLE
         NUMBER                                                                 DATE         DATE         ACTION

                                Housing Authority of the City of Tupelo,
         2002-AT-1002                                                           07/03/2002   10/31/2002   07/01/2015
                                Housing Programs Operations, Tupelo, MS

                                Corporacion Para el Fomento Economico
                                de la Ciudad Capital Did Not Administer Its
         2005-AT-1013                                                           09/15/2005   01/11/2006   Note 1
                                Independent Capital Fund in Accordance
                                With HUD Requirements, San Juan, PR

                                HUD’s Controls over the Reporting, Oversight,
         2006-NY-0001           and Monitoring of the Housing Counseling        06/08/2006   01/08/2007   10/01/2015
                                Assistance Program Were Not Adequate

                                The Cathedral Foundation of Jacksonville
         2007-AT-1010           Used More Than $2.65 Million in Project         08/14/2007   12/03/2007   04/10/2017
                                Funds for Questioned Costs, Jacksonville, FL

                                State of Louisiana, Road Home
                                Program, Funded 418 Grants Coded
         2008-AO-1002                                                           01/30/2008   05/12/2008   Note 1
                                Ineligible or Lacking an Eligibility
                                Determination, Baton Rouge, LA

                                Review of Selected FHA Major Applications’
         2008-DP-0004                                                           06/12/2008   10/08/2008   Note 1
                                Information Security Controls

                                State of Louisiana, Road Home Program,
                                Did Not Ensure That Road Home Employees
         2009-AO-1001                                                           05/05/2009   09/16/2009   Note 1
                                Were Eligible To Receive Additional
                                Compensation Grants, Baton Rouge, LA

                                State of Louisiana, Road Home Program,
                                Did Not Ensure That Multiple Disbursements
         2009-AO-1002                                                           05/05/2009   09/16/2009   Note 1
                                to a Single Damaged Residence Address
                                Were Eligible, Baton Rouge, LA

                                The City of Rome Did Not Administer
                                Its Economic Development
         2009-NY-1012                                                           05/20/2009   09/23/2009   01/30/2032
                                Activity in Accordance With HUD
                                Requirements, Rome, NY




       62
                                                                                       APPENDIX 3 TABLES




REPORT                                                       ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                       DATE         DATE         ACTION

               Review of Implementation of Security
2009-DP-0005                                                 06/11/2009   11/17/2009   Note 2
               Controls Over HUD’s Business Partners

               The Housing Authority of the City of
               Terre Haute Failed To Follow Federal
2009-CH-1011   Requirements and Its Employment               07/31/2009   11/24/2009   10/01/2015
               Contract Regarding Nonprofit
               Development Activities, Terre Haute, IN

               HUD Lacked Adequate Controls To
2009-AT-0001   Ensure the Timely Commitment and              09/28/2009   03/18/2011   Note 1
               Expenditure of HOME funds

               The Housing Authority of Whitesburg
2010-AT-1003                                                 04/28/2010   08/26/2010   11/29/2035
               Mismanaged Its Operations, Whitesburg, KY

               Sasha Bruce Youthwork, Incorporated,
2010-PH-1008   Did Not Support More Than $1.9 Million        05/11/2010   11/03/2010   Note 2
               in Expenditures, Washington, DC

               The DuPage Housing Authority
2010-CH-1008   Inappropriately Administered Its Section 8    06/15/2010   10/08/2010   07/31/2015
               Project-Based Voucher Program, Wheaton, IL

               The City of Flint Lacked Adequate Controls
               Over Its HOME Program Regarding
               Community Housing Development
2011-CH-1001                                                 10/13/2010   02/03/2011   Note 2
               Organizations’ Home-Buyer Projects,
               Subrecipients’ Activities, and Reporting
               Accomplishments in HUD’s System, Flint, MI

               Additional Details To Supplement Our
2011-FO-0003   Report on HUD’s Fiscal Years 2010             11/15/2010   08/08/2011   06/15/2015
               and 2009 Financial Statements

               The District of Columbia Did Not Administer
2011-PH-1005   Its HOME Program in Accordance With           12/23/2010   04/22/2011   Note 1
               Federal Requirements, Washington, DC

               The City of Cleveland Lacked Adequate
               Controls Over Its HOME Investment
2011-CH-1003   Partnerships Program and American             12/27/2010   04/26/2011   Note 2
               Dream Downpayment Initiative-Funded
               Afford-A-Home Program, Cleveland, OH




                                                                                            63
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                             ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                             DATE         DATE         ACTION

                        The State of Indiana’s Administrator
                        Lacked Adequate Controls Over the
                        State’s HOME Investment Partnerships
  2011-CH-1004                                                       01/31/2011   05/25/2011   04/30/2015
                        Program and American Dream
                        Downpayment Initiative-Funded First
                        Home/PLUS Program, Indianapolis, IN

                        The DuPage Housing Authority
                        Inappropriately Administered Its
  2011-CH-1006                                                       03/23/2011   07/28/2011   07/31/2015
                        Section 8 Housing Choice Voucher
                        Program, Wheaton, IL

                        The East Orange Revitalization and
                        Development Corporation Did Not Always
  2011-NY-1009                                                       04/07/2011   08/03/2011   07/01/2015
                        Comply With HOME Program Requirements
                        and Federal Regulations, East Orange, NJ

                        The Municipality of Mayaguez Did
  2011-AT-1006          Not Ensure Compliance With HOME              04/08/2011   08/05/2011   Note 1
                        Program Objectives, Mayaguez, PR

                        The City of Buffalo Did Not Always
  2011-NY-1010          Administer Its CDBG Program in Accordance    04/15/2011   01/25/2012   Note 2
                        With HUD Requirements, Buffalo, NY

                        The State of Mississippi Generally Ensured
  2011-AO-1005          That Disbursements to Program Participants   04/18/2011   08/16/2011   Note 1
                        Were Eligible and Supported, Jackson, MS

                        The Office of Healthcare Programs Could
  2011-FW-0002          Increase Its Controls To More Effectively    04/26/2011   08/17/2011   06/30/2015
                        Monitor the Section 232 Program

                        The Lafayette Parish Housing
                        Authority Violated HUD Procurement
  2011-AO-0001                                                       06/22/2011   10/13/2011   05/31/2016
                        Requirements and Executed Unreasonable
                        and Unnecessary Contracts

                        The City of Compton Did Not Administer
  2011-LA-1016          Its HOME Program in Compliance With          08/18/2011   12/15/2011   Note 2
                        HOME Requirements, Compton, CA

                        The City of Buffalo Did Not Always
                        Disburse Homelessness Prevention and
  2011-NY-1016                                                       09/22/2011   01/25/2012   Note 1
                        Rapid Re-Housing Program Funds in
                        Accordance With Regulations, Buffalo, NY




       64
                                                                                          APPENDIX 3 TABLES




REPORT                                                          ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                          DATE         DATE         ACTION

