oversight

SAR 74 - Semiannual Report to Congress for the period Ending September 30, 2015

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-12-18.

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 SEPTEMBER 30, 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.         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 April 1 to September 30, 2015
 AUDIT RESULTS1                                                                                           THIS REPORTING PERIOD                                   FISCAL YEAR 2015

 Recommendations that funds be put to better use                                                                     $783,126,186                                    $1,978,524,145

 Recommended questioned costs                                                                                        $375,546,339                                    $2,104,912,657

 Collections from audits                                                                                              $19,396,709                                     $476,546,692

 Administrative sanctions                                                                                                      1                                                 3

 Civil actions                                                                                                                 3                                                9

 Subpoenas                                                                                                                    60                                                72

 Personnel action                                                                                                              0                                                 1


 INVESTIGATION RESULTS1                                                                                   THIS REPORTING PERIOD                                   FISCAL YEAR 2015

 Total restitution and judgments2                                                                                    $259,491,265                                     $436,460,945

 Total recoveries and receivables to HUD programs                                                                    $194,658,354                                      $233,154,990

 Arrests                                                                                                                     126                                               232

 Indictments and informations                                                                                                175                                              308

 Convictions, pleas, and pretrial diversions                                                                                 156                                               335

 Civil actions                                                                                                                23                                               43

 Total administrative sanctions                                                                                              185                                              440

      Suspensions                                                                                                             36                                               110

      Debarments                                                                                                              99                                               191

      Limited denial of participation                                                                                          0                                                0

      Removal from program participation                                                                                      13                                                71

      Evictions                                                                                                               10                                                16

      Other2                                                                                                                  27                                                52

 Systemic implication reports                                                                                                  1                                                6

 Search warrants                                                                                                              24                                                61

 Subpoenas                                                                                                                   389                                               691


 JOINT CIVIL FRAUD RESULTS1                                                                               THIS REPORTING PERIOD                                   FISCAL YEAR 2015
 Recoveries and receivables to HUD programs or HUD pro-
                                                                                                                     $161,722,168                                      $558,657,646
 gram participants
 Recoveries and receivables for other entities                                                                       $86,959,989                                      $268,245,5113
 Civil actions                                                                                                                 7                                                12
 Administrative sanctions                                                                                                      1                                                 2

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 $212.5 million from First Tennessee Bank, $29.6 from
  Reverse Mortgage Solutions, Inc., and $1.8 million from three other settlements. 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.
DURING THIS REPORTING PERIOD, WE

HAD MORE THAN $783 MILLION IN FUNDS

PUT TO BETTER USE, QUESTIONED COSTS

OF MORE THAN $537 MILLION, AND

NEARLY $79 MILLION IN COLLECTIONS,

RESULTING FROM 110 AUDITS, AND OBTAINED

MORE THAN $260 MILLION IN RECOVERIES

AND RECEIVABLES DUE TO OUR INVESTIGATIVE

EFFORTS; OF THIS AMOUNT, $195 MILLION

WAS RETURNED TO HUD PROGRAMS,

WITH THE REMAINDER GOING

TO VICTIMS OF FRAUD AND ABUSE.
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 U.S.       which potentially increased the risk to the health and safety of the
                          Department of Housing and Urban            public or failed to prevent damage to the environment.
                          Development (HUD), Office of Inspector          During the second half of fiscal year 2015, the Office
                          General’s (OIG) Semiannual Report to       of Investigation completed 263 investigations to improve
                          Congress for the second half of fiscal     departmental operations and address program abuses,
                          year 2015. This report describes the       recovering $260 million. Of this amount, $195 million was
                          extraordinary accomplishments of the       returned to HUD programs, with the remainder going to
                          talented public servants of HUD OIG.
                                                                     victims of fraud and abuse. We continue to focus on HUD’s
                          By promoting better stewardship and
                                                                     performance and accountability in single-family and public and
accountability, HUD OIG staff continues to have an enduring
                                                                     Indian housing, both significant concerns for the Department
impact on the Department and our communities for the benefit
                                                                     and taxpayers.
of the American people.
                                                                          In one single-family loan case, the owner of a Florida
     Our mission is simple. We conduct and supervise
audits, evaluations, and investigations of HUD programs and          mortgage company was sentenced to serve 135 months in
operations to ensure their efficiency and effectiveness while        prison for orchestrating a multi-million-dollar mortgage fraud
always looking for instances of waste, fraud, and abuse. This        scheme. He was also ordered to pay more than $64.5 million in
is done primarily through the Office of Audit, the Office of         restitution and forfeit $8 million received through illicit profits.
Evaluation, and the Office of Investigation within HUD OIG.          In addition, three real estate developers; a straw buyer recruiter;
These offices are supported by the Office of Legal Counsel and       and 20 loan officers, loan processors, and underwriters at the
the Office of Management and Technology. Together, working           mortgage company were convicted of participating in the
as a collaborative team, the dedicated individuals of these          scheme, which resulted in jail terms and fines, restitutions, and
offices combine their skills and abilities to accomplish the goals   forfeitures of more than $31 million.
and mission of HUD OIG.                                                   These criminal conspirators solicited and approved
     During the second reporting period of fiscal year 2015, the     unqualified customers to submit fraudulent Federal Housing
Office of Audit issued 110 reports. These reports resulted in the    Administration (FHA) mortgage loan applications, which
following:
                                                                     resulted in loans that were sold to financial institutions. When
•	 Identifying more than $783 million in funds that could to be
                                                                     the loans defaulted, the financial institutions and FHA suffered
   put to better use in HUD programs to more appropriately
                                                                     millions of dollars in losses.
   serve its mission,
                                                                          In another case regarding HUD’s Home Equity Conversion
•	 Questioned costs of more than $537 million in situations
                                                                     Mortgage (HECM) program, which is also known as the reverse
   in which it was not clear that these expenditures were for
                                                                     mortgage program, the Office of Investigation and the Joint
   legitimate reasons, and
•	 Nearly $79 million in collections for reimbursement to HUD        Civil Fraud Division, working with the U.S. Department of
   programs or the U.S. Department of the Treasury in situations     Justice (DOJ), Civil Fraud Unit, investigated a HECM originator
   in which fraud and abuse were proven.                             and servicer that operated in several States. In this case,
Of these, two audits performed by the Office of Audit this           the servicer fraudulently received payments for interest and
reporting period were especially noteworthy. These were:             commissions equaling millions of dollars. On April 27, 2015, the
•	 Overincome Families Resided in Public Housing Units and           servicer and DOJ agreed to a settlement of nearly $30 million.
•	 HUD Did Not Adequately Implement or Provide Adequate                   In closing, I would like to express my continued gratitude
   Oversight To Ensure Compliance With Environmental                 to Congress and the Department for their sustained
   Requirements.                                                     commitment to improving HUD’s programs. I also want to
     The overincome audit received significant news coverage         reiterate my sincere appreciation of the people of HUD OIG
over several days and resulted in HUD, which originally              for their dedication to the critically important work that they
disagreed with the report, publically announcing that it would       do. Through their collective effort, HUD OIG has achieved
revisit its position. In this audit, our auditors discovered that
                                                                     its annual goals and fulfilled its mission and responsibilities.
25,226 families had annual incomes that exceeded HUD’s
                                                                     As a result, their hard work has had a positive impact on the
eligibility limits yet were living in HUD-subsidized public
                                                                     Department, our communities, and the citizens of our Nation.
housing. Also discovered was that almost 70 percent of these
                                                                     The members of the OIG staff have my deepest respect, and I
overincome tenants had been doing so for more than 1 year.
                                                                     am proud to be their Inspector General.
     The environmental audit reviewed five HUD field offices
and discovered that none of them adequately followed
environmental compliance requirements and either were not
trained or did not consider compliance a priority. As a result,
more than $405 million in activities had no or inadequate review,    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. HUD OIG strives to create an environment in
which allegations of waste, fraud, and abuse can be freely reported without fear of reprisal.
      Key to HUD OIG’s Whistleblower Protection Program is educating HUD and HUD OIG employees on
prohibitions against retaliating against Federal whistleblowers and ensuring that employees understand
their specific rights and remedies. In the last 6 months, the HUD OIG Whistleblower Ombudsman Program
has continued to focus on outreach and training. All HUD employees were directed to attend mandatory
whistleblower training in October of 2015. Two live training sessions were given, and the presentation was
posted on our Whistleblower Web page. Secretary Castro, consistent with his emphasis on this program,
introduced the training and stressed its importance. The training was also given to all HUD OIG personnel,
with Mr. Montoya providing introductory remarks stressing his view on the importance of the program. A
separate training session was provided at our OIG managers meeting. Our Whistleblower Ombudsman
discussed investigating whistleblower complaints with our Office of Investigation staff. Whistleblower training
is incorporated into HUD’s new employee training and is also included in HUD’s supervisor training series.
Training is also retained on HUD OIG Whistleblower and Ethics Web sites.
      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.


   Number of complaints received                                                                                                                70

   Number of complainants asserting whistleblower status4                                                                            70 (48 to hotline)

   Employee5 complaints referred for investigation to the HUD OIG Office of
                                                                                                                                                17
   Investigation (OI)

   Employee complaint investigations opened by OI                                                                                                3

   Complaints declined by OI                                                                                                                     1

   Complaints currently under review by OI                                                                                                       8

   Employee complaint investigations closed by OI                                                                                                5




4 Many complainants raise questions regarding treatment by housing authorities following alleging 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.
INTEGRITY AND COMPLIANCE PROGRAM

In September 2015, HUD OIG launched its new Integrity and Compliance Program (ICP) with a goal to
incorporate a values-based ethics culture. ICP is the first of its kind in a Federal OIG and will go beyond the
requirements of a typical government ethics endeavor. HUD OIG seeks to foster a higher level of integrity in
every decision our staff makes and will change the way we look at the ethical challenges we face every day. The
purpose of ICP is to demonstrate our commitment to the American public to always maintain a high standard
of accountability and integrity and live the values we judge others by.
    We believe that most people are fair and honest and approach their duties with integrity. They want
to do the right thing. However, sometimes they fall short or stray from their personal values. Unfortunately,
there have been far too many instances recently in which Federal workers have lost their way and engaged in
unethical behavior. HUD OIG’s ICP looks to change that.
    As the components of ICP are developed over the next few months, the program will be carefully shaped
into a sustainable platform using resources within HUD OIG. First among these are HUD OIG’s core values,
which will form the nucleus of a program to properly make the difficult ethical decisions that are a part of our
daily work life. There is no shortage of rules and rule books in the Federal Government, yet almost every day,
someone comes upon a circumstance no one had encountered before. ICP is designed to help guide the way
to an ethical solution when these unanticipated situations occur.
    We know this is an ambitious endeavor, and we will need innovative thinking and new approaches to
be successful. Most of all, we know we also have to take a collaborative approach that involves everyone at
HUD OIG. This approach includes a thorough examination of our culture, our challenges, and the resources
available to us. On this foundation, we will build a values-based program to transform our existing system into
an enduring blueprint for the highest levels of ethical behavior and standards of conduct.
    This is an exciting program, and we also hope our success will encourage other Federal agencies to follow
our lead, but more importantly, we hope to become a model for our own Department to emulate. Combined
with our existing whistleblower, ombudsman, and hotline programs, we are confident that ICP will lead us to
become an even stronger organization with impeccable integrity and unimpeachable ethics. That is what we
believe is expected of us by our fellow citizens. We can do nothing less.
TABLE OF CONTENTS
Chapter 1 – Single-Family Programs.............................................................................................................. 14
Audit...........................................................................................................................................................................................14
Investigation.............................................................................................................................................................................18



Chapter 2 – Public and Indian Housing Programs........................................................................................ 21
Audit........................................................................................................................................................................................... 21
Investigation.............................................................................................................................................................................25



Chapter 3 – Multifamily Housing Programs.................................................................................................. 26
Audit.......................................................................................................................................................................................... 26
Investigation............................................................................................................................................................................ 29



Chapter 4 – Community Planning and Development Programs................................................................. 30
Audit.......................................................................................................................................................................................... 30
Investigation............................................................................................................................................................................ 34



Chapter 5 – Disaster Relief Programs............................................................................................................. 35
Audit...........................................................................................................................................................................................35
Investigation............................................................................................................................................................................ 39


Chapter 6 – Other Significant Audits and Investigations............................................................................ 40
Audit.......................................................................................................................................................................................... 40


Chapter 7 – Joint Civil Fraud Initiatives........................................................................................................ 44

Chapter 8 – Evaluation Initiatives.................................................................................................................. 47

Chapter 9 – Legislation, Regulation, and Other Directives......................................................................... 50

Chapter 10 – Audit Resolution........................................................................................................................ 53

Appendix 1 – Peer Review Reporting............................................................................................................. 69

Appendix 2 – Audit Reports Issued..................................................................................................................71

Appendix 3 – Tables.......................................................................................................................................... 81

OIG Telephone Directory............................................................................................................................... 102

Acronyms List.................................................................................................................................................. 105

Reporting Requirements................................................................................................................................ 107
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               15 audits                    $25,239,740                       $258,526,170



REVIEW OF HUD’S FHA HOME AFFORDABLE MODIFICATION PROGRAM
The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
the HUD FHA Home Affordable Modification Program (HAMP) partial claim option to determine whether
HUD had adequate controls over its postclaim reviews and adequate policies in place to ensure that servicers
properly understood the FHA-HAMP partial claim option.
     HUD did not have an effective postclaim review function and did not have clear program guidance in
place for the FHA-HAMP partial claim option. As a result, HUD overpaid more than $177 million in partial
claim notes due to servicer miscalculations, which affected more than 21,200 loans. HUD’s policies allowed
servicers to determine partial claim amounts in different ways, which resulted in some claims that were higher
than necessary.
     OIG recommended that HUD (1) assign the necessary administrative resources and oversight to reduce
potential losses of $88.5 million per year for ineligible FHA-HAMP claim amounts that may go undetected,
(2) require servicers to repay HUD nearly $415,000 in ineligible partial claim amounts, (3) require servicers
to support or repay more than $94,000 in partial claim amounts, (4) provide training to HUD staff and
its contractor on all loss mitigation programs, (5) review a sample of postclaim reviews submitted by the
contractor to ensure that the contractor adequately identifies ineligible claims, and (6) update FHA-HAMP
policies to ensure that all servicers apply policies consistently. (Audit Report:  2015-LA-0003)




14
                                                                                   CHAPTER ONE SINGLE-FAMILY PROGRAMS




HUD OIG audited the FHA-HAMP partial claim option to determine whether HUD had adequate controls over
FHA-HAMP partial claim payments.
    HUD’s claim payment controls for the FHA-HAMP partial claim option were not adequate.  Specifically,
HUD’s claim system allowed payment of (1) more than one claim with a modification or FHA-HAMP option
in a 24-month period, (2) duplicate claims, (3) partial claims exceeding 30 percent of the unpaid principal
balance at initial default, and (4) non-HAMP partial claims after HUD discontinued this claim type.  As a
result, HUD paid more than $22 million in unsupported claims and nearly $104,000 in ineligible claims that
did not meet HUD requirements. 
    OIG recommended that HUD (1) develop and implement controls to detect and prevent payment of claims
that violate HUD requirements, (2) support the eligibility or require the repayment of the claims that did not
meet HUD requirements, and (3) require the repayment of the ineligible claims. (Audit Report:  2015-LA-0001)




REVIEW OF FHA-INSURED LOANS WITH DOWNPAYMENT ASSISTANCE
HUD OIG audited loanDepot in Foothill Ranch, CA to determine whether it originated FHA loans containing
downpayment assistance gift funds and secondary financing in accordance with HUD FHA requirements.
    The loanDepot FHA-insured loans with downpayment assistance gift funds and secondary financing did
not always comply with HUD requirements, putting FHA’s Mutual Mortgage Insurance Fund at unnecessary
risk, including potential losses of $4.7 million for 53 loans with ineligible assistance and $29.9 million for
a projected 339 loans that likely contained ineligible assistance.  Also, loanDepot inappropriately charged
borrowers nearly $26,000 in fees that were not customary or reasonable and nearly $47,000 in discount fees
that did not represent the purpose of the fee.  The ineligible loans put borrowers at a disadvantage due to
higher monthly mortgage payments resulting from a premium interest rate.
    OIG recommended that HUD determine legal sufficiency to pursue civil and administrative remedies
against loanDepot for incorrectly certifying that mortgages were eligible for FHA mortgage insurance. 
OIG also recommended that HUD require loanDepot to (1) stop originating FHA loans with the ineligible
assistance; (2) indemnify HUD for the loans with ineligible assistance; (3) indemnify HUD for loans that
likely contain ineligible assistance; (4) reimburse borrowers for fees that were not customary or reasonable
and discount fees that did not represent the purpose of the fee; (5) reduce the interest rate for borrowers who
received ineligible assistance; (6) reimburse borrowers for overpaid interest as a result of the premium interest
rate; and (7) update all internal control checklists to include specific HUD requirements on gifts, secondary
financing, premium rates, and allowable fees. (Audit Report:  2015-LA-1009)




HUD OIG audited loanDepot, LLC, to determine whether it originated FHA loans containing Golden State
Finance Authority downpayment assistance grants in accordance with HUD FHA requirements.
    The loanDepot FHA-insured loans with Golden State downpayment assistance gifts did not always
comply with HUD requirements, putting FHA’s Mutual Mortgage Insurance Fund at unnecessary risk,
including potential losses of $5.5 million for 62 loans with ineligible gifts and $16.1 million for 178 loans that
likely contained ineligible gifts.  Also, loanDepot inappropriately charged borrowers nearly $14,000 in fees that
were not customary or reasonable.  The ineligible loans put borrowers at a disadvantage due to higher monthly
mortgage payments, including the burden of funding the downpayment assistance program through premium
interest rates.




                                                                                                                     15
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD determine legal sufficiency to pursue civil and administrative remedies
against loanDepot for incorrectly certifying that mortgages were eligible for FHA mortgage insurance.  OIG
also recommended that HUD require loanDepot to (1) stop originating FHA insured loans with the ineligible
gifts; (2) indemnify HUD for the loans with ineligible gifts; (3) indemnify HUD for loans that likely contain
ineligible gifts; (4) reimburse borrowers for fees that were not customary or reasonable; (5) reduce the interest
rate for borrowers who received ineligible gifts; (6) reimburse borrowers for overpaid interest as a result of
the premium interest rate; and (7) update all internal controls to include specific HUD requirements on gifts,
premium rates, and allowable fees. (Audit Report:  2015-LA-1010)




HUD OIG audited NOVA Financial & Investment Corporation in Tucson, AZ, to determine whether NOVA
originated loans with downpayment assistance in accordance with HUD FHA rules and regulations.
     NOVA’s FHA-insured loans with downpayment assistance gift funds did not always comply with HUD FHA
rules and regulations, putting FHA’s Mutual Mortgage Insurance Fund at unnecessary risk, including potential
losses of $48.5 million for 709 loans.  NOVA also inappropriately charged borrowers more than $376,000
in misrepresented discount fees and more than $7,000 in fees that were not customary or reasonable.  The
premium rate attached to the ineligible loans put borrowers at a disadvantage due to higher monthly mortgage
payments.
     OIG recommended that HUD determine legal sufficiency to pursue civil and administrative remedies
against NOVA for incorrectly certifying that mortgages were eligible for FHA mortgage insurance.  OIG also
recommended that HUD require NOVA to (1) stop originating FHA-insured loans with ineligible gifts;
(2) indemnify HUD for 709 FHA loans that were originated with ineligible downpayment assistance gifts;
(3) reimburse borrowers for the misrepresented discount fees and fees that were not customary or reasonable;
(4) reduce the interest rate for borrowers who received downpayment assistance; (5) reimburse borrowers
for overpaid interest as a result of the premium interest rate; and (6) update all internal control checklists to
include specific HUD rules and regulations governing downpayment assistance, premium interest rates, and
allowable fees. (Audit Report:  2015-LA-1005)




REVIEW OF HUD’S HOME EQUITY CONVERSION MORTGAGE PROGRAM
HUD OIG audited HUD’s oversight of its Home Equity Conversion Mortgage (HECM) program to determine
whether HUD had effective controls to ensure that HECM loan borrowers complied with residency
requirements while also receiving rental assistance from its multifamily programs.
     HUD policies did not always ensure that HECM borrowers complied with residency requirements.  The
borrowers of 67 of 68 loans reviewed did not live in the properties associated with their loans because they
received rental assistance from HUD’s multifamily programs at a different address at the same time.  Of the 67
loans, 18 were independently terminated by the servicing lenders during the audit.  The remaining 49 insured
loans had current balances totaling more than $7.1 million and maximum claim amounts totaling more than
$8.4 million.  As a result, 49 insured loans should be declared in default and due and payable to reduce the
risk of loss to HUD’s insurance fund of up to $1.3 million.  Further, the borrowers of an additional 642 insured
loans also may have violated the residency requirements.  If HUD cannot confirm that these borrowers are
compliant with the residency requirements, these loans should also be declared in default and due and
payable to reduce the risk of loss to HUD’s insurance fund of up to $14.4 million.
     OIG recommended that HUD direct the applicable servicing lenders to verify borrowers’ compliance




16
                                                                                CHAPTER ONE SINGLE-FAMILY PROGRAMS



with the residency requirements or for each noncompliant borrower, declare the loan in default and due and
payable, thereby putting up to $15.7 million to better use.  Further, OIG recommended that HUD implement
controls to prevent or reduce instances of borrowers violating residency requirements by participating in
multifamily programs at the same time. (Audit Report:  2015-PH-0004)




REVIEW OF HUD’S LOSS MITIGATION PROGRAM
HUD OIG audited First Niagara Bank in Lockport, NY, regarding its servicing of FHA-insured mortgages and
its implementation of HUD’s Loss Mitigation program to determine whether First Niagara Bank properly
serviced FHA-insured mortgages; specifically, whether it (1) properly implemented HUD’s Loss Mitigation
program, (2) provided the proper reporting for the FHA-insured mortgages it serviced, and (3) established and
implemented an effective quality control program.
    First Niagara Bank did not always properly implement applicable procedures and requirements in
servicing FHA-insured mortgages.  Specifically, it did not (1) properly implement HUD’s Loss Mitigation
program, (2) accurately report its servicing of FHA-insured mortgages, and (3) implement an effective quality
control program.  The lack of adequate loss mitigation efforts could affect the borrower’s ability to retain home
ownership and have a negative impact on FHA’s Mutual Mortgage Insurance Fund. 
    OIG recommended that HUD instruct First Niagara Bank to provide support showing that the lender’s
servicing practices for identified loans were acceptable for mortgages insured by HUD.  For any loan for
which HUD determines that the servicing practices were inadequate, HUD should take the appropriate
administrative actions, including indemnifying inadequately serviced loans.  OIG also recommended that
HUD instruct First Niagara Bank to provide evidence that 80 loans were either paid in full or closed and
remove the loans from HUD’s FHA-insured portfolio.  This measure will result in a more than $4.2 million
reduction in obligations to the Mutual Mortgage Insurance Fund and reinstate 15 loans totaling nearly
$952,000 that were incorrectly terminated from HUD’s FHA-insured portfolio. (Audit Report:  2015-NY-1006)




REVIEW OF HUD’S SECTION 203(K) REHABILITATION LOAN MORTGAGE INSURANCE
PROGRAM
HUD OIG audited HUD’s Section 203(k) Rehabilitation Loan Mortgage Insurance program to determine
whether HUD had adequate oversight of the program.
    HUD needs to improve its monitoring of lenders for compliance with Section 203(k) program
requirements because lenders did not always ensure that (1) borrowers or contractors obtained required
building permits to rehabilitate properties and (2) contractors were licensed or certified to perform
rehabilitation work.  In addition, lenders did not always ensure that contractors’ cost estimates contained clear
descriptions of the proposed repairs to determine eligibility for the Streamlined (k) program.  As a result, HUD
lacked assurance of the soundness of the repairs, thus potentially impacting the safety of the borrowers and
increasing the risk to FHA’s Mutual Mortgage Insurance Fund.
    Further, HUD did not always ensure that (1) loan-to-value ratios were correctly calculated when
determining borrowers’ monthly mortgage insurance premiums and (2) lenders properly entered borrowers’
loan information into FHA Connection.  As a result, HUD lacked assurance that it (1) properly managed
the risk to FHA’s Mutual Mortgage Insurance Fund and (2) protected the interests of borrowers due to the
overpayment of mortgage insurance. 




                                                                                                               17
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD require lenders to (1) support or indemnify HUD for any future losses on 40
loans with estimated losses totaling more than $1.2 million and (2) support or reimburse HUD for the actual
losses incurred on 2 loans totaling more than $83,000.  OIG also recommended that HUD (1) strengthen its
controls over Section 203(k) program requirements, (2) adjust its formula for calculating the loan-to-value
ratio, (3) determine the overpaid mortgage insurance premiums for loans with incorrect loan-to-value ratios,
and (4) credit the accounts of active borrowers who overpaid their mortgage insurance premiums and refund
overpaid premiums to borrowers for terminated loans. (Audit Report:  2015-CH-0001)




REVIEW OF FILING OF CLAIMS ON FORECLOSED-UPON PROPERTIES
HUD OIG audited LoanCare, LLC, in Virginia Beach, VA, regarding its postforeclosure activities as a single-
family master subservicer for the Government National Mortgage Association (Ginnie Mae) to determine
whether LoanCare conveyed foreclosed-upon properties held on behalf of Ginnie Mae, filed claims with FHA,
and remitted the funds to Ginnie Mae on time.
     LoanCare did not always (1) convey foreclosed-upon properties to FHA within 30 days of acquiring
possession and title, (2) file the part B portion of its conveyance claim within 45 days of the date the deed was
filed for record or within 15 days of the title approval letter date, and (3) remit FHA claim funds to Ginnie Mae
within 2 business days.
     OIG recommended that Ginnie Mae require LoanCare to repay any additional costs associated with the
violations noted. (Audit Report:  2015-KC-1012)



INVESTIGATION

PROGRAM RESULTS

            Administrative-civil actions                              16

       Convictions-pleas-pretrial diversions                         155

                Financial recoveries                            $164,695,040



MULTIPLE SUBJECTS CONVICTED IN MORTGAGE INSURANCE FRAUD CONSPIRACY
Three recruiters, two loan officers, a seller, and an attorney assistant pled guilty to wire fraud, mail fraud,
obstruction of justice, and aggravated identity theft for their roles in a multiloan mortgage insurance fraud
scheme involving both FHA and conventional loans. From August 2004 through October 2012, the
conspirators participated in a scheme to defraud lenders by providing false information on loan documents to
qualify borrowers. The investigation identified 52 fraudulent loans in the scheme, including five having FHA
mortgage insurance. Losses to FHA are approximately $1.6 million. This investigation was conducted by HUD
OIG and the Federal Bureau of Investigation (FBI). (Chicago, IL)




18
                                                                                  CHAPTER ONE SINGLE-FAMILY PROGRAMS



CLOSING ATTORNEY SENTENCED FOR MORTGAGE FRAUD
A closing attorney was sentenced in U.S. District Court to 1 year and 1 day incarceration and 3 years
supervised release and ordered to pay $2 million in restitution, with $625,220 payable to FHA, following his
conviction of conspiracy to commit wire fraud and money laundering.  From March 2011 through December
2012, the attorney and other conspirators recruited straw buyers and submitted falsified loan applications and
supporting documents to lenders to obtain mortgage loans for properties located in northern New Jersey.  The
closing attorney used his position to facilitate some of these transactions.  Several of the loans involved in this
scheme have defaulted, exposing lenders and FHA to more than $2 million in potential losses.  This
investigation was conducted by HUD OIG, the FBI, the U.S. Postal Inspection Service, and the Federal Housing
Finance Agency (FHFA) OIG. (Newark, NJ)



MORTGAGE BROKER SENTENCED IN LOAN MODIFICATION SCHEME
A former mortgage broker and owner of a mortgage company was sentenced in U.S. District Court to 24
months incarceration and ordered to pay $997,712 in restitution related to his conviction of making false
statements. From January 2010 through April 2015, the mortgage broker assisted distressed homeowners with
obtaining extensions and renewals of their mortgage loans while charging illegal fees for his loan modification
services. The mortgage broker also received mortgage payments from the borrowers but did not forward the
payments to the lenders. This investigation was conducted by HUD OIG and FHFA OIG. (Sherman, TX)



OWNER OF MORTGAGE COMPANY SENTENCED TO 11 YEARS INCARCERATION
The owner and operator of a former FHA mortgage lender in Miami, FL, was sentenced in U.S. District Court
to 135 months incarceration and 60 months supervised release and agreed to forfeit $8 million following his
conviction of conspiracy to commit wire fraud affecting a financial institution.  From at least 2006 through
September 2008, the owner and other conspirators specialized in approving FHA loans primarily for buyers of
condominiums at complexes where he had an ownership interest. As part of the scheme, the conspirators
provided false information on loan documents to qualify borrowers and in some cases, also paid inducements
to borrowers to purchase the condominium units.  Many of the loans defaulted, causing losses to FHA and
financial institutions.  To date, 25 individuals have been charged in this investigation, including the owner, 3
partner developers, and 20 former employees of the mortgage lender.  Of those charged, 14 individuals have
pled guilty, and 1 has signed a plea agreement.  Losses to FHA exceeded $64 million.  This investigation was
conducted by HUD OIG. (Miami, FL)



ATTORNEY SENTENCED FOR MAKING FALSE STATEMENTS TO THE MORTGAGEE
REVIEW BOARD
The attorney for a HUD direct endorsement-approved mortgage company was sentenced to 60 months
probation and ordered to pay $1.3 million in restitution to HUD following his conviction of making a false
statement to HUD. The attorney created and submitted an affidavit to the Mortgagee Review Board falsely
representing that the owner of the mortgage company did not have an interest in a construction entity that
received direct payments at the closings of FHA-insured purchases originated by the mortgage company. The
affidavit was submitted in response to a notice of violation, issued to the mortgage company by the Mortgagee
Review Board. The investigation further determined that the owner was also the full shareholder, director,
president, chief executive officer, and secretary of the construction entity, who received more than $12 million
in payments during FHA-insured closings originated by the lender. This investigation was conducted by HUD
OIG. (Fort Worth, TX)




                                                                                                                   19
SEMIANNUAL REPORT TO CONGRESS



WOMAN SENTENCED FOR REVERSE MORTGAGE FRAUD
The daughter and former power of attorney of a HECM borrower was sentenced in Arizona Superior Court to 3
years probation and ordered to pay $100,573 in restitution to FHA following her conviction of residential
mortgage fraud. The daughter submitted a false residency certification in the HECM loan application, which
stated that her father lived in the subject property, when he was in hospice care in another State at the time the
HECM loan was completed. The father died 5 days after the HECM loan closed. The investigation further
determined that after the loan closed, the daughter quit-claimed the subject property into the name of a trust
for which she was the sole trustee and had a $30,596 one-time HECM payment wired to a bank account in the
trust name. The HECM loan was later foreclosed upon, resulting in a loss to FHA of $100,573. This
investigation was conducted by HUD OIG. (Phoenix, AZ)




20
                                                                      CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS




 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.