               The Municipality of San Juan Did Not
2011-AT-1018   Properly Manage Its HOME Investment              09/28/2011   01/12/2012   Note 2
               Partnerships Program, San Juan, PR

               The City of Cleveland Lacked Adequate
               Controls Over Its HOME Investment
2011-CH-1014   Partnerships Program-Funded                      09/29/2011   01/26/2012   Note 1
               Housing Trust Fund Program Home-
               Buyer Activities, Cleveland, OH

               The Pontiac Housing Commission
               Did Not Adequately Administer Its
2011-CH-1018                                                    09/30/2011   01/10/2012   12/31/2015
               American Recovery and Reinvestment
               Act Capital Fund Grant, Pontiac, MI

               The City of New York Charged Questionable
2012-NY-1002                                                    10/18/2011   02/16/2012   Note 1
               Expenditures to Its HPRP, New York, NY

               The City of Syracuse Did Not Always
2012-NY-1003   Administer Its CDBG Program in Accordance        10/25/2011   02/22/2012   06/01/2015
               With HUD Requirements, Syracuse, NY

               HUD Needed To Improve Its Use of Its
2012-PH-0001   Integrated Disbursement and Information          10/31/2011   02/28/2012   Note 1
               System To Oversee Its CDBG Program

               Additional Details To Supplement Our
2012-FO-0003   Report on HUD’s Fiscal Years 2011                11/15/2011   05/10/2012   Note 2
               and 2010 Financial Statements

               HUD Did Not Adequately Support the
2012-LA-0001   Reasonableness of the Fee-for-Service            11/16/2011   03/27/2012   04/15/2015
               Amounts or Monitor the Amounts Charged

               The State of Indiana’s Administrator Lacked
               Adequate Controls Over the State’s HOME
2012-CH-1004                                                    02/24/2012   06/22/2012   04/30/2015
               Investment Partnerships Program Regarding
               CHDOs’ Activities and Income, Indianapolis, IN

               The State of Texas Did Not Follow
               Requirements for Its Infrastructure and
2012-FW-1005                                                    03/07/2012   07/05/2012   Note 2
               Revitalization Contracts Funded With CDBG
               Disaster Recovery Program Funds, Austin, TX




                                                                                               65
REPORT                                                          ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                          DATE         DATE         ACTION

               The City of Los Angeles Did Not Expend
               Brownfields Economic Development Initiative
2012-LA-1005   and Section 108 Funds for the Goodyear           03/13/2012   09/19/2012   Note 2
               Industrial Tract Project in Accordance With
               HUD Requirements, Los Angeles, CA

               The Municipality of Bayamón Did Not
               Always Ensure Compliance With HOME
2012-AT-1009                                                    05/23/2012   09/18/2012   Note 1
               Investment Partnerships Program
               Requirements, Bayamon, PR

               The City of Phoenix Did Not Always
               Comply With Program Requirements
2012-LA-1008                                                    06/15/2012   10/15/2012   10/30/2015
               When Administering Its NSP1 and
               NSP2 Grants, Phoenix, AZ

               The Hammond Housing Authority Did
               Not Administer Its Recovery Act Grants in
2012-CH-1009                                                    08/03/2012   11/30/2012   11/30/2015
               Accordance With Recovery Act, HUD’s, and
               Its Own Requirements, Hammond, IN

               Prince George’s County Generally Did Not
2012-PH-1011   Administer Its HOME Program in Accordance        08/03/2012   11/30/2012   Note 1
               With Federal Requirements, Largo, MD

               The City of Elizabeth Did Not Always
2012-NY-1011   Administer Its CDBG Program in Accordance        08/15/2012   12/07/2012   Note 1
               With Regulations, Elizabeth, NJ

               Little Haiti Did Not Fully Comply With Federal
2012-AT-1015                                                    09/06/2012   01/03/2013   Note 1
               Rules When Administering NSP2, Miami, FL

               The Stark Metropolitan Housing Authority
               Did Not Always Administer Its Grant in
2012-CH-1011                                                    09/27/2012   01/15/2013   12/31/2018
               Accordance With Recovery Act, HUD’s,
               and Its Own Requirements, Canton, OH

               The Saginaw Housing Commission
               Did Not Always Administer Its Section
2012-CH-1012   8 Housing Choice Voucher Program                 09/27/2012   01/07/2013   01/01/2023
               in Accordance With HUD’s and Its
               Own Requirements, Saginaw, MI




   66
                                                                                      APPENDIX 3 TABLES




REPORT                                                      ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                      DATE         DATE         ACTION

               The Flint Housing Commission Did
               Not Always Administer Its Grants in
2012-CH-1013                                                09/27/2012   01/24/2013   09/30/2015
               Accordance With Recovery Act, HUD’s,
               and Its Own Requirements, Flint, MI

               HUD’s Oversight of Recovery Act-
2012-FO-0006                                                09/27/2012   03/05/2013   Note 1
               Funded Housing Programs

               Review of Controls Over
2012-DP-0005                                                09/28/2012   12/18/2012   09/30/2015
               HUD’s Mobile Devices

               Allen Mortgage, LLC, Did Not Comply
               With HUD Requirements for Underwriting
2012-CH-1015   FHA Loans and Fully Implement Its Quality    09/30/2012   02/04/2013   06/01/2015
               Control Program in Accordance With
               HUD’s Requirement, Centennial Park, AZ

               Luzerne County Did Not Properly
2013-PH-1001   Evaluate, Underwrite, and Monitor a          10/31/2012   01/31/2013   Note 1
               High-Risk Loan, Wilkes-Barre, PA

               Additional Details To Supplement Our
2013-FO-0003   Report on HUD’s Fiscal Years 2012            11/15/2012   05/15/2013   10/01/2015
               and 2011 Financial Statements

               The Municipality of Ponce Did Not
               Always Ensure Compliance With
2013-AT-1001                                                11/30/2012   03/29/2013   Note 1
               HOME Investment Partnerships
               Program Requirements, Ponce, PR

               The City of Albany CDBG Recovery
2013-NY-1001                                                12/06/2012   04/03/2013   Note 2
               Act Program, Albany, NY

               HUD Policies Did Not Always Ensure
2013-PH-0002   That Borrowers Complied With                 12/20/2012   04/19/2013   Note 2
               Program Residency Requirements

               The Idaho Housing and Finance
               Association Did Not Always Comply
2013-SE-1001   With HOME Investment Partnerships            12/21/2012   12/21/2012   Note 1
               Program Match and Compliance
               Monitoring Requirements, Boise, ID

               Information System Deficiencies Noted
2013-FO-0004   During Federal Housing Administration’s      01/15/2013   08/22/2013   Note 2
               Fiscal Year 2012 Financial Statement Audit




                                                                                           67
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                              ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                              DATE         DATE         ACTION

                        The City of Paterson Had Weaknesses in the
  2013-NY-1004          Administration of Its Housing Opportunities   02/25/2013   04/15/2013   Note 2
                        for Persons with AIDS Program, Paterson, NJ

                        Bay Vista Methodist Heights Violated Its
  2013-LA-1003          Agreement With HUD When Administering         03/14/2013   05/15/2013   Note 2
                        Its Trust Funds, San Diego, CA

                        The Municipality of Arecibo Did Not
  2013-AT-1003          Always Ensure Compliance With CDBG            03/22/2013   06/14/2013   Note 2
                        Program Requirements, Arecibo, PR

                        Follow-up of the Inspections and
                        Evaluations Division on Its Inspection
  2013-IE-0803          of the State of Louisiana’s Road Home         03/29/2013   09/29/2014   04/30/2015
                        Elevation Incentive Program Homeowner
                        Compliance (IED-09-002, March 2010)

                        The Housing Authority of the City
                        of El Paso Did Not Follow Recovery
  2013-FW-1004                                                        04/12/2013   08/27/2013   Note 2
                        Act Obligation Requirements or
                        Procurement Policies, El Paso, TX

                        CTX Mortgage Company LLC
  2013-LA-1803          Allowed the Recording of Prohibited           04/18/2013   01/10/2014   Note 2
                        Restrictive Covenants, Dallas, TX

                        The City of San Bernardino Did Not
                        Administer Its CDBG and CDBG-Recovery
  2013-LA-1004                                                        04/23/2013   09/06/2013   09/30/2017
                        Act Programs in Accordance With HUD
                        Rules and Regulations, San Bernardino, CA

                        Nassau County Did Not Administer
                        Its HOME Investment Partnerships
  2013-NY-1006                                                        05/13/2013   09/06/2013   Note 2
                        Program in Accordance With HUD
                        Requirements, Nassau County, NY

                        The Management and Board of
                        Commissioners of the Harris County
  2013-FW-1006                                                        06/19/2013   02/11/2014   08/13/2016
                        Housing Authority Mismanaged
                        the Authority, Houston, TX

                        HUD Did Not Enforce the Reporting
                        Requirements of Section 3 of the
  2013-KC-0002                                                        06/26/2013   10/24/2013   07/31/2015
                        Housing and Urban Development Act of
                        1968 for Public Housing Authorities




       68
                                                                                     APPENDIX 3 TABLES




REPORT                                                     ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                     DATE         DATE         ACTION

               The County of Santa Barbara Did Not
2013-LA-1007   Comply With HOME Investment Partnerships    07/09/2013   11/04/2013   03/16/2016
               Program Requirements, Santa Barbara, CA

               HUD Officials Did Not Always Monitor
2013-NY-0003   Grantee Compliance With the CDBG            07/19/2013   11/26/2013   Note 2
               Timeliness Spending Requirement

               The Puerto Rico Housing Finance
2013-AT-1006   Authority Did Not Always Comply With        07/23/2013   11/20/2013   Note 2
               HOME Requirements, San Juan, PR

               Essex County’s HOME Investment
               Partnerships Program Was Not Always
2013-NY-1009   Administered in Compliance With             08/09/2013   11/05/2013   Note 2
               Program Requirements and Federal
               Regulations, Essex County, NJ

               The Lending Company, Inc., Did Not Always
2013-LA-1008   Comply With FHA Underwriting and Quality    08/20/2013   12/24/2013   06/24/2015
               Control Program Requirements, Phoenix, AZ

               Economic Development Programs
2013-AT-0003   Lacked Adequate Controls To                 09/03/2013   02/04/2014   Note 2
               Ensure Program Effectiveness

               FHA Paid Claims for Approximately 4,457
2013-LA-0002   Preforeclosure Sales That Did Not Meet      09/05/2013   03/31/2014   Note 2
               Minimum Net Sales Proceeds Requirements

               The City of Hawthorne Inappropriately
2013-LA-1009   Used Nearly $1.6 Million in HOME Funds      09/13/2013   01/06/2014   Note 2
               for Section 8 Tenants, Hawthorne, CA

               The State of Michigan Lacked Adequate
               Controls Over Its NSP Under the
2013-CH-1006                                               09/15/2013   01/13/2014   Note 2
               American Recovery and Reinvestment
               Act of 2009, Lansing, MI

               Community Advocates Did Not Properly
2013-CH-1008   Administer Its Program and Recovery         09/17/2013   01/15/2014   Note 2
               Act Grant Funds, Milwaukee, WI

               HUD Paid Claims That Lacked Contact or
2013-KC-0004                                               09/18/2013   01/07/2014   Note 2
               Collection Activities With Coborrowers




                                                                                          69
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                               ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                               DATE         DATE         ACTION

                        The City of Hawthorne Did Not Administer
                        Its CDBG Program Cost Allocations
  2013-LA-1010                                                         09/20/2013   01/06/2014   Note 2
                        in Accordance With HUD Rules and
                        Requirements, Hawthorne, CA

                        Reviews of Six FHA Lenders Demonstrated
  2013-LA-0803          That HUD Needs To Strengthen Its Oversight     09/23/2013   03/27/2014   10/15/2015
                        of Prohibited Restrictive Covenants

                        The City of New Orleans Did Not Have
                        Adequate Financial and Programmatic
  2013-FW-1008          Controls To Ensure That It Expended            09/24/2013   01/06/2014   Note 2
                        and Reported Funds in Accordance With
                        Program Requirements, New Orleans, LA

                        The Malakoff Housing Authority Did
                        Not Have Sufficient Controls Over Its
  2013-FW-1805                                                         09/26/2013   12/19/2013   12/01/2015
                        Public Housing Programs, Including Its
                        Recovery Act Funds, Malakoff, TX

                        The City of Auburn Did Not Always
  2013-NY-1010          Administer Its CDBG Program in Accordance      09/26/2013   01/24/2014   06/30/2015
                        With HUD Requirements, Auburn, NY

                        The Flint Housing Commission Did
                        Not Always Administer Its Grant in
  2013-CH-1009                                                         09/27/2013   01/14/2014   01/23/2016
                        Accordance With Recovery Act, HUD’s,
                        and Its Own Requirements, Flint, MI

                        Evaluation of HUD’s Property
  2013-IE-0804                                                         09/27/2013   03/26/2014   Note 2
                        Inventory System

                        The City of West Palm Beach Did Not
  2013-AT-1008          Always Properly Administer Its HOME            09/30/2013   01/17/2014   09/30/2015
                        Program, West Palm Beach, FL

                        The City of Toledo Did Not Always Administer
  2013-CH-1010          Its CDBG-R Program in Accordance With          09/30/2013   01/15/2014   Note 2
                        HUD’s and Its Own Requirements, Toledo, OH

                        The Michigan State Housing Development
                        Authority Did Not Follow HUD’s
  2013-CH-1011                                                         09/30/2013   01/15/2014   07/31/2029
                        Requirements Regarding the Administration
                        of Its Program, Lansing, MI




       70
                                                                                           APPENDIX 3 TABLES




REPORT                                                           ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                           DATE         DATE         ACTION