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

             Key program results                    Questioned costs                Funds put to better use

     Audit                34 audits                    $12,274,297                        $188,055,413



SECTION 8 HOUSING CHOICE VOUCHER PROGRAM
HUD’s Office of Inspector General (OIG) audited HUD’s oversight of enhanced vouchers provided under its
Housing Choice Voucher program to determine whether HUD had adequate oversight related to enhanced
vouchers administered by three New York PHAs.
    HUD did not adequately oversee enhanced vouchers administered by three New York PHAs responsible
for administering most of the funds associated with the vouchers.  The PHAs could not fully justify program
subsidies provided to voucher recipients.  Of 28 cases reviewed, HUD overpaid subsidies for 15 units (54
percent) that were larger than allowed.  For another 264 families, HUD potentially overpaid subsidies for
units that were larger than allowed.  One of the PHAs did not perform rent reasonableness determinations
as required for 544 units at 2 of its properties; therefore, the rent charged for the units may not have been
reasonable.  As a result, more than $1.1 million in program subsidies used for housing assistance payments
was unsupported.  In addition, HUD could save more than $1.2 million over a 1-year period by ensuring that
PHAs implement policies and procedures to prevent deficiencies.




                                                                                                                  21
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD require the three PHAs to (1) justify the more than $1.1 million in program
subsidies spent on housing assistance payments and (2) implement policies and procedures to ensure that
they make housing assistance payments related to enhanced vouchers in accordance with all applicable
requirements and detect and prevent future deficiencies.  OIG also recommended that HUD develop
policies to implement periodic targeted monitoring and related followup procedures for PHAs responsible
for administering the most funds associated with enhanced vouchers to help prevent the potential waste of
program funds. (Audit Report:  2015-PH-0003)




HUD OIG audited the Jefferson Metropolitan Housing Authority in Steubenville, OH, regarding its Section 8
Housing Choice Voucher program housing quality standards to determine whether the Authority conducted
thorough housing quality standards inspections of its program units in accordance with HUD’s and its own
requirements. 
     The Authority did not adequately enforce HUD’s housing quality standards and its own requirements. 
Specifically, it failed to ensure that 44 program units, including 38 that materially failed, complied with HUD’s
housing quality standards and its program administrative plan.  As a result, the Authority’s households were
subjected to health- and safety-related violations, and the Authority did not properly use its program funds. 
     OIG recommended that HUD require the Authority to (1) certify that the applicable housing quality
standards violations have been corrected for the units cited, (2) reimburse its program more than $38,000
from non-Federal funds for the units that materially failed to meet HUD’s and its own requirements, and (3)
implement adequate procedures and controls to ensure that all units meet HUD’s housing quality standards
and its own requirements to prevent more than $1.9 million in program funds from being spent on units that
do not comply with HUD’s requirements over the next year. (Audit Report:  2015-CH-1007)




HUD OIG audited the Housing Authority of the City of South Bend, IN’s Section 8 Housing Choice Voucher
program to determine whether the Authority (1) correctly calculated and paid housing assistance and utility
allowances, (2) obtained and maintained eligibility documentation required to support the admission and
continued occupancy of its program households, and (3) appropriately managed its Family Self-Sufficiency
program.
     The Authority did not always comply with HUD’s requirements and its own administrative plan regarding its
program household files. Specifically, it did not (1) correctly calculate and process housing assistance payments
and (2) obtain and maintain required eligibility documentation. As a result, HUD lacked assurance that the
Authority used its program funds appropriately. If the Authority does not correct its certification process, it could
overpay nearly $754,000 and underpay more than $67,000 in housing assistance over the next year.
     The Authority also failed to appropriately manage its Family Self-Sufficiency program. Specifically, it did not
ensure that (1) participants were connected to needed supportive services, (2) services included in the participants’
contracts of participation were provided, and (3) participants’ escrow accounts were properly maintained. As a
result, the Authority inappropriately received Family Self-Sufficiency program coordinator grant funds.
     OIG recommended that HUD require the Authority to (1) reimburse its program nearly $80,000 from non-
Federal funds for the ineligible housing assistance and utility allowance payments, (2) support or reimburse
its program more than $411,000 from non-Federal funds for the unsupported payments, (3) reimburse HUD
more than $24,000 for the unearned Family Self- Sufficiency grant funds, and (4) implement adequate controls
to address the findings cited. (Audit Report:  2015-CH-1008)




22
                                                                    CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS




PUBLIC HOUSING
HUD OIG audited HUD’s public housing program to determine the extent to which HUD-subsidized public
housing units were occupied by overincome families and evaluate the impact of HUD policies.
    PHAs provided public housing assistance to as many as 25,226 families with income exceeding HUD’s
2014 eligibility income limits, and 17,761 of those families had exceeded HUD’s limits for more than a year. 
HUD regulations require families to meet eligibility income limits only when they are admitted to the public
housing program.  The regulations do not limit the length of time families may reside in public housing. 
However, HUD’s December 2004 public housing final rule gave PHAs discretion to establish and implement
policies that would require families with incomes above the eligibility income limits to find housing in the
unassisted market.  The 15 PHAs contacted allowed overincome families to reside in public housing, and HUD
did not encourage them to require these families to find housing in the unassisted market.  As a result, HUD
did not assist as many low-income families in need of housing as it could have. 
    OIG recommended that HUD direct PHAs to establish policies to reduce the number of overincome
families in public housing, thereby putting as much as $104.4 million to better use by providing those funds to
eligible low-income families in need of housing assistance. (Audit Report:  2015-PH-0002)




HUD OIG audited the Richmond Redevelopment and Housing Authority in Richmond, VA, regarding its public
housing program to determine whether the Authority complied with HUD procurement requirements.
    The Authority did not procure services associated with its public housing program in accordance with
HUD procurement requirements.  Specifically, it did not (1) prepare an independent cost estimate and cost
analysis before awarding contracts, (2) maintain documentation to demonstrate that services were procured
competitively, and (3) ensure that option years were awarded competitively.  As a result, HUD and the
Authority had no assurance that public housing operating funds totaling more than $6.5 million, which were
paid under the contracts, were fair and reasonable. 
    OIG recommended that HUD direct the Authority to (1) provide documentation to support that payments
for services totaling more than $6.5 million were fair and reasonable or reimburse its program from non-
Federal funds for any amount that it cannot support, (2) not exercise remaining option years for the contracts
identified, and (3) implement controls in its procurement process to ensure that HUD requirements are
followed.  OIG also recommended that HUD provide technical assistance to the Authority to ensure that
responsible personnel receive necessary procurement training. (Audit Report:  2015-PH-1008)




SECTION 184 INDIAN HOME LOAN GUARANTEE PROGRAM
HUD OIG audited HUD’s Section 184 Indian Home Loan Guarantee program to determine whether HUD had
adequate controls in place to provide oversight of the program.
    HUD did not provide adequate oversight of the Section 184 program, resulting in an increased overall
risk to the program, including guaranteeing 3,845 loans totaling more than $705 million that were not
underwritten in accordance with program guidelines.  Specifically, HUD did not adequately monitor, track,
and evaluate participating lenders to ensure that loans were underwritten in accordance with the Section 184
processing guidelines.  This lack of oversight and high incidence of poorly underwritten loans could negatively
impact the financial standing of Native American communities.




                                                                                                                23
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD develop and implement policies and procedures (1) for monitoring,
tracking, underwriting, and evaluating the Section 184 program, resulting in $77 million in funds to be put
to better use; (2) for standardized monthly delinquency reports; (3) to deny payments to lenders for claims
on loans that have material underwriting deficiencies; and (4) to ensure that it uses enforcement actions
available under 12 U.S.C. (United States Code) 1715z-13a(g).  HUD should also (1) request indemnification
for the loans that had material underwriting deficiencies, resulting in $2.5 million in funds to be put to better
use; (2) request statutory authority to indemnify poorly underwritten loans; (3) obtain support for one loan,
which lacked documentation required for loan approval; and (4) ensure that only HUD-approved underwriters
underwrite Section 184 loans. (Audit Report:  2015-LA-0002)




MOVING TO WORK PROGRAM
HUD OIG reviewed HUD’s oversight of the Moving to Work program of the Chicago Housing Authority in
Chicago, IL, to determine whether HUD provided adequate oversight of the Authority’s Moving to Work
exception payment standards.
     HUD could improve its oversight of the Authority’s Moving to Work exception payment standards to
ensure that expenditures for related activities in the Authority’s annual Moving to Work plans and reports are
reasonable and cost effective.
     OIG recommended that HUD implement adequate policies and procedures to ensure that the activities
included in Authority’s plans are (1) allowable under the Moving to Work statutory purposes, (2) described in
sufficient detail to convey anticipated impacts (including financial impact), and (3) in accordance with the terms
and authorizations in the Moving to Work agreements.  This recommendation should apply to all PHAs under
Moving to Work agreements to ensure consistency within the program. (Audit Memorandum:  2015-CH-0802)




RENTAL ASSISTANCE DEMONSTRATION PROGRAM
HUD OIG audited HUD’s Rental Assistance Demonstration program to determine whether HUD had adequate
controls over the program, to include (1) completing a risk assessment that adequately evaluated (a) the need
for additional administrative funding, (b) determining how funding level and program funds were established,
(c) site conditions and residents’ ability to return after conversion, and (d) participants’ management and
information systems capacity and (2) a plan to reduce these risks to an acceptable level.
     HUD did not sufficiently identify the risks that could disrupt an effective implementation of the program
in its front-end risk assessment, document a plan to reduce these risks to an acceptable level, or conduct the
risk assessment in a timely manner.  Additionally, HUD did not clearly identify specific risks associated with
some program units.
     OIG recommended that HUD (1) reexamine and modify the risk assessment completed for the program,
(2) clearly identify specific risks for its program units, and (3) ensure that a plan for reducing the risks to an
acceptable level is in place to promote an effective and successful implementation of the program. (Audit
Report:  2015-AT-0003)




24
                                                                     CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS



INVESTIGATION
            Administrative-civil actions                               24

       Convictions-pleas-pretrial diversions                           69

                Financial recoveries                               $3,956,144




COMPANY PRESIDENT SENTENCED FOR WIRE FRAUD
The president of a company was sentenced in U.S. District Court to 12 months and 1 day incarceration and
ordered to pay $1.25 million in restitution to HUD related to his conviction of wire fraud. From January 2008
to June 2009, the president diverted $1.25 million in funds from a HUD Special Purpose Grant, earmarked for
the Mesa Grande Band of Mission Indians to purchase equipment for the construction of a panelized home
factory, for his personal use by repaying personal debts and the purchase of a timeshare for a private jet, exotic
furniture, and a personal limousine service. This case was investigated by HUD OIG and the Federal Bureau of
Investigation (FBI). (San Diego, CA)



FORMER EXECUTIVE DIRECTOR SENTENCED FOR EMBEZZLEMENT
The former executive director of the Bradenton Housing Authority was sentenced in U.S. District Court to 12
months and 1 day incarceration and 3 years supervised release and ordered to pay $276,300 in restitution to
HUD following his conviction of theft of government funds. From September 2010 through September 2013,
the executive director and a coworker engaged in a romantic relationship and stole government time while
employed by the Authority. Specifically, they were frequently absent from the Authority during work hours
while not engaged in Authority business and failed on many occasions to take annual or sick leave for their
absences. This investigation was conducted by HUD OIG, the FBI, the Florida Department of Law
Enforcement, and the Bradenton Police Department. (Tampa, FL)



PROGRAM MANAGER SENTENCED IN EMBEZZLEMENT SCHEME
The former program manager for the Parma Public Housing Agency was sentenced in U.S. District Court to 16
months incarceration and ordered to pay $232,407 in restitution to the Agency following her conviction of theft
of public funds. From January 2008 through September 2014, the program manager issued checks to herself
from the Agency. Although the Agency required two signatures on the checks, the program manager was able
to coendorse the checks, using a stamp of the executive director’s signature to which she had access. The
program manager was able to conceal her activities by creating false invoices from legitimate Agency vendors,
which she deposited into her personal account, and then falsified the Agency check registers to make it appear
that the vendor was paid for work that had not been ordered or completed. The program manager deposited
138 Agency checks into her personal bank account. This investigation was conducted by HUD OIG and the
Parma Police Department. (Cleveland, OH)




                                                                                                                25
SEMIANNUAL REPORT TO CONGRESS




THREE           MULTIFAMILY HOUSING PROGRAMS




In addition to multifamily housing developments and healthcare programs 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                14 audits                   $59,036,512                        $22,669,593




REVIEW OF MULTIFAMILY MANAGEMENT AGENTS
HUD’s Office of Inspector General (OIG) audited HUD’s resident home-ownership program grant for Carmen-
Marine Apartments in Chicago, IL, to determine whether the Carmen-Marine Cooperative and management
agent operated the project in accordance with HUD requirements and the grant agreement.
     The Cooperative and management agent did not ensure that (1) the Cooperative always maintained a
proper waiting list for rental units and appropriately selected households for initial membership sales, (2)
sufficient documentation was maintained to support that the Cooperative’s payments to HUD for initial
membership sales were accurate, (3) sufficient documentation was maintained to support whether the City of
Chicago should have received proceeds from subsequent membership sales, (4) housing was affordable for all
members, (5) members maintained their units as their principal residence, (6) the Cooperative could support
that it notified the Chicago Housing Authority that it received excessive Section 8 Housing Choice Voucher
program housing assistance payments for units, and (7) the Cooperative submitted required reports to HUD. 
As a result, HUD and the Cooperative lacked assurance that the project was operated in accordance with
HUD’s requirements and the grant agreement, and the Cooperative is at risk of having to reimburse HUD
nearly $22.7 million in program funds.