               The Hamtramck Housing Commission Did
               Not Administer Its Grant in Accordance
2013-CH-1012                                                     09/30/2013   01/21/2014   01/23/2016
               With Recovery Act, HUD’s, and Its Own
               Requirements, Hamtramck, MI

               The Jefferson County Housing Authority
2013-DE-1005   Did Not Properly Use Its Disposition              09/30/2013   01/24/2014   02/28/2020
               Sales Proceeds, Wheat Ridge, CO

               Information System Control Weaknesses
2014-DP-0001                                                     11/07/2013   01/30/2014   08/30/2015
               Identified in the Line of Credit Control System

               The Colfax Housing Authority Did
               Not Properly Administer Its Programs,
2014-FW-1801                                                     11/08/2013   02/05/2014   09/30/2015
               Including Its 2009 American Recovery
               and Reinvestment Act Grant, Colfax, LA

               The City of Flint Lacked Adequate
2014-CH-1001   Controls Over Its HOME Investment                 11/15/2013   03/13/2014   Note 2
               Partnerships Program, Flint, MI

               The Municipality of Arecibo Did Not Properly
2014-AT-1001                                                     12/03/2013   01/24/2014   Note 2
               Administer Its HOME Program, Arecibo, PR

               Government National Mortgage
2014-FO-0001   Association Fiscal Years 2013 and                 12/06/2013   05/02/2014   Note 2
               2012 Financial Statements Audit

               Federal Housing Administration Fiscal Years
2014-FO-0002                                                     12/13/2013   04/14/2014   Note 2
               2013 and 2012 Financial Statements Audit

               Additional Details To Supplement Our
2014-FO-0003   Report on HUD’s Fiscal Years 2013 and             12/16/2013   07/09/2014   Note 3
               2012 (Restated) Financial Statements

               The City of Norfolk Generally Failed To
2014-PH-1001                                                     12/17/2013   04/16/2014   04/15/2015
               Justify Its CDBG Activities, Norfolk, VA

               The State of Mississippi Did Not Ensure That
               Its Subrecipient and Appraisers Complied
2014-AT-1004   With Requirements, and It Did Not Fully           12/30/2013   04/15/2014   04/15/2015
               Implement Adequate Procedures For Its
               Disaster Infrastructure Program, Jackson, MS




                                                                                                 71
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                               ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                               DATE         DATE         ACTION

                        The City of Detroit Lacked Adequate
                        Controls Over Its Neighborhood Stabilization
  2014-CH-1002          Program-Funded Demolition Activities           01/06/2014   05/05/2014   05/01/2015
                        Under the Housing and Economic
                        Recovery Act of 2008, Detroit, MI

                        Application Control Weaknesses
  2014-DP-0002          Identified in the Asset Disposition            01/14/2014   05/13/2014   06/30/2015
                        and Management System

                        The Paterson Housing Authority Had
  2014-NY-1001          Weaknesses in Administration of Its Housing    01/15/2014   06/12/2014   07/01/2025
                        Choice Voucher Program, Paterson, NJ

                        The Housing Authority of the City of
                        Bridgeport Did Not Always Ensure
  2014-BO-1001          That Expenses Charged to Its Federal           01/23/2014   05/19/2014   05/19/2015
                        Programs Were Eligible, Reasonable,
                        and Supported, Bridgeport, CT

                        The Boston Office of Public Housing Did Not
                        Provide Adequate Oversight of Environmental
  2014-FW-0001                                                         02/07/2014   03/17/2015   10/01/2016
                        Reviews of Three Housing Agencies, Including
                        Reviews Involving Recovery Act Funds

                        HUD Did Not Provide Effective Oversight of
  2014-NY-0001                                                         02/19/2014   06/10/2014   Note 2
                        Section 202 Multifamily Project Refinances

                        CPD Did Not Monitor Grantees’ CPD-Funded
  2014-LA-0001          Assets Transferred by Former Redevelopment     02/28/2014   06/19/2014   06/19/2015
                        Agencies To Minimize HUD’s Risk

                        Information System Control Weaknesses
  2014-DP-0004                                                         03/13/2014   04/03/2014   Note 2
                        Identified in the Financial Data Mart

                        Violations Increased the Cost of Housing’s
  2014-AT-0001                                                         03/14/2014   07/11/2014   06/30/2015
                        Administration of Its Bond Refund Program

                        Vieques Sports City Complex, Office of the
  2014-AT-1801          Commissioner for Municipal Affairs, Section    03/20/2014   07/11/2014   06/18/2015
                        108 Loan Guarantee Program, San Juan, PR

                        HUD's Procedures Do Not Always
                        Ensure the Proper Use and Timely
  2014-BO-0001                                                         03/21/2014   07/02/2014   04/15/2015
                        Reimbursement of Public Housing
                        Agency Interfund Transaction Balances




       72
                                                                                                      APPENDIX 3 TABLES




REPORT                                                                  ISSUE            DECISION     FINAL
                     REPORT TITLE
NUMBER                                                                  DATE             DATE         ACTION

Significant audit reports issued within the past 12 months that were described in previous
semiannual reports for which final action had not been completed as of 03/31/2015

                     HUD’s Fiscal Year 2013 Compliance
2014-FO-0004         With the Improper Payments Elimination             04/15/2014       01/07/2015   Note 3
                     and Recovery Act of 2010

                     The Yakama Nation Housing Authority Did
2014-SE-1002         Not Always Spend Its Recovery Act Funds in         04/29/2014       08/26/2014   08/20/2015
                     Accordance With Requirements, Wapato, WA

                     Chelsea Housing Authority, Review of
2014-BO-1002         Cost Allocations and Reasonableness                04/30/2014       08/28/2014   06/30/2015
                     of Salaries, Chelsea, MA

                     The Hamtramck Housing Commission
                     Did Not Always Administer Its Grant in
2014-CH-1003                                                            04/30/2014       08/08/2014   08/31/2015
                     Accordance With Recovery Act, HUD’s, or
                     Its Own Requirements, Hamtramck, MI

                     Fiscal Year 2013 Review of Information
2014-DP-0005         Systems Controls in Support of the                 04/30/2014       02/09/2015   10/31/2015
                     Financial Statements Audit

                     The County of Northumberland Did Not
                     Administer Its Homelessness Prevention and
2014-PH-1004                                                            04/30/2014       08/28/2014   04/29/2015
                     Rapid Re-Housing Program Grant According
                     to Recovery Act Requirements, Sunbury, PA

                     The New York City Housing Authority Did
                     Not Always Administer Its Section 8 Housing
2014-NY-1002                                                            05/01/2014       08/28/2014   06/30/2015
                     Choice Voucher Program in Accordance
                     With Regulations, New York, NY

                     The New York City Housing Authority
                     Did Not Always Ensure that Its Housing
2014-NY-1003                                                            05/01/2014       08/28/2014   04/30/2015
                     Choice Voucher Program Units Met HUD’s
                     Housing Quality Standards, New York, NY

                     Improvements Are Needed Over
2014-FW-0002         Environmental Reviews of Public Housing and        05/12/2014       03/17/2015   10/01/2016
                     Recovery Act Funds in the Kansas City Office




                                                                                                           73
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                              ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                              DATE         DATE         ACTION

                        The City of Huntsville, Community
                        Development Department, Did Not
  2014-AT-1005                                                        05/29/2014   09/23/2014   09/22/2015
                        Adequately Account for and Administer the
                        Mirabeau Apartments Project, Huntsville, AL

                        Potential Antideficiency Act Violations
  2014-FW-0801                                                        05/30/2014   09/22/2014   06/30/2015
                        Intergovernmental Personnel Act Agreements

                        Financial and Administrative Control
                        Weaknesses Existed in Middlesex County,
  2014-NY-1005                                                        06/10/2014   07/17/2014   05/15/2015
                        NJ’s HOME Investment Partnerships
                        Program, Middlesex County, NJ

                        HUD Adequately Implemented and Monitored
  2014-LA-0003          the HUD-VASH Program, but Changes             06/18/2014   10/08/2014   12/01/2015
                        Are Needed To Improve Lease Rates

                        HUD Could Not Support the Reasonableness
                        of the Operating and Capital Fund
  2014-LA-0004                                                        06/30/2014   10/20/2014   Note 3
                        Programs’ Fees and Did Not Adequately
                        Monitor Central Office Cost Centers

                        The Data in CAIVRS Did Not Agree With the
  2014-KC-0002                                                        07/02/2014   10/27/2014   Note 3
                        Data in FHA’s Default and Claims Systems

                        Monmouth County Expended CDBG
                        Funds for Eligible Activities, But
  2014-NY-1006                                                        07/02/2014   08/06/2014   07/02/2015
                        Control Weaknesses Need To Be
                        Strengthened, Monmouth County, NJ

                        The White Mountain Apache Housing
                        Authority Did Not Always Comply
  2014-LA-1004                                                        07/08/2014   10/24/2014   07/31/2015
                        With Its Indian Housing Block Grant
                        Requirements, White River, AZ

                        The Niagara Falls Housing Authority Did
                        Not Always Administer Its HOPE VI Grant
  2014-NY-1007                                                        07/10/2014   10/28/2014   Note 3
                        Program and Activities in Accordance With
                        HUD Requirements, Niagara Falls, NY

                        Improvements Are Needed Over
  2014-FW-0004          Environmental Reviews of Public Housing and   07/14/2014   10/27/2014   10/27/2015
                        Recovery Act Funds in the Greensboro Office




       74
                                                                                         APPENDIX 3 TABLES




REPORT                                                         ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                         DATE         DATE         ACTION

               The State of Texas’ Contractor Did Not
               Perform Adequate Hurricane Dolly Damage
2014-FW-1004                                                   07/15/2014   11/12/2014   11/10/2015
               Inspections and Failed To Meet Critical
               Performance Benchmarks, Austin, TX

               The Cumberland Plateau Regional
               Housing Authority Did Not Procure
2014-PH-1007                                                   07/15/2014   09/05/2014   07/31/2015
               Services in Accordance With HUD
               Requirements, Lebanon, VA

               Pierce County Claimed Ineligible
2014-SE-1003   and Unsupported HOME Matching                   07/17/2014   11/13/2014   04/30/2015
               Funds, Tacoma, WA

               Palladia, Inc., Did Not Administer Its
2014-NY-1008   Supportive Housing Program in Accordance        07/25/2014   11/21/2014   11/20/2015
               With HUD Requirements, New York, NY

               The Municipality of Carolina Did Not Properly
2014-AT-1007                                                   08/08/2014   12/05/2014   12/31/2015
               Administer Its HOME Program, Carolina, PR

               HUD Did Not Always Recover FHA
               Single-Family Indemnification Losses
2014-LA-0005                                                   08/08/2014   12/03/2014   Note 3
               and Ensure That Indemnification
               Agreements Were Extended

               The Kenner Housing Authority Did
               Not Administer Its Public Housing and
2014-FW-1805                                                   08/13/2014   11/10/2014   10/27/2015
               Recovery Act Programs in Accordance With
               Regulations and Guidance, Kenner, LA

               The Goshen Housing Authority
               Failed To Follow HUD’s and Its Own
2014-CH-1006                                                   08/14/2014   01/21/2015   11/30/2015
               Requirements Regarding the Administration
               of Its Program, Goshen, IN

               The South Landry Housing Authority
               Did Not Always Comply With Federal
2014-FW-1806   Procurement and Financial Requirements,         08/19/2014   12/09/2014   08/19/2015
               Including a Procurement Using Recovery
               Act Funds, Grand Coteau, LA

               HUD’s ONAP Lacked Adequate Controls
2014-LA-0006                                                   08/19/2014   12/09/2014   07/31/2015
               Over the ICDBG Closeout Process




                                                                                              75
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                               ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                               DATE         DATE         ACTION

                        The City of Richmond Did Not
  2014-LA-1005          Administer Its NSP in Accordance With          08/22/2014   12/19/2014   10/31/2015
                        Requirements, Richmond, CA

                        Asset Repositioning Fees for Public
                        Housing Authorities With Units Approved
  2014-NY-0003                                                         09/04/2014   12/29/2014   01/01/2016
                        for Demolition or Disposition Were
                        Not Always Accurately Calculated

                        Miami-Dade County Did Not Always Properly
  2014-AT-1010                                                         09/11/2014   12/11/2014   09/11/2015
                        Administer Its HOME Program, Miami, FL

                        HUD Did Not Always Enforce the
                        Requirements of the Regulatory Agreements
  2014-KC-0003                                                         09/17/2014   11/25/2014   04/30/2015
                        and HUD Handbooks Pertaining to
                        Owner Advances and Distributions

                        The City of Jersey City’s HOME Investment
                        Partnerships Program Administration Had
  2014-NY-1009                                                         09/18/2014   01/13/2015   08/18/2015
                        Financial and Administrative Controls
                        Weaknesses, City of Jersey City, NJ

                        The Former Owner of Yale Court
                        Apartments Used Project Funds in
  2014-FW-1005                                                         09/22/2014   02/19/2015   10/30/2015
                        Violation of the Regulatory Agreement
                        With HUD, Houston, TX

  2014-DP-0006          Program Accounting System                      09/23/2014   12/01/2014   08/30/2015

                        Improvements Are Needed Over
  2014-FW-0005          Environmental Reviews of Public Housing        09/24/2014   03/17/2015   10/01/2016
                        and Recovery Act Funds in the Detroit Office

                        Lenders Generated $428 Million in Gains
  2014-KC-0004                                                         09/24/2014   01/22/2015   12/10/2015
                        From Modifying Defaulted FHA Loans

                        Wellston Housing Authority Improperly
  2014-KC-0005          Administered the Community Service             09/24/2014   01/20/2015   05/31/2015
                        and Self-Sufficiency Requirement