26
                                                                          CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS



    OIG recommended that HUD (1) require the Cooperative to resolve the issues and implement adequate
procedures and controls to address the weaknesses cited and (2) determine whether the Cooperative is in
default of its grant agreement. (Audit Report:  2015-CH-1010)




HUD OIG audited HUD’s Office of Multifamily Asset Management and Portfolio Oversight to determine
whether HUD adequately monitored its management agents to ensure that front line costs and direct costs
were not excessive across their portfolios.
    HUD did not adequately monitor its management agents.  HUD’s monitoring did not always include
detailed reviews of management agents’ front line costs and direct costs across their portfolios to ensure that
costs were not excessive.  As a result, funds may not have been available to maintain property conditions, and
Section 8 reserves may have been reduced if project funds were used to pay improper front line and direct costs.
    OIG recommended that HUD’s Office of Multifamily Asset Management and Portfolio Oversight
comply with its handbook requirements, which state that HUD must perform management reviews of the
management agent’s central office activities as well as regular onsite reviews of functions carried out at the
projects.  These reviews should be performed at least every 18 months. (Audit Report:  2015-AT-0002)




REVIEW OF UNDERWRITING PROCESS
HUD OIG audited Prudential Huntoon Paige Associates, LTD’s underwriting of a $22.8 million mortgage loan
to refinance Lafayette Towers Apartments, a 584-unit highrise multifamily project in Detroit, MI, to determine
whether Prudential underwrote and processed the loan for Lafayette Towers according to HUD’s requirements.
    Prudential exposed the FHA insurance fund to unnecessary risk and a loss of more than $15 million
because it did not underwrite and process the loan for Lafayette in accordance with HUD’s guidelines and
regulations.  Specifically, Prudential did not ensure that the project capital needs assessment was complete
and accurate, adequately assess the borrower’s eligibility, adequately assess the property’s financial capacity,
and ensure that the appraisal report was supported.
    OIG recommended that HUD refer Prudential to the Mortgagee Review Board to take appropriate action
for violations that caused the loss to the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance
Fund or other administrative action as appropriate.  OIG also recommended that HUD pursue civil remedies,
if legally sufficient, against responsible parties and administrative actions, as appropriate, against the
responsible party for the material underwriting deficiencies cited. (Audit Report:  2015-AT-1007)




HUD OIG audited Berkadia Commercial Mortgage, LLC’s underwriting of a loan to fund the renovation of
the Temtor project in St. Louis, MO, to determine whether Berkadia properly underwrote the items that
established the maximum mortgage amount for the Temtor project.
    Berkadia did not properly determine the maximum mortgage amount for the Temtor loan, resulting in an
$11.3 million loss to HUD.  Ineligible and unsupported items increased the HUD-insured mortgage by more
than $6 million.  Berkadia included projected commercial rents without establishing the market rate and tax
increment financing payments that were not guaranteed.  The project’s income was insufficient to pay the
larger mortgage.  The owners defaulted on the loan, and a claim was submitted to HUD.




                                                                                                                  27
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD refer Berkadia to the Mortgagee Review Board for the violations that caused
the loss to FHA’s Mutual Mortgage Insurance Fund.  OIG also recommended that Berkadia modify its policies and
procedures to ensure that future loans represent an acceptable risk to HUD. (Audit Report:  2015-KC-1005)




HUD OIG audited Prudential Huntoon Paige Associates, LTD’s underwriting of a $19.9 million mortgage loan
to develop Amaranth at 544, a senior multifamily project located in Lewisville, TX, to determine whether
Prudential underwrote and processed the loan according to HUD requirements.
     Prudential exposed FHA’s Mutual Mortgage Insurance Fund to unnecessary risk and a loss of more than
$10 million because it did not underwrite and process the loan for Amaranth in accordance with HUD’s
guidelines and regulations.  Specifically, it did not ensure that adequate cash reserves were provided at loan
closing, the appraisal report was supported, the market analysis included support to reflect the present
economic conditions, and the project revenue was not overstated.  In addition, Prudential failed to obtain
support for the borrower’s financial capacity.
     OIG recommended that HUD refer Prudential to the Mortgagee Review Board to take appropriate action
for the violations that caused the loss to FHA’s Mutual Mortgage Insurance Fund or other administrative action
as appropriate.  Additionally, OIG recommended that HUD pursue administrative actions, as appropriate,
against the responsible party for the material underwriting deficiencies cited. (Audit Report:  2015-AT-1003)




REVIEW OF OFFICE OF HEALTHCARE PROGRAMS
HUD OIG audited St. Francis Hospital, Inc., in Columbus, GA, to determine whether the hospital complied
with its executed regulatory agreement and HUD requirements for its Section 242 program. 
     The hospital did not comply with its regulatory agreement and Federal regulations.  Specifically,
it submitted inaccurate financial information, improperly disbursed mortgage proceeds, incurred an
unauthorized liability, and subjected mortgage funds to bank sweeps.  Additionally, members of the hospital’s
board of trustees, including its chairman, had potential conflicts of interest through employment with and
serving on the board of a bank from which the hospital obtained a line of credit.  As a result, $21.4 million in
proceeds from the HUD-insured mortgage and HUD’s collateralized properties was not disbursed properly,
and the multifamily insurance portfolio was subjected to increased risk.  Also, HUD depended on inaccurate
financial information to approve a $29.8 million mortgage increase.
     OIG recommended that HUD require the hospital to (1) repay the improperly disbursed mortgage funds,
(2) resolve the apparent conflicts of interest between its board of trustees members and the bank, and (3)
improve its internal controls and implement policies and procedures to provide accurate and complete
reporting of financial information to ensure compliance with Federal regulations and HUD requirements.  OIG
also recommended that HUD pursue administrative actions, as appropriate, against the responsible parties
for the regulatory violations cited and civil remedies, if legally sufficient, against responsible parties. (Audit
Report:  2015-AT-1009)




28
                                                                       CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS



INVESTIGATION
            Administrative-civil actions                              15

       Convictions-pleas-pretrial diversions                          3

                Financial recoveries                              $1,033,771




OWNER OF ASSISTED LIVING FACILITY SETTLES LAWSUIT WITH HUD
The owner of an assisted living facility entered into an agreement with HUD to pay $500,000 in civil money
penalties, related to a March 2015 complaint filed by HUD against Williams seeking $12.9 million in monetary
recoveries. The complaint alleged that Williams used operating funds for his personal gain by purchasing golf
club memberships, private school tuition for his children, and health care coverage for himself and his family
as well as paying his home mortgage. The owner refinanced the facility’s mortgage with an FHA-insured
mortgage and in conjunction with the refinance, entered into a regulatory agreement with HUD, which
precluded him from paying out any project funds except for reasonable operating expenses without the prior
written approval of HUD.  This settlement was as the result of a joint investigation between the HUD OIG,
Office of Investigation and Office of Audit.  (Denver, CO) 




                                                                                                             29
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                        30 audits6                                $276,185,846                                      $313,793,822


The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
the HOME Investment Partnerships Program (HOME), Community Development Block Grant (CDBG), Shelter
Plus Care Program, and Supportive Housing Program (SHP).



HOME INVESTMENT PARTNERSHIPS PROGRAM
HUD OIG audited the City of Paterson, NJ’s HOME program to determine whether City officials had
established and implemented adequate controls to ensure that the City’s HOME program was administered in
compliance with program requirements and Federal regulations.
      The City’s HOME program was not always administered in compliance with program requirements. 
Specifically, HOME funds were (1) not committed in accordance with program requirements, (2) spent on
ineligible and unsupported costs, (3) reserved and disbursed to ineligible community housing development
organizations (CHDO), (4) drawn down in excess of need and not reimbursed for terminated activities, and
(5) used to assist ineligible and unsupported home buyers and homeowners.  As a result, $1.8 million was
unavailable for eligible activities, more than $561,000 was disbursed for unsupported costs, more than $2.2
million in CHDO reserve was ineligible, the CHDO reserve was underfunded by more than $1.1 million, and
HUD’s interest in more than $1.37 million was not properly recorded. 

6 The total CPD audits, questioned costs, and funds put to better use amounts include any disaster recovery (13 audits) type audits conducted in the CPD area.
The writeups for these audits may be shown separately in chapter 5 of this semiannual report.




30
                                                         CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS



    OIG recommended that HUD recapture nearly $845,000 in ineligible committed funds and instruct City
officials to (1) reimburse more than $948,000 spent for ineligible costs, (2) provide documentation to support
the HUD funds spent on unsupported costs and activities, (3) remove the ineligible CHDO reserve funds, (4)
provide documentation for the unsupported CHDO reserve funds, and (5) properly record deed restrictions
and affordability requirements so that HUD’s interest is protected. (Audit Report:  2015-NY-1005)



HUD OIG audited the City of Colorado Springs, CO, to determine whether the City properly committed its HOME
program funds and monitored its subrecipients’ use of tenant-based rental assistance administrative funds.
    The City committed HOME grant funds without having properly executed contracts or environmental
reviews.  Specifically, it (1) committed funds for 5 affordable housing projects that lacked contracts or
environmental reviews at the time of the commitment, (2) committed funds for 6 affordable housing and 26
residential rehabilitation projects that had a complete contract or environmental review but did not have
the required signatures or dates, and (3) increased the original commitment amounts for 15 residential
rehabilitation projects without having an amendment to the contract or a change order.  Additionally, the City
did not monitor how its subrecipient spent tenant-based rental assistance administration funds.
    OIG recommended that HUD (1) recapture more than $1.9 million of the City’s HOME grant, (2) require
the City to provide support for $2.1 million in HOME grant expenses, (3) require the City to provide support
for more than $36,000 in increased commitments, (4) require the City to develop and implement detailed
policies and procedures to ensure better managerial oversight, (5) monitor its subrecipient’s use of the
tenant-based rental assistance funds allocated to it from 2009 to 2014 to ensure that they were used for eligible
administration costs, and (6) require the City to develop and implement detailed policies and procedures for
monitoring its subrecipients to ensure that all HUD funds are spent for eligible program activities. (Audit
Report:  2015-DE-1003)



HUD OIG reviewed the City of Richmond, CA’s Filbert Phase 1 and Filbert Phase 2 activities in response
to HUD’s concerns regarding the City’s administration of its HOME program, CDBG, and CDBG Recovery
(CDBG-R) funding of Filbert Phase 1 and Filbert Phase 2 activities.
    The City did not use its HUD funds for Filbert Phase 1 and Filbert Phase 2 activities in accordance with
HUD requirements.  It constructed three HOME-funded townhomes and disbursed more than $2 million in
HOME, CDBG, and CDBG-R funding for both projects.  In addition, it (1) removed restrictions requiring a
low-income family to occupy HOME-funded units for a minimum of 15 years (Filbert Phase 1), (2) entered
inaccurate information that misrepresented the status of its project in HUD’s Integrated Disbursement and
Information System (IDIS), and (3) withdrew funds without an agreement in place (Filbert Phase 2).  As a
result, the long-term affordability of HOME-assisted units was not maintained, and HUD lacked assurance
regarding how funding was used for the projects.
    OIG recommended that HUD require the City to (1) repay from non-Federal funds nearly $1.3 million
for funds spent on Filbert Phase 1 for units that did not meet affordability requirements and (2) repay more
than $1 million in ineligible costs for Filbert Phase 2, which was misrepresented in IDIS, was drawn before
a legally binding agreement was in place, and did not produce a project. OIG also recommended that HUD
require the City to implement policies and procedures to require HOME, CDBG, and CDBG-R program
expenditures to be adequately supported, ensure proper oversight of IDIS administration and maintenance of
support for grant expenditures, and ensure the long-term affordability of HOME projects and activities. (Audit
Memorandum:  2015-LA-1803)




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SEMIANNUAL REPORT TO CONGRESS




HUD OIG audited CPD’s administration of the HOME matching requirements to determine whether CPD
effectively reviewed participating jurisdictions’ match logs and the support for their match contributions and
whether it applied the correct match reductions in fiscal year 2013. 
     CPD did not always enforce the HOME requirement that participating jurisdictions maintain sufficient and
supported match logs, and it applied incorrect match reductions for 63 participating jurisdictions in fiscal year 2013. 
     OIG recommended that CPD (1) issue guidance to help participating jurisdictions accurately report
the amount of match contributed and consumed; (2) include monitoring of HOME match during its
performance reviews to ensure that match contributions exist, are eligible, and are supported; (3) require
the 10 jurisdictions that overstated their excess match balances to remove the overstated amounts from their
reported HOME match carry-forward balances; (4) create and implement policies and procedures specifying
the process for assigning match reductions; (5) begin using the poverty rate instead of the family poverty rate
for determining eligible fiscal match reductions; (6) use the national average for per capita income reported
by the U.S. Census Bureau for determining eligible fiscal match reductions; and (7) review the reductions
assigned in HUD’s systems by comparing a report of all match liabilities to the calculated reductions. (Audit
Report:  2015-KC-0002)




COMMUNITY DEVELOPMENT BLOCK GRANT
HUD OIG audited the City of Colorado Springs, CO, to determine whether the City used its grant funds for
eligible project costs and performed environmental reviews of its projects.
     The City used grant funds for unsupported salary and project costs.  It could not support its CDBG
salaries from 2009 to 2013 totaling more than $3.8 million and could not support any expenditures for a 2011
capital improvement project totaling more than $67,000. Additionally, the City did not properly complete
environmental reviews of its projects.  It did not document the exempt status for its human service projects
and did not complete a full environmental review of 22 of its non-human-service projects totaling more than
$3.1 million.
     OIG recommended that HUD require the City to (1) provide support for the unsupported salary costs
or reimburse HUD from non-Federal funds any amount that it cannot support; (2) provide support for the
unsupported project costs or reimburse HUD from non-Federal funds any amount that it cannot support; (3)
develop and implement a detailed payroll tracking system to ensure that only costs incurred in administering
the CDBG program are charged to the CDBG grants; (4) develop and implement a system to track its project
files; (5) develop and implement detailed policies and procedures to ensure that it complies with HUD
environmental review requirements; and (6) provide support for the 22 non-human-service CDBG projects,
showing that each project was either exempt or complied with environmental requirements, and for any
amount not supported, reimburse HUD from non-Federal funds. (Audit Report:  2015-DE-1002)




32
                                                         CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS




SHELTER PLUS CARE PROGRAM
HUD OIG audited the Shelter Plus Care program of the Housing Authority of the County of San Bernardino in
San Bernardino, CA, to determine whether the Authority administered its program funds in accordance with
HUD rules and requirements, specifically related to participants’ eligibility.
    The Authority did not always ensure that its participants were eligible for the program.  Of 75 participants
reviewed, 50 were ineligible for the program.  The eligibility of eight participants could not be validated
because of missing documents.  The Authority spent more than $3.2 million in program funds on ineligible
participants and participants whose eligibility was not supported with documentation.  If the Authority
does not improve its controls, it could pay more than $873,000 in program funds for ineligible participants
in the next year.  Further, the Authority’s practices reduced its ability to accomplish HUD’s goal of ending
homelessness for individuals with disabilities and their families. 
    OIG recommended that HUD require the Authority to (1) repay HUD from non-Federal funds for program
funds spent on ineligible participants, (2) provide supporting documentation for program funds used for
participants for whom eligibility could not be determined, and (3) develop and implement written policies
and procedures to ensure that participants are eligible for the program and comply with HUD rules and
requirements so that program funds can be put to better use and not paid for ineligible participants. (Report
Number:  2015-LA-1004)




SUPPORTIVE HOUSING PROGRAM
HUD OIG audited the Supportive Housing Program of Veterans First in Santa Ana, CA, to determine whether
expenditures Veterans First charged to its SHP grants and program fees it charged to its SHP clients were
eligible and supported. 
    Veterans First charged its SHP grants nearly $531,000 in unsupported payroll and other costs and had
more than $3,000 in ineligible costs.  In addition, Veterans First’s accounting system data were unreliable and
unauditable.  Further, Veterans First continued charging clients a 19 percent program fee after a change in
regulations disallowed the practice and did not adequately maintain documentation in its client files. 
    OIG recommended that HUD require Veterans First to provide adequate supporting documentation for
the unsupported costs or repay its program from non-Federal funds and repay its program for the ineligible
costs.  Additionally, OIG recommended that Veterans First implement accounting system procedures and
controls and that HUD suspend its funding until such controls are in place.  OIG also recommended that
Veterans First repay the applicable clients the overcharged program fees, which totaled more than $15,000, and
implement additional policies and procedures for reviewing and maintaining client income documentation
and rent determinations. (Audit Report:  2015-LA-1002)




                                                                                                               33
SEMIANNUAL REPORT TO CONGRESS



INVESTIGATION
            Administrative-civil actions                               8

       Convictions-pleas-pretrial diversions                           17

                Financial recoveries                              $1,716,482



BOOK KEEPER INVOLVED IN $1.3 MILLION EMBEZZLEMENT
The former book keeper-fiscal manager for several nonprofit organizations was sentenced in U.S. District
Court to 3 years incarceration followed by 3 years of supervised release and ordered to pay $1.3 million related
to her earlier guilty plea to theft of government funds. From January 2008 through March 2011, the book
keeper diverted business checks for her personal use from four nonprofit organizations that received Federal
funding to provide services for disadvantaged children and homeless families in Baltimore, MD.  The Shelter
Plus Care Housing and SHP grants are administered by Baltimore City, with Federal funds provided by HUD. 
The HUD funding received by the nonprofits included more than $800,000.  This investigation was conducted
by HUD OIG, the Federal Bureau of Investigation (FBI) and the Baltimore City OIG.  (Baltimore, MD)



GRANTEE SENTENCED FOR RACKETEERING AND THEFT OF GOVERNMENT FUNDS
The former chairman of the board of trustees at South Carolina State University and HUD American Recovery
and Reinvestment Act grant recipient for a property development company was sentenced in U.S. District
Court to 60 months incarceration and 5 years supervised release and ordered to pay $337,000 in restitution,
$234,000 of which is payable to HUD, following his conviction, which included charges of Racketeer
Influenced and Corrupt Organizations Act violatons, theft of government funds, money laundering, wire fraud,
and false statements. The developer submitted false statements on HUD construction draw request forms,
committed wire fraud and money laundering, and embezzled funds earmarked for construction for his
personal use. The developer has also been suspended by the HUD, Office of General Counsel, Departmental
Enforcement Center. This investigation was conducted by HUD OIG, the FBI, the Internal Revenue Service –
Criminal Investigations, and the South Carolina Law Enforcement Division. (Columbia, SC)




34
                                                                                  CHAPTER FIVE DISASTER RELIEF PROGRAMS




    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. To
date, approximately $3 billion of the $47 billion in disaster grants has been closed out, and $44.2 billion remains
active. Of the $44.2 billion in active disaster grants, the funds have been allocated nationwide, with nearly $35.1
billion obligated and $30.6 billion disbursed as of September 30, 2015.




                                    Funds                 Funds                  Funds             Percentage of
         Disaster
                                  allocated              obligated             disbursed            funds used

     Hurricane Sandy             $14.2 billion          $5.6 billion          $4.0 billion                28

    Hurricanes Katrina,
                                 $19.6 billion          $19.5 billion         $18.6 billion               95
       Rita & Wilma

      Hurricanes Ike,
                                  $6.1 billion          $6.0 billion          $4.4 billion                72
      Gustav & Dolly

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

           Other                  $0.8 billion          $0.6 billion          $0.47 billion               59




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SEMIANNUAL REPORT TO CONGRESS



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 HUD remains diligent in assisting communities
with their recovery efforts.



STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

AUDIT
                 Key Program results                                      Questioned costs                             Funds put to better use

       Audit                        13 audits7                               $250,534,950                                      $311,040,127


HUD OIG audited the New York State Community Development Block Grant Disaster Recovery (CDBG-
DR)-funded New York Rising Housing Recovery Program to determine whether State officials established
and maintained adequate controls to ensure that CDBG-DR funds were disbursed for eligible activities and
allowable costs and properly reported in compliance with regulations.
      State officials did not always ensure that CDBG-DR funds were disbursed for eligible costs, ineligible
awards could be recovered, procurement activity was executed or reported as required, and disbursements
were properly reported.  Specifically, (1) funds were disbursed for ineligible and unsupported costs, (2)
disbursements were made before recipients executed grant agreements, (3) procedures were not implemented
to recapture funds disbursed for ineligible costs, (4) procurement of construction management and
environmental review services did not comply with Federal and State requirements, (5) national objectives
were inadequately classified and reported, and (6) assistance payments were made without receipts.
      OIG recommended that HUD direct State officials to (1) repay the program more than $2.2 million in
CDBG-DR funds disbursed for ineligible costs, (2) provide documentation supporting more than $119,000
in unsupported disbursements and the reasonableness of the cost figure used to disburse more than $55.6
million for reconstruction costs, (3) strengthen controls to ensure that grant agreements are signed before
checks are disbursed to recipients, (4) implement procedures to recapture ineligible CDBG-DR funds
disbursed, (5) provide documentation showing that the $127.2 million contract for construction management
and environmental review services was fair and reasonable, (6) strengthen controls to ensure that national
objectives are adequately classified and reported, and (7) require receipts for completed work to ensure that
more than $241.2 million will be put to its intended use. (Audit Report:  2015-NY-1011)




HUD OIG audited the State of New Jersey’s CDBG-DR-funded Sandy Integrated Recovery Operations and
Management System to determine whether the State procured services and products for its system in
accordance with Federal procurement and cost principle requirements.
      The State did not procure services and products for its system in accordance with Federal procurement
and cost principle requirements.  Specifically, it did not prepare an independent cost estimate and analysis
before awarding the system contract to the only responsive bidder.  Further, it did not ensure that option years
were awarded competitively and included provisions in its request for quotation that restricted competition.  It
also did not ensure that software was purchased competitively and that the winning contractor had adequate
documentation to support labor costs charged by its employees.  The State’s process was not equivalent to
Federal procurement standards; therefore, its certification to HUD was inaccurate.  As a result, the State did


7 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.




36
                                                                                 CHAPTER FIVE DISASTER RELIEF PROGRAMS



not show that the overall contract price of $38.5 million and option years totaling another $21.7 million were
fair and reasonable and that the $1.5 million it disbursed was adequately supported.  The State began taking
corrective actions during the audit and began providing some documentation to resolve these deficiencies. 
    OIG recommended that HUD determine whether corrective actions and documentation the State
provided are adequate to show that the $38.5 million contract price for the initial 2-year period was fair and
reasonable and that $1.5 million disbursed for software and labor costs was allowable and supported or direct
the State to repay HUD from non-Federal funds.  Further, HUD should determine whether the documentation
provided is adequate to show that the contract price for the 3 additional option years was fair and reasonable
or direct the State to rebid for the additional option years, thereby putting $9.1 million to better use. (Audit
Report:  2015-PH-1003)




HUD OIG audited the New York Rising Home Enhanced Buyout Program to determine whether New York State
officials established adequate controls to ensure that funds were used for eligible activities and reasonable
expenses and procurement actions complied with Federal regulations. 
    State officials did not always (1) administer the program in accordance with program procedures and their
partial action plan, (2) ensure that property eligibility and the purchase price were adequately supported, (3)
maintain documentation to support that procurement actions complied with Federal and State requirements,
and (4) post required information to a Web site.  As a result, officials disbursed $6.6 million for properties
that did not conform to published requirements, $672,000 for ineligible incentives, and more than $598,000
for purchase prices in excess of authorized limits. Documentation was also inadequate to support that $1.7
million was disbursed for eligible purchases and that $8.7 million spent for contracts complied with Federal
or State requirements.  State officials had taken corrective actions to ensure that an additional $16.5 million
would be put to its intended use.
    OIG recommended that HUD require State officials to (1) support that 19 properties complied with the
State’s partial action plan and the intent of its board resolution authorizing the buyout program, (2) repay
ineligible incentives and purchase prices, (3) provide support for unsupported expenditures and that contracts
were procured in accordance with requirements, and (4) ensure that contracts and subrecipient agreements
are executed in accordance with Federal and State regulations. (Audit Report:  2015-NY-1010)




HUD OIG audited the City of New Orleans, LA’s CDBG-DR funds awarded to the City as a result of damages
caused by Hurricane Isaac to determine whether the City maintained adequate procurement controls and
financial management systems and administered its CDBG-DR funds in accordance with Federal guidelines,
HUD regulations, and other requirements.
    The City did not always maintain adequate procurement controls and financial management systems
or administer its CDBG-DR funds in accordance with Federal guidelines, HUD regulations, and other
requirements.  Specifically, it did not always (1) prepare independent cost estimates or cost analyses, (2) have
documentation to support expenditures, (3) submit timely projections to HUD, or (4) maintain a complete
public Web site.  As a result, it could not show that costs were reasonable, adequately support its contract costs,
or ensure that it received the greatest overall benefit from HUD funds paid to its contractors.  Further, the City
could not provide reasonable assurance to HUD that it had adequate procurement and financial controls for
the proper administration and expenditure of its CDBG-DR funds. Thus, its remaining CDBG-DR grant funds
were at risk of mismanagement.




                                                                                                                   37
SEMIANNUAL REPORT TO CONGRESS



     OIG recommended that HUD require the City to (1) support or repay more than $2.5 million and develop
and implement a HUD-approved written plan and checklists to correct and prevent the procurement and
financial deficiencies identified to better ensure that it spends its remaining $4.5 million in CDBG-DR funds in
accordance with requirements, (2) amend its contracts to clarify the type of documentation needed to support
invoices, (3) maintain complete CDBG-DR procurement and expenditure files, (4) obtain training concerning
procurement and CDBG-DR requirements, and (5) maintain a required log of its Web site updates and submit
the log to HUD periodically for review to ensure that it completes the updates in a timely manner and in
accordance with requirements. (Audit Report:  2015-FW-1002)




HUD OIG audited the State of Illinois’ CDBG-DR program to determine whether the State’s Department
of Commerce and Economic Opportunity ensured that program funds used for three projects met Federal
requirements.
     The Department did not ensure that program funds used for the three projects met Federal requirements. 
It could not provide sufficient documentation to support that two of the three projects met a national objective
and the use of program funds for one project.  Further, program funds loaned for one project were not repaid
as required by the Department’s grant agreement with the subrecipient, and the Department could not ensure
that two of the subrecipients appropriately procured services for three contracts associated with two of the
projects.  As a result, HUD and the Department lacked assurance that more than $1.7 million in program
funds was used and more than $4.3 million in program funds would be used in accordance with Federal
requirements.  In addition, the Department did not have $250,000 in program funds available for eligible
program-funded projects.
     OIG recommended that HUD require the State to (1) support or reimburse its program from non-Federal
funds for the three projects that lacked evidence of compliance with Federal requirements, (2) support that
one project met a national objective or deobligate the program funds, (3) reimburse its program from non-
Federal funds for the program funds not repaid, and (4) implement adequate controls to address the findings
cited. (Audit Report:  2015-CH-1009)




HUD OIG audited the State of Florida’s CDBG-DR program to determine whether the State administered its
program in accordance with applicable HUD requirements; specifically, whether the State used funds to assist
eligible properties and beneficiaries.
     The State did not adequately administer its CDBG-DR program in accordance with HUD requirements
because it did not demonstrate whether (1) 93 assisted units with expenditures of more than $2 million were
impacted by the 2008 declared disasters, (2) a property acquired for more than $63,000 was in a high-risk area,
(3) a property met the low- and moderate-income housing national objective, and (4) 9 beneficiaries with
expenditures of nearly $221,000 were income eligible to receive assistance.
     OIG recommended that HUD require the State to support the eligibility of funds used or reimburse HUD
from non-Federal funds.  The State should also develop policies and procedures to ensure that sufficient
eligibility documentation is maintained. (Audit Report:  2015-AT-1006)




38
                                                                                 CHAPTER FIVE DISASTER RELIEF PROGRAMS




HUD OIG audited the State of Maryland’s CDBG-DR-funded Housing Recovery program to determine
whether the State (1) assisted eligible applicants, (2) avoided duplicating assistance, (3) incurred eligible
expenses that were properly supported, (4) procured services and products properly, and (5) constructed
homes properly in accordance with applicable HUD and Federal requirements.
    The State could not show that replacement homes were designed and constructed to increase energy
efficiency and minimize their environmental footprint as required.  Specifically, the State’s subgrantee could
not show that it constructed replacement homes that complied with the Green Building Standard.  As a result,
HUD had no assurance that $1.9 million in program funds paid to the subgrantee were spent and $293,000 in
program funds not yet paid to the subgrantee would be spent to design and construct 13 replacement homes
in a manner that increased energy efficiency and minimized their environmental footprint.  The subgrantee
(1) assisted eligible applicants, (2) avoided duplicating assistance, (3) incurred eligible expenses that were
properly supported, and (4) procured services and products properly.
    OIG recommended that HUD require the State to (1) provide documentation showing that the 13 homes,
with related program costs totaling $1.9 million, meet the Green Building Standard or repay HUD for any
amount that it cannot support and (2) continue to develop and implement procedures to ensure that future
replacement homes comply with the Standard, thereby ensuring that $293,000 in program funds not yet paid
to the subgrantee will be put to better use. (Audit Report:  2015-PH-1005)



INVESTIGATION

PROGRAM RESULTS*

            Administrative-civil actions                                 8

       Convictions-pleas-pretrial diversions                             1

                Financial recoveries                                    $0

*Figures included in public and Indian housing and community planning and development statistics



LOUISIANA ROAD HOME GRANT RECIPIENT CONVICTED OF FRAUD
A Louisiana Road Home Program grant recipient pled guilty in U.S. District Court to making false statements
related to a CDBG-DR grant.  In June 2007, the grantee received $97,969 from the Program after signing a
covenant agreement to reoccupy the property within 3 years of the grant closing. However, the recipient did
not repair or reoccupy the property.  To avoid having her grant recaptured, the grantee submitted a falsified
utility bill to the Program in an effort to prove occupancy.  This investigation was conducted by HUD OIG and
the Federal Bureau of Investigation.  (New Orleans, LA)




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SEMIANNUAL REPORT TO CONGRESS




     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                  9 audits                       $1,179,830                          $2,500



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



REVIEW OF HUD’S COMPLIANCE WITH IMPROPER PAYMENTS INFORMATION ACT
HUD OIG audited HUD’s fiscal year 2014 compliance with the Improper Payments Elimination and Recovery
Act of 2010 (IPERA) to determine (1) HUD’s compliance with IPERA reporting and improper payments
reduction requirements; (2) whether HUD’s reporting of improper payments data, including the agency’s
performance in reducing and recapturing improper payments, was complete and accurate; and (3) whether
HUD’s assessment of the level of risk associated with high-priority programs and the quality of the improper
payments estimates and methodology were reasonable.
     HUD did not comply with IPERA for fiscal year 2014.  It did not adequately report on its supplemental
measures because it lacked documented procedures, and its improper payments risk assessment was deficient
because all relevant OIG audit reports were not considered.  Additionally, HUD’s estimate of improper payments
for the billing error component was based on out-of-date information, and its methodology for developing the
estimate did not include an evaluation of all types of errors that could lead to significant improper payments. 
Finally, OIG noted 18 unimplemented recommendations from its prior-year report.  As a result, (1) HUD officials
and other users, including Congress and the Office of Management and Budget (OMB), did not have a complete
and accurate picture for making decisions regarding HUD’s internal controls over improper payments and efforts
to recover improper payments, (2) HUD’s risk assessments may have underestimated the risk of significant
improper payments, and (3) its estimate of improper payments may have been misstated.