                        The City of Pomona Did Not Administer
  2014-LA-1006          Its NSP in Accordance With HUD Rules           09/25/2014   01/23/2015   10/27/2015
                        and Requirements, Pomona, CA




       76
                                                                                          APPENDIX 3 TABLES




REPORT                                                          ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                          DATE         DATE         ACTION

               Cornerstone Home Lending Did Not
               Adequately Underwrite 16 Loans,
               Violated the Real Estate Settlement
2014-FW-1006                                                    09/26/2014   03/30/2015   09/26/2015
               Procedures Act, and Did Not Implement
               an Adequate Quality Control Plan During
               Our Review Period, Houston, TX

               EverBank Did Not Properly Determine
2014-AT-1012   Mortgagor Eligibility for FHA’s Preforeclosure   09/29/2014   01/30/2015   09/29/2015
               Sale Program, Jacksonville, FL

               The Department of Housing and
               Community Development Did Not Always
2014-BO-1004                                                    09/29/2014   12/12/2014   11/25/2015
               Operate Its Disaster Recovery Programs
               Effectively and Efficiently, Montpelier, VT

               The Owner and Former Management
2014-CH-1010   Agents Lacked Adequate Controls Over the         09/29/2014   01/27/2015   02/24/2016
               Operation of Lake Village of Auburn Hills, MI

               The City of Los Angeles Did Not Always
2014-LA-1007   Ensure That CDBG-Funded Projects Met             09/29/2014   01/27/2015   01/27/2016
               National Program Objectives, Los Angeles, CA

               Peoples Home Equity, Inc., Did Not
               Follow HUD Requirements in Approving
2014-AT-1013                                                    09/30/2014   02/10/2015   09/30/2015
               FHA Loans and Implementing Its Quality
               Control Program, Brentwood, TN

               The Memphis Housing Authority Did Not
               Always Ensure That Its Housing Choice
2014-AT-1014                                                    09/30/2014   01/27/2015   10/01/2015
               Voucher Program Units Met HUD’s
               Housing Quality Standards, Memphis, TN

               The Housing Authority of the City of
2014-AT-1016   Spartanburg Used HUD Program Funds               09/30/2014   01/28/2015   03/02/2016
               for Ineligible Expenses, Spartanburg, SC

               HUD Did Not Always Provide
2014-CH-0001   Adequate Oversight of Its Property-              09/30/2014   03/24/2015   07/30/2015
               Flipping Waiver Requirements




                                                                                               77
       SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                     ISSUE             DECISION         FINAL
                        REPORT TITLE
  NUMBER                                                                     DATE              DATE             ACTION

                        The City of Chicago Lacked Adequate
                        Controls Over Its HOME Investment
  2014-CH-1011          Partnerships Program-Funded Rental                   09/30/2014        01/28/2015       08/29/2016
                        New Construction Projects and
                        Program Income, Chicago, IL

                        The Owner and Former Management
                        Agents Lacked Adequate Controls
  2014-CH-1012                                                               09/30/2014        01/28/2015       02/19/2016
                        Over the Operation of Lake Village of
                        Fairlane Apartments, Dearborn, MI

                        Complaint Allegations Substantiated - City
  2014-DE-1802          of Colorado Springs’ HOME and CDBG                   09/30/2014        02/02/2015       01/29/2016
                        Programs, Colorado Springs, CO

                        The Jefferson Parish Department of
                        Community Development Did Not
                        Always Support Expenditures, Comply
  2014-FW-1007                                                               09/30/2014        01/26/2015       06/30/2015
                        With Procurement Requirements,
                        or Provide Adequate Oversight of
                        Subrecipients, Jefferson, LA

                        The HUD Office of the Chief
  2014-KC-0006          Financial Officer Had Not Always                     09/30/2014        01/22/2015       11/30/2016
                        Implemented Its User Fee Policy

                        HUD Policies Did Not Always Ensure
  2014-PH-0001          That HECM Borrowers Complied                         09/30/2014        01/28/2015       09/29/2015
                        With Residency Requirements



AUDITS EXCLUDED:
80 audits under repayment plans
33 audits under debt claims collection processing, formal judicial review, investigation, or legislative solution


NOTES:
1. Management did not meet the target date. Target date is more than 1 year old.
2. Management did not meet the target date. Target date is less than 1 year old.
3. No management decision




       78
                                                                                                                            APPENDIX 3 TABLES



TABLE C


Inspector General-issued reports with questioned and unsupported costs at
03/31/2015 (thousands)

                                                                                  NUMBER
                                                                                                     QUESTIONED          UNSUPPORTED
  AUDIT REPORTS                                                                  OF AUDIT
                                                                                                         COSTS                COSTS
                                                                                  REPORTS

            For which no management decision had been made
   A1                                                                                     51             748,874               221,226
            by the commencement of the reporting period

            For which litigation, legislation, or
   A2       investigation was pending at the                                                 4               7,176                5,170
            commencement of the reporting period

            For which additional costs were added                                                          15,527                 2,739
   A3                                                                                        -
            to reports in beginning inventory

   A4       For which costs were added to noncost reports                                   0                    0                     0

   B1       Which were issued during the reporting period                                 19           2,074,790             1,710,227

   B2       Which were reopened during the reporting period                                 0                    0                     0

  SUBTOTALS (A + B)                                                                       74           2,846,367            1,939,362

            For which a management decision was made during
   C                                                                                     5215          1,160,362               379,709
            the reporting period

            1) Dollar value of disallowed costs:
                                                                                         2316            894,236               122,771
            	         Due HUD
                                                                                          40             261,340               253,894
            	         Due program participants

            (2) Dollar value of costs not disallowed                                     1117               4,786                3,044

            For which a management decision had been made
   D        not to determine costs until completion of litigation,                           5             27,333                 5,170
            legislation, or investigation

            For which no management decision had made by the                              17            1,658,672            1,554,483
    E
            end of the reporting period                                             < 38 >  18
                                                                                                  < 1,629,347 >  18
                                                                                                                         < 1,548,291 >18




15 Twenty-seven audit reports also contain recommendations with funds to be put to better use.
16 Eleven audit reports also contain recommendations with funds due program participants.
17 Eleven audit reports also contain recommendations with funds agreed to by management.
18 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




                                                                                                                                  79
        SEMIANNUAL REPORT TO CONGRESS



TABLE D


Inspector General-issued reports with recommendations that funds be put to
better use at 03/31/2015 (dollars)


                                                                                                     NUMBER
  AUDIT REPORTS                                                                                     OF AUDIT             DOLLAR VALUE
                                                                                                     REPORTS

             For which no management decision had been made by the
   A1                                                                                                      33                    1,479,828
             commencement of the reporting period

             For which litigation, legislation, or investigation was pending
   A2                                                                                                          2                     1,854
             at the commencement of the reporting periodd

   A3        For which additional costs were added to reports in beginning inventory                           -                         11

   A4        For which costs were added to noncost reports                                                   0                               0

   B1        Which were issued during the reporting period                                                  17                   1,195,387

   B2        Which were reopened during the reporting period                                                 0                               0

   SUBTOTALS (A + B)                                                                                       52                   2,677,080

   C         For which a management decision was made during the reporting period                         3419                     521,507

             (1) Dollar value of recommendations that were agreed to by management:
                                                                                                             8                     329,185
             	        Due HUD
                                                                                                           26                     189,834
             	        Due program participants

             (2) Dollar value of recommendations that were not agreed to
                                                                                                           420                       2,488
             by management

             For which a management decision had been made not to determine
   D                                                                                                           2                     1,854
             costs until completion of litigation, legislation, or investigation

             For which no management decision had made by the end of the                                    16                   2,153,719
    E
             reporting period                                                                         < 21 > 21
                                                                                                                           < 1,004,874 >21



19 Twenty-seven audit reports also contain recommendations with questioned costs.
20 Four audit reports also contain recommendations with funds agreed to by management.
21 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




        80
                                                                                                         APPENDIX 3 TABLES




EXPLANATIONS OF TABLES C AND D

The Inspector General Act Amendments of 1988 require inspectors general and agency heads to report cost
data on management decisions and final actions on audit reports. The current method of reporting at the
“report” level rather than at the individual audit “recommendation” level results in misleading reporting of cost
data. Under the Act, an audit “report” does not have a management decision or final action until all
questioned cost items or other recommendations have a management decision or final action. Under these
circumstances, the use of the “report” based rather than the “recommendation” based method of reporting
distorts the actual agency efforts to resolve and complete action on audit recommendations. For example,
certain cost items or recommendations could have a management decision and repayment (final action) in a
short period of time. Other cost items or nonmonetary recommendation issues in the same audit report may
be more complex, requiring a longer period of time for management’s decision or final action. Although
management may have taken timely action on all but one of many recommendations in an audit report, the
current “all or nothing” reporting format does not recognize its efforts.
    The closing inventory for items with no management decision in tables C and D (line E) reflects figures at
the report level as well as the recommendation level.




                                                                                                              81
SEMIANNUAL REPORT TO CONGRESS




       HUD OIG TELEPHONE DIRECTORY


       HEADQUARTERS OFFICE	         Washington, DC				     202-708-0364




       OFFICE OF AUDIT

       REGION 1		               	   Boston, MA				         617-994-8380
       				Hartford, CT			                                 860-240-4837
       		

       REGION 2		               	   New York, NY				       212-264-4174
       				                         Albany, NY		           518-462-2892
       				Buffalo, NY				                                 716-551-5755
       				Newark, NJ				                                  973-776-7339
       		

       REGION 3			                  Philadelphia, PA				   215-656-0500
       				                         Baltimore, MD		        410-962-2520
       				                         Pittsburgh, PA		       412-644-6372
       				                         Richmond, VA		         804-771-2100



       REGION 4			                  Atlanta, GA				        404-331-3369
       				Greensboro, NC			                               336-547-4001
       				Jacksonville, FL			                             904-232-1226
       				Knoxville, TN			                                865-545-4400
       				Miami, FL			                                    305-536-5387
       				San Juan, PR			                                 787-766-5540


       REGION 5			                  Chicago, IL				        312-353-7832
       				Columbus, OH			                                 614-469-5745
       				Detroit, MI			                                  313-226-6280



       REGION 6			                  Fort Worth, TX			      817-978-9309
       				Baton Rouge, LA			                              225-448-3976
       				                         Houston, TX		          713-718-3199
       				New Orleans, LA			                              504-671-3715
       				Albuquerque, NM			                              505-346-7270
       				Oklahoma City, OK		                             405-609-8606
       				San Antonio, TX			                              210-475-6800




       82
                                                                  HUD OIG TELEPHONE DIRECTORY



REGION 7-8-10		 Kansas City, KS				                        913-551-5870
				St. Louis, MO			                                       314-539-6339
				Denver, CO			                                          303-672-5452
				Seattle, WA			                                         206-220-5360



REG ION 9			      Los Angeles, CA			                       213-894-8016
				Las Vegas, NV			                                       702-366-2100
				Phoenix, AZ			                                         602-379-7250
				San Francisco, CA		                                    415-489-6400



OFFICE OF INVESTIGATION

HEADQ UARTERS		   Washington, DC	Office of Investigation   202-708-0390



REG ION 1-2			    New York, NY				                         212-264-8062
				Boston, MA		 	                                         617-994-8450
				              Hartford, CT		            	              860-240-4800
				Manchester, NH			                                      603-666-7988
				Newark, NJ			                                          973-776-7355



REG ION 3			      Philadelphia, PA				                     215-430-6758
				Baltimore, MD			                                       410-209-6533
				Pittsburgh, PA			                                      412-644-6598
				Richmond, VA			                                        804-822-4890



REGION 4			       Atlanta, GA				                          404-331-5001
				Birmingham, AL			                                      205-745-4314
				Columbia, SC			                                        803-451-4318
				Greensboro, NC			                                      336-547-4000
				Memphis, TN			                                         901-554-3148
				Miami, FL			                                           305-536-3087
				San Juan, PR			                                        787-766-5868
				Tampa, FL			                                           813-228-2026
				Jackson, MS			                                         601-329-6924


REG ION 5			      Chicago, IL				                          312-353-4196
				Cleveland, OH			                                       216-357-7800
				Columbus, OH			                                        614-469-6677
				Detroit, MI			                                         313-226-6280
				Grand Rapids, MI			                                    313-226-6280
				              Indianapolis, IN		                       317-957-7377
				Minneapolis-St. Paul, MN		                             612-370-3130


                                                                                  83
SEMIANNUAL REPORT TO CONGRESS



REGION 6			                     Fort Worth, TX			      817-978-5440
				                            Baton Rouge, LA	       225-448-3941
				                            Houston, TX	           713-718-3227
				Little Rock, AR		                                  501-324-5931
				                            New Orleans, LA		      504-671-3700
				                            Oklahoma City, LA	     405-609-8601
				                            San Antonio, TX		      210-475-6822


REGION 7-8-10		                 Denver, CO				303-672-5350
				                            Billings, MT		         406-247-4080
				                            Kansas City, KS		      913-551-5866
				                            Salt Lake City, UT		   801-524-6090
				                            St. Louis, MO		        314-539-6559
				                            Seattle, WA		          206-220-5380


REG ION 9			                    Los Angeles, CA				213-894-0219
				                            Las Vegas, NV		        702-366-2144
				                            Phoenix, AZ		          602-379-7252
				                            Sacramento, CA		       916-930-5691
				                            San Francisco, CA	     415-489-6683



JOINT CIVIL FRAUD DIVISION

AUDIT	AND 			  Kansas City, KS				913-551-5566
INVESTIGATION			




84
                                                                                                                                ACRONYMS LIST




ACRONYMS LIST


ACD.........................................................................Accelerated Claims Disposition (HUD program)

CAIVRS....................................................................Credit Alert Verification Reporting System

CDBG.......................................................................Community Development Block Grant