40
                                                                CHAPTER SIX OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS



    OIG recommended that HUD (1) implement procedures to ensure that all required improper payments
reporting elements are included in its annual financial report and all relevant OIG and U.S. Government
Accountability Office (GAO) audit reports are considered in its risk assessments, (2) consider the dollar
amounts related to OIG and GAO audit reports and HUD’s program monitoring findings in its risk assessment,
and (3) reevaluate the types of errors previously identified to determine whether there are new causes of
significant improper payments that would require reporting. (Audit Report: 2015-FO-0005)




REVIEW OF NEW CORE PROJECT
HUD OIG audited release 3 of phase 1 of HUD’s New Core Project as part of the internal control assessments
required for the fiscal year 2015 financial statement audit under the Chief Financial Officer’s Act of 1990.  OIG’s
objective was to assess the status of the project and determine whether the New Core Project team complied
with Federal regulations and departmental project management processes. 
    Weaknesses in the New Core Project had not been adequately addressed.  HUD did not follow its own
agency policies and procedures, the policies established for New Core, or best practices.  If HUD is not
successful in this implementation, it could reflect negatively on OMB’s mandate to use Federal shared service
providers.  The weaknesses identified relate to requirements and schedule and risk management.  These areas
are significant to the project plan, and the effectiveness with which HUD manages them is critical to the
project’s success.
    OIG recommended that HUD (1) ensure that requirements for the functional areas that were not part of
the shared service provider’s standard configuration are completed and approved before beginning design and
development, (2) reevaluate the October 1, 2015, start date for release 3 of phase 1 of the project, (3) modify
the project schedule and dashboard to identify the critical path, (4) establish a contingency plan, (5) ensure
that all risks are fully mitigated before closing, and (6) address the remaining weaknesses identified. (Audit
Report:  2015-DP-0006)




HUD OIG audited HUD’s New Core Interface Solution (NCIS) for release 1 of phase 1 as part of the internal
control assessments required for the fiscal year 2015 financial statement audit under the Chief Financial
Officer’s Act of 1990.  The objective was to determine whether adequate internal controls were in place for
NCIS and relate the results of the review to the upcoming release 3 implementation. 
    HUD’s implementation of release 1 of the New Core Project was not completely successful.  A review of
NCIS processing for release 1 travel and relocation transactions found that missed requirements and ineffective
controls and procedures resulted in inaccurate financial data in HUD’s general ledger and Oracle Financials.  As a
result, NCIS processed for more than 6 months with unresolved errors, leaving HUD’s general ledger and Oracle
Financials with inaccurate financial data and discrepancies in the balances between HUD’s general ledger and
the U.S. Department of the Treasury’s Government Wide Accounting System.  The implementation of release
1 confirmed the concerns cited when OIG reviewed release 3.  Although HUD had taken action in its plans for
release 3 to mitigate some of the problems that occurred with release 1, OIG is concerned that HUD could be
moving too fast with its implementation plans and may repeat these weaknesses.
    OIG recommended that HUD correct the deficiencies cited to ensure that financial data are recorded
accurately in HUD’s general ledger and Oracle Financials.  Additionally, HUD should implement controls in
current and future releases that will prevent similar errors from occurring. (Audit Report:  2015-DP-0007)




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SEMIANNUAL REPORT TO CONGRESS




POTENTIAL ANTIDEFICIENCY ACT VIOLATION IN HOME INVESTMENT PARTNERSHIPS
PROGRAM
HUD OIG conducted further analysis of its fiscal years 2013 and 2014 findings that HUD’s formula grant
accounting did not comply with generally accepted accounting principles, resulting in misstatements on its
financial statements, and that HUD did not comply with the HOME Investment Partnership Act (also known as
the HOME Statute).  The additional analysis was performed due to concerns about a potential Antideficiency
Act violation regarding HOME Investment Partnerships Program funds based on HUD’s implementation of the
cumulative method to meet commitment deadlines; specifically, its use of the first-in, first-out (FIFO) method
to commit and disburse funds for this program.  The objective of the audit was to determine whether grant
funds were obligated and spent in accordance with statutory requirements.
     HUD’s use of the cumulative method to determine compliance with the HOME Statute’s 24-month
commitment deadline incorrectly permitted some jurisdictions to retain and commit HOME funds beyond
the statutory commitment deadline.  If funds are retained by grantees beyond the deadline, HUD may incur
an Antideficiency Act violation because funds remain available for obligation or expenditure by the grantee. 
The Antideficiency Act prohibits Federal agencies from making or authorizing an expenditure or obligation
exceeding an amount available in an appropriation or fund for the expenditure or obligation.  In fiscal
year 2014, HUD continued to use the cumulative and FIFO methods for commitments and disbursements. 
Therefore, the conditions remained, and the potential for an Antideficiency Act violation continued to exist.
     OIG recommended that HUD (1) open an investigation and determine the impact of FIFO and the
cumulative method for commitments for the HOME program on HUD’s risk of an Antideficiency Act violation;
(2) as part of the investigation, obtain a legal opinion from GAO and OMB to determine whether maintaining
the cumulative method for determining compliance with the HOME Statute results in noncompliance with the
Statute and potential Antideficiency Act violations; and (3) if HUD incurred an Antideficiency Act violation,
comply with the reporting requirements at 31 U.S.C. (United States Code) 1351 and 1517(b) and OMB
Circular No. A-11, Preparation, Submission, and Execution of the Budget, section 145 (June 21, 2005). (Audit
Memorandum:  2015-FO-0801)




REVIEW OF HUD’S ADMINISTRATION OF ITS PURCHASE CARD PROGRAM
HUD OIG audited HUD’s administration of its purchase card program in accordance with the Charge Card
Abuse Prevention Act of 2012 to determine whether HUD evaluated and reported improper and potentially
illegal uses of government purchase cards.
     Purchase card transactions were generally supported. However, HUD did not evaluate a potential
violation to determine whether it constituted a significant weakness and could have provided better
transparency by reporting the potential purchase card violation in its reports to OMB. Specifically, HUD did
not evaluate or report a violation in which an employee made fraudulent purchases totaling nearly $12,000
from August through October 2013.
     OIG recommended that HUD revise its procedures to include evaluating the impact of identified
violations on HUD’s purchase card program controls and how violations will be reported. (Audit
Report:  2015-FO-0006)




42
                                                                 CHAPTER SIX OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS




REVIEW OF ENVIRONMENTAL REQUIREMENTS
HUD OIG audited HUD’s implementation and oversight of compliance with environmental requirements to
determine whether HUD ensured that it adequately implemented environmental requirements and provided
adequate oversight to ensure compliance with these requirements. 
    HUD did not adequately implement environmental requirements or provide adequate oversight to ensure
compliance with these requirements.  For example, it did not adequately monitor or provide training to its
staff, grantees, or responsible entities on how to comply with environmental requirements.  Also, HUD did
not have an adequate reporting process to ensure that the appropriate headquarters programs were informed
of field offices’ environmental concerns.  Further, OIG’s review of five field offices found that none of them
adequately followed environmental compliance requirements.  As a result, HUD may have increased the risk
to the health and safety of the public and failed to prevent or eliminate damage to the environment, and five
field offices allowed public housing agencies to spend almost $405 million for activities that either did not have
required environmental reviews or had reviews that were not adequately supported.
    OIG recommended that HUD (1) comply with and provide adequate oversight to ensure compliance with
environmental requirements, (2) either establish an independent program office with overall departmental
responsibility for developing and enforcing compliance with environmental policies by all program
offices and grantees or establish an agreement that clearly outlines all program offices’ environmental
oversight responsibilities, and (3) clarify the delegation of authority in Federal Register notices related to
its responsibility for the implementation of and compliance with environmental requirements. (Audit
Report:  2015-FW-0001)




REVIEW OF LEAD-BASED PAINT HAZARDS CONTROL
HUD OIG audited the City of High Point, NC’s lead-based paint procurement and eligibility operations to
determine whether the City administered its lead-based paint hazard control grants in accordance with HUD’s
regulations and grant requirements for procurement of contracted services and expense eligibility.
    The City did not properly manage its procurement activities in accordance with HUD’s requirements. 
Specifically, it used an expired contract to pay for environmental services from November 1, 2009, to July 15,
2013.  Also, it did not consistently select the lowest bidder, retain required documentation, and perform cost
analyses on change orders.  As a result of this noncompliance, HUD funds were used to pay more than $1
million for ineligible and unsupported procurement costs.  In addition, the City improperly used its grant for
ineligible lead-based paint abatement expenses.  As a result, HUD funds were used to pay more than $9,000 for
ineligible costs, which the City was not able to use for other projects.
    OIG recommended that HUD require the City to (1) reimburse more than $207,000 in ineligible costs
from non-Federal funds, (2) support or reimburse more than $874,000 in unsupported costs from non-Federal
funds, and (3) implement internal controls to ensure that regulations and procedures are followed.  OIG also
recommended that HUD continue the zero threshold process by reviewing the eligibility of the projects for
approval under the 2011 grant until the grant is completed. (Audit Report:  2015-AT-1005)




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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, 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                                  $161,722,168

             Recoveries and receivables for other entities                        $86,959,989

                                Civil actions                                           7

                       Administrative sanctions                                         1




44
                                                                              CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES



SINGLE FAMILY
HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, Northern
District of Georgia, in conducting a review of First Tennessee Bank. First Tennessee has its principal place
of business in Memphis, TN, and is a wholly owned subsidiary of First Horizon Financial Corporation.  First
Tennessee became a Federal Housing Administration (FHA)-approved direct endorsement lender in 1984.  As
a direct endorsement lender, First Tennessee was authorized by HUD to originate and underwrite mortgage
loans on HUD’s behalf, including determining a borrower’s creditworthiness and whether the proposed
loan met all applicable 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 it 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 June 1, 2015, First Tennessee entered into a settlement agreement with the Federal Government to pay
$212.5 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation of certain civil
claims the Government contended that it had against First Tennessee.  The settlement agreement was neither
an admission of liability by First Tennessee nor a concession by the United States that its claims were not well
founded.  As part of the settlement, First Tennessee agreed that it engaged in certain conduct in connection
with its origination, underwriting, and quality control of certain single-family residential mortgage loans
insured by FHA.  As a result of First Tennessee’s conduct, HUD insured hundreds of loans approved by First
Tennessee that were not eligible for FHA mortgage insurance under the direct endorsement program and that
HUD would not otherwise have insured.  HUD incurred substantial losses when it paid insurance claims on
the loans covered by the settlement agreement.  Of the total settlement, FHA received $142 million in July 2015,
and other Federal entities were to receive the remaining $70.5 million. (Memorandum:  2015-AT-1801; Office
of Audit Region 4 and Joint Civil Fraud Division, with assistance from various Office of Investigation regions)




HUD OIG assisted in an investigation into alleged violations by Reverse Mortgage Solutions, Inc., of FHA
regulations related to its Home Equity Conversion Mortgage (HECM) program.  The investigation began due
to a qui tam action filed under the False Claims Act, 31 U.S.C. (United States Code) 3729, in the U.S. District
Court for the Middle District of Florida.  The False Claims Act allows private persons to file suit for violations of
the False Claims Act on behalf of the Government.  A suit filed by an individual on behalf of the Government is
known as a qui tam action, and the person bringing the action is referred to as a relator.
    Reverse Mortgage Solutions is a mortgage company authorized to originate and service FHA-insured
HECM loans (commonly known as reverse mortgages).  Reverse Mortgage Solutions is a wholly owned
subsidiary of Walter Investment Management Corporation, with its operations based in Spring, TX.  Reverse
Mortgage Solutions conducts loan servicing activities for reverse mortgages.  HUD’s HECM program enables
qualified homeowners to withdraw a portion of the home’s equity, thus creating a reverse mortgage.  On July
1, 2013, the relator filed a qui tam action alleging that Walter Investment Management Corporation, Reverse
Mortgage Solutions, and other entities engaged in a scheme to defraud HUD by failing to disclose in FHA
insurance claims that certain required servicing actions on reverse mortgages were not completed according
to HUD regulations within the required timeframes.  The relator also alleged that Reverse Mortgage Solutions
used a straw corporation to keep commissions on the sale of properties it liquidated. 




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SEMIANNUAL REPORT TO CONGRESS



     On March 27, 2015, the United States joined in the relator’s civil action regarding certain allegations made
by the relator.  In joining the civil action, the United States contended that it had certain civil claims against
Reverse Mortgage Solutions and the other defendants for violating program rules and that as a result, HUD
paid more in claims on the loans than loan owners were entitled to receive on certain claims.  On September
3, 2015, the United States, the relator, Walter Investment Management Corporation, and the other defendants
entered into a settlement agreement to avoid the delay, uncertainty, inconvenience, and expense of litigation. 
To settle the matter, Walter Investment Management Corporation, the parent corporation of Reverse
Mortgage Solutions, agreed to pay $29.63 million to the United States, covering certain claims.  The settlement
agreement was neither an admission of liability by the defendants nor a concession by the United States
that its claims were not well founded.  FHA’s Mutual Mortgage Insurance Fund is to receive more than $13.69
million of the $29.63 million, with the remaining funds being remitted to the relator and other Federal entities.
(Memorandum:  2015-CF-1808; Office of Investigation Region 4 and Joint Civil Fraud Division)




HUD OIG, in coordination with the U.S. Attorney’s Office for the Eastern District of Michigan, conducted a
review of GTL Investments, Inc., doing business as John Adams Mortgage Company, regarding its originations,
underwriting, quality control, and endorsement of FHA loans. GTL Investments is based in Southfield, MI.
     The U.S. Government contended that it had certain civil claims against GTL Investments due to the
origination, underwriting, quality control, and endorsement of 29 FHA-insured loans made from January 2008
through April 2012 that went to claim.  Further, GTL Investments’ material deficiencies in the underwriting of
the 29 loans resulted in losses to FHA’s Mutual Mortgage Insurance Fund.  The Government also contended
that it had actual and potential administrative claims against GTL Investments for two additional FHA-insured
loans that remained in GTL Investments’ loan portfolio. 
     To avoid the delay, uncertainty, inconvenience, and expense of lengthy ligation in regard to the
Government’s claim and in consideration of mutual promises and obligations, on December 23, 2014, GTL
Investments entered into a settlement agreement to pay $4.2 million to FHA’s Mutual Mortgage Insurance
Fund.  GTL Investments also agreed to refrain from making any claim for FHA insurance benefits or
indemnify FHA for losses incurred, if any, on the two loans that remained in its loan portfolio.  The settlement
agreement was neither an admission of liability by GTL Investments nor a concession by the Government
that its allegations were not well founded. (Memorandum:  2015-CH-1801; Office of Audit Region 5, Office of
Investigation Region 5, and Joint Civil Fraud Division)




46
                                                                                 CHAPTER EIGHT EVALUATION INITIATIVES




 EIGHT          EVALUATION INITIATIVES




Program evaluation affords the Office of Inspector General (OIG) a flexible and effective mechanism for
oversight and review of U.S. Department of Housing and Urban Development (HUD) programs by using
a multidisciplinary, collaborative approach and multiple methods for gathering and analyzing data. The
program evaluation team performs information technology (IT) and program evaluations, provides data
analytics services to OIG components, and performs management assistance reviews to ensure that OIG operates
in accordance with its policy. During this 6-month period, OIG issued one report and had seven evaluations
underway. In addition, it provided a wide range of statistical and analytical support to OIG headquarters and
field components and completed two management assistance reviews within OIG.



EVALUATIONS

COMPLETED PROJECT:

HUD IT MODERNIZATION REPORT (2015-OE-0002)
OIG completed an IT modernization evaluation and issued a report with 13 recommendations to the HUD
Office of the Chief Information Officer. The evaluation reviewed the implementation and maturity of HUD’s
capital planning and investment control process and enterprise architecture program, focusing on how they
support HUD’s strategic plan and IT modernization roadmap.




NEW PROJECT:

EVALUATION OF HUD RECOMMENDATION TRACKING EFFECTIVENESS
The purpose of this evaluation is to determine whether HUD would benefit from an enterprise risk
management (ERM) approach to identifying, assessing, and managing departmentwide risks using a single
enterprise-level recommendation tracking system. The recently revised Office of Management and Budget
(OMB) Circular No. A-123, Management’s Responsibility for Risk Management and Internal Control,
encourages Federal agencies to adopt an ERM framework for the application of risk management principles at
every level of an organization that is integrated in day-to-day operations, providing more effective risk
management and internal control in the Federal Government.




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SEMIANNUAL REPORT TO CONGRESS



ONGOING PROJECTS:

DEPARTMENTAL ENFORCEMENT CENTER EFFECTIVENESS
OIG is awaiting HUD’s response to a draft report on the effectiveness of the Departmental Enforcement Center.
This project was designed to determine whether enforcement efforts were successful in improving the physical
and financial condition of multifamily properties and whether implementing a risk-based approach to
enforcement could improve accomplishments in other programs.



PUBLIC HOUSING AGENCIES’ FLOOD INSURANCE
OIG is awaiting HUD’s response to a draft report explaining why three public housing agencies (PHA) did not
have adequate flood insurance before Hurricane Sandy. In 2014, HUD acknowledged the need to determine
the best way to ensure that PHAs have adequate coverage. This project was designed to inform HUD decision
makers about flood insurance coverage.



HUD ACQUISITION PROCESS IMPROVEMENTS
An OIG contractor is completing fieldwork on a project to determine how HUD initiatives to improve the
acquisition process are progressing and to identify practices that could improve the quality and timeliness of
acquisitions. HUD has been working to address acquisition issues since 2001, when the U.S. Government
Accountability Office identified acquisition management as a significant management challenge at HUD.



HUD SECURITY POLICIES AND PROCESSES FOR CONTRACTOR PERSONNEL
An OIG contractor is completing fieldwork on a review of HUD’s security policies and practices for contractor
personnel. Contractors pose a potential vulnerability to HUD because they comprise around half of HUD’s
workforce and the Office of the Chief Human Capital Officer has been under pressure to bring contractors on
board quickly.



ENERGY STAR BUILDING STANDARD ALTERNATIVES
OIG is completing a research project requested by the HUD Office of Community Planning and Development
(CPD). For its Home Investment Partnerships Program, CPD tracks new and significantly remodeled units that
meet the HUD priority goal of certification under the Energy Star building standard. CPD asked OIG to
research State low-income housing building standards to see whether States used other standards, equivalent
to Energy Star, that CPD could count toward achieving the HUD priority goal.



FEDERAL INFORMATION SECURITY MODERNIZATION ACT
OIG is completing the fiscal year 2015 Federal Information Security Modernization Act (FISMA) review of
HUD. According to OMB’s FISMA guidance, inspectors general are required to conduct an independent review
of agency IT security programs based on U.S. Department of Homeland Security (DHS) annual metrics. These
metrics consist of 10 topic areas that measure the agency’s IT security posture. The review is due to OMB by
mid-November. OIG will provide written submissions for the DHS metrics, along with a written report.




48
                                                                                CHAPTER EIGHT EVALUATION INITIATIVES



COUNCIL OF THE INSPECTORS GENERAL FOR INTEGRITY AND EFFICIENCY IT PROJECT
OIG participated in a Council of the Inspectors General for Integrity and Efficiency IT subcommittee project
group that developed an Information Security Continuous Monitoring maturity model. This maturity model
and methodology were approved by OMB and DHS for use in annual FISMA reviews as it strengthens the
assessment and oversight of agencies’ information security under FISMA.



DATA ANALYTICS
OIG analyzed HUD internal and housing-related external data to identify program mismanagement patterns,
internal control weaknesses, and potential fraud to improve long-term OIG workload planning and strategic
decision making. During the 6-month reporting period, OIG


•	   Completed 110 data and statistical analyses assistance requests.


•	   Quantified more than $1.5 billion in statistically estimated monetary benefits associated with work
     performed for the Office of Audit.


•	   Contributed to the $212.5 million civil settlement negotiated as part of an OIG-U.S. Department of
     Justice-Federal Housing Administration (FHA) national home mortgage underwriting initiative.


•	   Developed HUD program assessment systems designed to identify high-risk multifamily nursing home
     operations and poorly performing FHA loan servicing institutions.


•	   Enhanced its predictive analyses infrastructure by adding data visualization and linkage capabilities and
     consolidating key HUD single-family and FHA data.



MANAGEMENT ASSISTANCE
OIG management assistance reviews provide the quality assurance mechanism, which ensures that OIG’s
audit, investigative, and administrative operations follow established standards, policies, and procedures. 
Management assistance review reports are issued to top OIG management to recommend improvement in
management and operations. During this 6-month period, OIG


•	   Performed a special assessment of IT and


•	   Reviewed the Region 4, Atlanta, GA, audit and investigation activities.




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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 915 hours to reviewing 134 issuances. The draft directives
consisted of 65 notices, 12 mortgagee letters, and 57 other directives. OIG provided comments on 37 (or 28
percent) of the issuances and provided 9 nonconcurrences and was able to resolve 2. A summary of selected
reviews for this 6-month period is provided below.



NOTICES, POLICY ISSUANCES, AND FINAL RULES

SINGLE FAMILY HOUSING
Single Family Lender Handbook – OIG reviewed various sections of the Federal Housing Administration’s
(FHA) updated and consolidated Single Family Housing Policy Handbook 4000.1. 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 guid-
ance into a single, authoritative document to serve as the definitive guide on all aspects of FHA’s single-family
programs. Major sections of this handbook became effective September 14, 2015.
     During this period, we reviewed handbook sections “Doing Business with FHA,” “Origination through Post
Closing and Endorsement,” “Servicing and Loss Mitigation,” and “Quality Control, Oversight and Compliance.”
OIG provided comments and nonconcurring comments on several issues. Based on OIG’s internal audit of the
203(k) program, the work writeups or cost estimates did not have adequate details to identify the specific
rehabilitation work required. In many cases, due to the vague language, OIG could not determine whether the
repairs and improvements involved structural changes. OIG commented that the language regarding these
requirements could be strengthened. It also commented that the handbook did not adequately address
lead-based paint renovation, repairs, and remodeling safety practices for homes built before 1978. Further,
HUD only requires a prospective 203(k) consultant to have 3 years’ experience as a remodeling contractor or
general contractor. OIG is concerned that this requirement is not sufficient to determine whether a contractor
would have the necessary skills to provide architectural exhibits and drawings and, if required, perform
substantial rehabilitation work.




50
                                                               CHAPTER NINE LEGISLATION, REGULATION, AND OTHER DIRECTIVES



    OIG also provided a number of comments related to servicing and loss mitigation based on weaknesses
identified in audit work on loss mitigation. Current mortgagee letters state that a stand-alone partial claim
may be used if certain criteria are met. However, the mortgagee letters do not specifically prohibit the use of
a loan modification when a stand-alone partial claim is allowed. FHA pays the servicer an administrative fee
under the Home Affordable Modification Program (HAMP). This practice may encourage lenders to include
the HAMP loan modification with the partial claim even when it results in a nearly identical or higher interest
rate that may not benefit the borrower. OIG recommends that HUD consider clarifying its policy to ensure
that lenders use the loan modification with a stand-alone partial claim only if it would benefit the borrower.
    HUD/VA [U.S. Department of Veterans Affairs] Addendum Uniform Residential Loan Application (form
HUD-92900-A) – On May 15, 2015, HUD published a notice requesting public comment on its proposed
revisions to the addendum. The purpose of the proposed revisions was to (1) show the differences between
the initial and final Uniform Residential Loan Application, (2) revise lender certification on debarment
and suspension to be loan-level specific, (3) remove references to handbooks no longer in use by the Office
of Single Family Housing, (4) update language regarding acceptable sources of funds, (5) provide current
nondiscrimination language, and (6) update terminology to reflect the new Single Family Housing Handbook
4000.1. HUD also removed the lender certification related to convictions, civil judgments, indictments,
and terminations of public transactions for cause or default from loan level certifications to FHA’s lender
certifications for initial approval and annual renewal to assess at the lender level. When these changes were
official noticed HUD OIG non-concurred.
    Methodology for assessing loan quality – On June 18, 2015, FHA published its single-family loan quality
assessment methodology in its drafting table. This methodology, also known as the defect taxonomy, explains
how FHA intends to categorize loan defects identified in FHA-insured loans. The methodology centers
on three main concepts: (1) identifying a defect, (2) capturing the sources and causes of a defect, and (3)
assessing the severity of a defect. OIG informed HUD that this document meets the criteria of a change in
guidance and should go through the formal clearance review process required for all directives. In addition,
OIG continues to have concerns with the contents of the methodology that it would like to formally comment
on before HUD’s implementation. OIG is concerned that the general references to “qualitative issues of
eligibility” do not clearly identify significant issues affecting eligibility of the loan. OIG is also concerned
that HUD does not identify the remedy related to each specific defect based on the assessment. OIG
recommended creating a matrix of remedies to outcomes.


PUBLIC AND INDIAN HOUSING
Rental Assistance Demonstration – On June 15, 2015, HUD revised its Office of Public and Indian Housing
(PIH) notice PIH-2012-32 (HA) regarding final implementation of the program. OIG strongly recommended
that PIH work with HUD’s Office of General Counsel (OGC) to ensure that it complies with the delegation of
authority since the Office of Housing and PIH both administer this program. OIG also recommended that
OGC opine on whether the existing method for computing the financial assistance was in accordance with the
congressional intent. Lastly, OIG expressed concern that HUD may have assumed an unacceptable level of
risk without compensating controls for the implementation and oversight of the demonstration program.
Program staff may want to consider allocating technical assistance funds to public housing agencies when it
identifies capacity issues.




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SEMIANNUAL REPORT TO CONGRESS



     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-governmental 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, however, that HUD has not
agreed that PIH 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.



OFFICE OF MULTIFAMILY HOUSING
Underwriter approval delegation – On August 12, 2015, HUD issued a notice describing the realignment of its
underwriter approval process. Eligible multifamily accelerated processing (MAP) and Section 232 lenders will
designate a chief underwriter. The chief underwriter will designate and approve its MAP and Section 232
underwriters. HUD will no longer review and approve MAP and Section 232 underwriters, except as otherwise
stated in the notice, and will instead rely on certifications from the MAP and Section 232 lender and chief
underwriter that individual underwriters meet MAP Guide or Section 232 Handbook 4232.1 requirements.



COMMUNITY PLANNING AND DEVELOPMENT
The Disaster Relief Appropriations Act required grantees to spend Community Development Block Grant
Disaster Recovery (CDBG-DR) funding within 24 months after HUD obligates the funds to the grantee. Section
904(c) of the Appropriations Act authorized the Office of Management and Budget (OMB) to grant waivers of
the deadline. OMB authorized HUD to provide CDBG-DR grantees with expenditure deadline extensions for
activities that are inherently long term and when it would not be practical to spend funds within the 24-month
period and still achieve program missions. On May 11, 2015, HUD published guidance and instructions for
requesting an extension.
     OIG reviewed two Federal Register notices related to the waivers for grantees receiving CDGB-DR funding.
The first notice, published in the Federal Register on April 7, 2015, allowed the State of New Jersey to use up to
$32 million for rental assistance, utility payments, and if necessary, rental costs (for example, security deposits
and utility deposits). The State may provide the assistance on behalf of beneficiaries for up to 2 years.
     The second notice was published on August 25, 2015, and modified the requirements for infrastructure
projects funded by Hurricane Sandy funding. It also allowed alternative requirements for the State of New
Jersey’s Energy Resilience Bank and LMI Homeowner Rebuilding Program and for New York City’s infrastruc-
ture projects at the Breezy Point Flood Mitigation System.



FAIR HOUSING AND EQUAL OPPORTUNITY
On July 3, 2014, HUD published a notice of funding availability announcing approximately $38.3 million to be
used for the Fair Housing Initiatives Program (FHIP). On April 24, 2015, HUD published the names and
addresses of the recipients selected for FHIP funding. FHIP assists projects and activities designed to enhance
compliance with the Fair Housing Act and substantially equivalent State and local fair housing laws.




52
                                                                                          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 START OF PERIOD WITH
NO MANAGEMENT DECISION AS OF SEPTEMBER 30, 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. 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 there were not sufficient internal
controls over the process in place 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, 2014, April 17, 2014, 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 until the final action date to
implement corrective action. Further, the proposals included several contingencies; therefore, OIG has no
reasonable way to determine PIH’s progress in addressing the recommendation.