CDBG-DR................................................................Community Development Block Grant Disaster Recovery

CFR..........................................................................Code of Federal Regulations

CLPHA.....................................................................Council of Large Public Housing Authorities

CPD..........................................................................Office of Community Planning and Development

CSSR........................................................................community service and self sufficiency requirement

CWCOT...................................................................Claims Without Conveyance of the Title (HUD program)

DoD.........................................................................U.S. Department of Defense

DOJ.........................................................................U.S. Department of Justice

FBI............................................................................Federal Bureau of Investigation

FFMIA......................................................................Federal Financial Management Improvement Act of 1996

FHA..........................................................................Federal Housing Administration

FHFA........................................................................Federal Housing Finance Agency

FHLMC....................................................................Federal Home Loan Mortgage Corporation

FIFO.........................................................................first-in, first-out

FIRMS......................................................................Facilities Integrated Resources Management System

FISMA......................................................................Federal Information Security Management Act

FMFIA......................................................................Federal Managers’ Financial Integrity Act

GAO.........................................................................U.S. Government Accountability Office

HIAMS.....................................................................HUD Integrated Acquisition Management System

HOME......................................................................HOME Investment Partnerships Program

HPS..........................................................................HUD Procurement System

HUD.........................................................................U.S. Department of Housing and Urban Development

IDIS..........................................................................Integrated Disbursement and Information System

IPA...........................................................................Intergovernmental Personnel Act

IPERA.......................................................................Improper Payments Elimination and Recovery Act of 2010

IRS-CI......................................................................Internal Revenue Service – Criminal Investigation




                                                                                                                                         85
SEMIANNUAL REPORT TO CONGRESS




ACRONYMS LIST                                    (CONCLUDED)


IT..............................................................................information technology

MTW........................................................................HUD Moving to Work program

OCFO.......................................................................Office of the Chief Financial Officer

OCPO......................................................................Office of the Chief Procurement Officer

OE............................................................................Office of Evaluation

OI.............................................................................Office of Investigation

OIG..........................................................................Office of Inspector General

OMB.........................................................................Office of Management and Budget

OPHI........................................................................Office of Public Housing Investments

PHA..........................................................................public housing agency

PIH...........................................................................Office of Public and Indian Housing

SPS...........................................................................Small Purchase System

SSA...........................................................................Social Security Administration

U.S.C........................................................................United States Code

USPIS.......................................................................U.S. Postal Inspection Service

USSS........................................................................U.S. Secret Service




86
                                                                                             REPORTING REQUIREMENTS




REPORTING REQUIREMENTS
The specific reporting requirements as prescribed by the Inspector General Act of 1978, as amended by the
Inspector General Act of 1988, are listed below:


SOURCE-REQUIREMENT	PAGES



Section 4(a)(2)-review of existing and proposed legislation and regulations	                                    38

Section 5(a)(1)-description of significant problems, abuses, and deficiencies 	                             12-37
relating to the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with 	                                     41
respect to significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation described in	            Appendix 3, Table B, 62
previous Semiannual Report on which corrective action has not been completed.

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 	                            12-37
prosecutions and convictions that have resulted.

Section 5(a)(5)-summary of reports made on instances where information or assistance	                No instances
was unreasonably refused or not provided, as required by Section 6(b)(2) of the Act.

Section 5(a)(6)-listing of each audit report completed during the reporting period, and	           Appendix 2, 57
for each report, where applicable, the total dollar value of questioned and unsupported
costs and the dollar value of recommendations that funds be put to better use.

Section 5(a)(7)-summary of each particularly significant report.	                                           12-37

Section 5(a)(8)-statistical tables showing the total number of audit reports and the	      Appendix 3, Table C, 79
total dollar value of questioned and unsupported costs.

Section 5(a)(9)-statistical tables showing the total number of audit reports and the 	     Appendix 3, Table D, 80	
dollar value of recommendations that funds be put to better use by management.

Section 5(a)(10)-summary of each audit report issued before the commencement of	           Appendix 3, Table A, 61
the reporting period for which no management decision had been made by the
end of the period.

Section 5(a)(11)-a description and explanation of the reasons for any significant	                              49
revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with	                               52
which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 5(b) of the Federal 	                                  52
Financial Management Improvement Act of 1996.




                                                                                                                87
FRAUD ALERT
Every day, loan modification and foreclosure rescue scams rob vulnerable homeowners of their money and their
homes. The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, is the
Department’s law enforcement arm and is responsible for investigating complaints and allegations of mortgage
fraud. Following are some of the more common scams:



COMMON LOAN MODIFICATION SCAMS

Phony counseling scams: The scam artist says that he or she can negotiate a deal with the lender to modify
the mortgage — for an upfront fee.


Phony foreclosure rescue scams: Some scammers advise homeowners to make their mortgage payments
directly to the scammer while he or she negotiates with the lender. Once the homeowner has made a few
mortgage payments, the scammer disappears with the homeowner’s money.


Fake “government” modification programs: Some scammers claim to be affiliated with or approved by the
government. The scammer’s company name and Web site may appear to be a real government agency, but the
Web site address will end with .com or .net instead of .gov.


Forensic loan audit: Because advance fees for loan counseling services are prohibited, scammers may sell
their services as “forensic mortgage audits.” The scammer will say that the audit report can be used to avoid
foreclosure, force a mortgage modification, or even cancel a loan. The fraudster typically will request an
upfront fee for this service.


Mass joinder lawsuit: The scam artist, usually a lawyer, law firm, or marketing partner, will promise that he
or she can force lenders to modify loans. The scammers will try to “sell” participation in a lawsuit against the
mortgage lender, claiming that the homeowner cannot participate in the lawsuit until he or she pays some
type of upfront fee.


Rent-to-own or leaseback scheme: The homeowner surrenders the title or deed as part of a deal that will let
the homeowner stay in the home as a renter and then buy it back in a few years. However, the scammer has
no intention of selling the home back to the homeowner and, instead, takes the monthly “rent” payments and
allows the home to go into foreclosure.


Remember, only work with a HUD-approved housing counselor to understand your options for assistance.
HUD-approved housing counseling agencies are available to provide information and assistance. Call 888-
995-HOPE to speak with an expert about your situation. HUD-approved counseling is free of charge.
Report fraud, waste, and mismanagement
    in HUD programs and operations by

               Faxing the OIG hotline: 202-708-4829
            Emailing the OIG hotline: hotline@hudoig.gov



                   Sending written information to
           Department of Housing and Urban Development
                   Inspector General Hotline (GFI)
                         451 7th Street, SW
                            Room 8254
                      Washington, DC 20410



                              Internet
              http://www.hudoig.gov/hotline/index.php


ALL INFORMATION IS CONFIDENTIAL, AND YOU MAY REMAIN ANONYMOUS.




                                                                 89
                   U.S. DEPARTMENT
                   OF HOUSING
                   AND URBAN
                   DEVELOPMENT



Report Number 73
www.hudoig.gov