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     This issue was referred to the Assistant Secretary on June 19, 2014, 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. A meeting was held to brief the Deputy Secretary’s staff on the subject on April 20, 2015;
however, a new proposal had not been made as of September 30, 2015. (Audit Report: 2014-FO-0003)



U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, WASHINGTON, DC,
IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2015, 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 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 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.
     Initially, OCFO disagreed with several of OIG’s recommendations, citing (1) funding issues in conducting
current billing studies, which it believes do not produce tangible results; (2) disagreement for 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 yet
entered a management decision, were referred to the Deputy Secretary on March 31, 2015. A meeting was held
to brief the Deputy Secretary’s staff on the subject on April 20, 2015, and in August 2015, meetings were held
with OCFO to discuss what was needed for agreement. As of September 30, 2015, management decisions had
been agreed upon for all but two recommendations. (Audit Report: 2014-FO-0004)




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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.
    The OIG report found that HUD could not adequately support the reasonableness of the Operating Fund
management, book-keeping, 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 book-keeping 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 PIH 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 the recommendations to the Deputy Secretary on February 12, 2015, and a decision is
pending. After the referral, OIG and HUD held further discussions on the matter but were unable to reach
agreement. On April 27, 2015, PIH sent a letter to OMB requesting input and guidance on the issues, and OIG
sent a separate letter on May 11, 2015, to OMB to provide additional input. OIG has not received a response;
however, PIH stated that it had held several discussions with OMB but that no final determination had been
made. On August 3, 2015, Senator Grassley sent a letter to OMB to urge OMB to reject HUD’s request to
exempt the PHA fees from the OMB guidance and repeated the need to have the funds refederalized. (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



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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
the U.S. Department of the Treasury, to ensure that they were aware that CAIVRS was being updated and
would no longer report credit worthiness information – the 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
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.  OIG has not received the final management decision. (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 the
U.S. Treasury for approximately $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 that there was no authority to require
non-Federal cost savings to be returned to the U.S. Treasury. OIG disagrees with the proposed management




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decisions for recommendations 1A, 1B, and 1C and believes that all of the questioned funds should be
returned to the U.S. Treasury absent a suitable legal opinion. As a result of November 25, 2014, discussions
with OIG, OPHI agreed to obtain a legal determination from HUD’s Office of General Counsel (OGC) 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.
    On April 28, 2015, the Associate General Counsel, Office of Assisted Housing and Community
Development, provided an opinion on the proposed management decisions and the related OIG concerns.
This opinion concluded that approximately $1.5 million in questioned costs was program income under the
definition of excess income and did not have to be repaid to the U.S. Treasury.
    The Counsel to the Inspector General reviewed the OGC opinion and agreed that the OIG
recommendations should be retained, the questioned costs were not program income, and the interest earned
on these funds was also not program income. Also, exhibit H of the annual contributions contract amendment
would have required program income to have been spent before HOPE VI funds were drawn down. Because
unspent HOPE VI grant funds are no longer available for expenditure, funds returned to HUD must be
returned to the U.S. Treasury.
    On August 13, 2015, the Inspector General referred the disagreement on the management decisions to the
Deputy Secretary for a decision as the departmental audit resolution official. (Audit Report: 2014-NY-1007)




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 $373,228 for 5 loans, and 16 loans had
a potential loss to HUD of approximately $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.




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     OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on
January 8, 2015. OIG met with OGC and the HUD Offices of Housing, Single Family Housing, and Finance and
Budget on January 30, 2015. The meeting ended in disagreement; however, OGC and the OIG Office of Legal
Counsel continued discussions.
     The Office of Single Family Housing received two legal opinions from OGC, dated January 26, 2015, and
February 24, 2015, respectively. Combined, the legal opinions support the Offices of Single Family Housing’s
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 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 OGC and the Offices of Single Family Housing and Finance and Budget
regarding the recommendations in question, but agreeable management decisions have not been reached.
On March 31, 2015, OIG referred the recommendations to the Deputy Secretary for a decision and has not
received that decision. (Audit Report: 2014-LA-0005)




INTERIM REPORT ON HUD’S INTERNAL CONTROLS OVER FINANCIAL REPORTING,
ISSUE DATE:  DECEMBER 8, 2014
HUD OIG audited the Office of Community Planning and Development’s (CPD) elimination of the first-in,
first-out (FIFO) method for disbursing obligations.  OIG reported in prior years that the FIFO method used by
the Integrated Disbursement Information System (IDIS) was not designed to comply with Federal financial
management system requirements and was not compliant with generally accepted accounting principles.  The
continued use of the FIFO method allowed HUD’s financial statements to be materially misstated.
     The OIG report included a recommendation to continue working with the information technology services
contractor and OCFO to ensure that all phases of the FIFO elimination plan were completed to bring IDIS into
compliance with generally accepted accounting principles and applicable Federal system requirements as
scheduled.  However, during fiscal year 2015, funding for the elimination plan was withheld, causing delays in the
timeframe.  HUD issued a proposal to address the recommendation; however, OIG rejected it because it indicated
that CPD did not have approved funding for fiscal years 2015 and 2016, thereby causing the elimination project to
be halted sometime in the Spring of 2015.  The second proposal was submitted by CPD after management approved
a substantial amount of the remaining funding required, allowing the project to resume.  However, a gap of
approximately $150,000 in funding remained.  OIG rejected the proposal because it did not include an explanation
of whether the expenditure plan covered all of the necessary funds to complete the elimination plan and the new
approved expenditure plan was not included as part of the management decision. (Audit Report: 2015-FO-0002)




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GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS 2014 AND 2013
FINANCIAL STATEMENTS AUDIT, ISSUE DATE: FEBRUARY 27, 2015
HUD OIG audited the Government National Mortgage Association’s (Ginnie Mae) fiscal year 2014 stand-alone
financial statements.  OIG conducted this audit in accordance with the Chief Financial Officers Act of 1990
as amended.  OIG found a number of material weaknesses in Ginnie Mae’s financial reporting specifically
related to the auditability of several material assets and reserve for loss liability account balances.  The audit
report contained 20 audit recommendations to (1) correct the financial statement misstatements identified
during the audit and (2) take steps to strengthen Ginnie Mae’s financial management operations.  Of 20 audit
recommendations, OIG did not reach consensus on the necessary corrective actions for 9.  OIG disagreed with
Ginnie Mae on the application of accounting and the model estimation methodology for the fiscal year 2014
reserve for loss account for six of nine audit recommendations. For the other three audit recommendations,
OIG rejected management’s proposed corrective actions because it believes they are insufficient and
inadequately responsive to the audit recommendations. OIG’s audit recommendations call for the HUD Chief
Financial Officer to provide oversight of Ginnie Mae’s financial management operations.  HUD’s plan of action
for providing oversight of Ginnie Mae lacked specificity. (Audit Report: 2015-FO-0003)



The next section includes five civil actions that have gone through similar issues in attempts to obtain
management decisions.
    In all five cases, the Office of Program Enforcement let the 120-day deadline for the management
decisions pass to trigger a referral and, ultimately, a solution for its concerns about audit resolution related to
certain recommendations from final civil action memorandums. On July 22, 2015, OIG met with OCFO and
the Departmental Audit Liaison Officer to discuss civil outcomes; the reporting and recording process by OIG’s
Office of Audit to date; and the responsibility for handling those outcomes, including the audit resolution
process. As no firm decisions were made, OIG referred three of the matters to HUD’s Deputy General
Counsel for Enforcement in June and July 2015 (and the other two in September 2015). The Office of Program
Enforcement contacted OIG on August 5, 2015, and stated that it was willing to work with OIG on resolving the
issues but remained concerned about being held responsible for certain payments due HUD from settlements
and court-ordered judgments that are to be collected by the U.S. Department of Justice (DOJ) on HUD’s behalf.
    As of August 26, 2015, OIG had not received management decisions or been contacted by HUD, so OIG
informed HUD that in OIG’s opinion, HUD should record the civil outcomes at the time of the settlement or
court-ordered judgment, rather than waiting for the first payment to be received. Also, OIG believes that for
those outcomes reached by DOJ on HUD’s behalf, HUD should record the outcomes at the gross proceeds
amount expected to be received by HUD. If HUD wanted the initial entry to better represent the expected “net”
receipts due HUD, it should include an allowance for the potential DOJ retainer fee. This approach would allow
a timelier and more accurate recording of civil outcomes in HUD’s accounting records, as well as the Audit
Resolution and Corrective Actions Tracking System (ARCATS). OIG further stated that based on this OIG opinion,
future civil outcome recommendations would focus on ensuring that the outcomes were recorded in HUD’s
records upon settlement or court order, which would affect how the Office of Program Enforcement would
respond with proposed management decisions. In addition, OIG explained the expected ARCATS process and
coding that would allow this approach and that it would allow recommendations to remain open until collection
was completed in full or remaining uncollectible funds were written off via HUD’s formal writeoff process.
    OIG again contacted the Office of Program Enforcement on August 27, 2015, to try to resolve the matter.
The Office of Program Enforcement stated that it would check into the status of the settlement collections
and consider whether it could provide proposed management decisions. However, the Office of Program




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Enforcement reiterated that it was OGC’s opinion that once a settlement agreement is finalized, OIG should
record the outcome in ARCATS and close the recommendation, without leaving the recommendation open
until collections are completed or remaining amounts due are written off.
     On August 28, 2015, OIG requested a meeting with HUD’s Deputy General Counsel for Enforcement to
discuss the matters and attempt resolution. The Deputy General Counsel replied and asked OIG to elevate the
matter to HUD’s General Counsel for resolution. OIG referred the overall matter to HUD’s General Counsel in
September 2015. After the matters were referred, OIG followed up with the Office of Program Enforcement and
was notified that HUD did not expect to provide management decisions and that OGC expected OIG to elevate the
disagreements to the Deputy Secretary.



BORROWER SETTLED ALLEGED VIOLATIONS OF HOME EQUITY CONVERSION
MORTGAGE PROGRAM, ISSUE DATE: JANUARY 30, 2015
HUD OIG audited HUD’s oversight of its Home Equity Conversion Mortgage (HECM) program and found that
contrary to program residency requirements, 37 borrowers were not living in the property associated with
the loan and were renting the property to participants in HUD’s Section 8 Housing Choice Voucher program
(HUD OIG audit report number 2013-PH-0002, issued December 20, 2012). Renting the properties to Section
8 program participants violated program requirements because HUD requires borrowers to reside in the
mortgaged residence as their principal residence.
     In May 2006, a borrower obtained a HECM loan on a property that he owned in St. Charles, MO. The
borrower certified in writing on at least three occasions (October 2010, June 2011, and July 2013) that the
home was his principal residence. However, he was renting the property to a participant in HUD’s Housing
Choice Voucher program when he made the certifications. His actions violated HUD’s principal residency
requirements. We referred the violations to HUD’s Office of Program Enforcement for action under the
Program Fraud Civil Remedies Act (PFCRA).
     After HUD’s Office of Program Enforcement sent the borrower a demand letter, the borrower admitted
that he did not reside in the property as his principal residence when he submitted the certifications. After
negotiations with HUD, the borrower agreed to pay $3,000, or 12 monthly payments of $250, to settle the
matter. The borrower made the first settlement payment on January 6, 2015.
     OIG recommended that HUD’s Office of Program Enforcement allow OIG to post the settlement of $3,000
in ARCATS as funds put to better use. (Memorandum: 2015-PH-1803)




COURT ORDERED A FORMER EXECUTIVE DIRECTOR OF THE PHILADELPHIA
HOUSING AUTHORITY TO PAY CIVIL PENALTIES FOR VIOLATING FEDERAL LOBBYING
DISCLOSURE REQUIREMENTS AND RESTRICTIONS, ISSUE DATE: FEBRUARY 19, 2015
HUD OIG conducted a review of the Philadelphia Housing Authority’s compliance with Federal lobbying
disclosure requirements and restrictions (HUD OIG audit memorandum number 2013-PH-1803, issued April
26, 2013). OIG found that the Authority engaged in the prohibited practice of using Federal funds for lobbying,
and a former executive director certified to HUD that it did not do so. In addition, the former executive
director falsely certified to HUD that the Authority did not use non-Federal funds for lobbying activities. OIG
recommended that HUD’s Office of Program Enforcement pursue remedies under PFCRA against the former
executive director for falsely certifying to HUD that the Authority did not participate in lobbying activities.




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    In January 2014, HUD filed a complaint against the former executive director, seeking three civil penalties
under the Byrd Amendment and three civil penalties under PFCRA. As a basis for the civil penalties, HUD
alleged that the former executive director made or caused to be made three materially false statements to
HUD. These alleged false statements were disclosures and certifications submitted to HUD by the Authority.
    In December 2014, an administrative law judge determined that the former executive director was liable
for submitting three false certifications and disclosures, constituting a failure to file the required certifications
and disclosures under the Byrd Amendment and violating PFCRA by knowingly making three false statements
to HUD. The court ordered the former executive director to pay HUD civil penalties of $75,000. The court
determined that the former executive director was liable for a $10,000 civil penalty for the first Byrd Amendment
count and two $25,000 civil penalties for the second and third counts under the Byrd Amendment. Additionally,
the former executive director was liable for three $5,000 civil penalties under PFCRA.
    OIG recommended that HUD’s Office of Program Enforcement allow OIG to post the civil penalty of
$75,000 in ARCATS as funds put to better use. (Memorandum: 2015-PH-1804)




GROUP ONE MORTGAGE, INC., SETTLED ALLEGATIONS OF FAILING TO COMPLY
WITH FEDERAL HOUSING ADMINISTRATION UNDERWRITING REQUIREMENTS, ISSUE
DATE: MARCH 27, 2015
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.  The
direct endorsement program authorizes private-sector mortgage lenders to approve mortgage loans for FHA
insurance.  Lenders approved for the program must follow FHA requirements and provide annual and per loan
certifications that the lender complied with these requirements when underwriting and approving loans for
FHA insurance.  When a borrower defaults on an FHA-insured loan, HUD pays the insurance claims submitted
by or on behalf of the lender. 
    Based on our 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. (United States Code) 3729-3733, and common
law causes of action.  Of the settlement total, FHA’s Mutual Mortgage Insurance Fund was to receive nearly
$376,000 and the more than $29,000 remaining 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.
    OIG recommended that HUD’s Office of Program Enforcement allow OIG to post the settlement of
$376,523 to ARCATS as ineligible costs. (Memorandum: 2015-CF-1801)




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BORROWER SETTLED ALLEGATIONS OF NOT COMPLYING WITH THE PRIMARY
RESIDENCE REQUIREMENT OF THE FEDERAL HOUSING ADMINISTRATION
PROGRAM, ISSUE DATE: MARCH 27, 2015
HUD OIG conducted a civil investigation of an alleged loan origination fraud scheme involving a cash-out
refinance loan that was insured by FHA.  FHA provides mortgage insurance on loans made by FHA-approved
lenders to creditworthy borrowers.  Borrowers must occupy the properties as their primary residence for at
least 1 year.  Borrowers certify to their intent to occupy the property when signing the uniform residential loan
application and an addendum to the loan application. 
     Based on OIG’s investigation, HUD alleged that the borrower falsely certified to HUD in her refinance
application documents that she would occupy the subject property as her primary residence.  However, she
allegedly used the proceeds from her FHA-insured cash-out refinance for a downpayment on another home,
which she purchased 1 month after closing the refinance loan and moved into soon thereafter.  The borrower
defaulted on the loan, and FHA incurred a loss when it paid an insurance claim to the lender and sold the
property.  HUD further alleged that the borrower was liable for the false claim for FHA mortgage insurance
under PFCRA and its implementing regulations at 24 CFR Part 28.  The borrower denied that she had violated
the Act or HUD regulations.  However, on February 11, 2015, she settled with HUD for $15,000 to avoid further
expense and administrative proceedings and to reach a satisfactory resolution of the matter.  The agreement
did not constitute an admission of liability or fault on the part of HUD or the borrower.
     OIG recommended that HUD’s Office of Program Enforcement allow OIG to record the $15,000 settlement
in ARCATS as an ineligible cost. (Memorandum: 2015-CF-1804)




CIVIC CONSTRUCTION, LLC, SETTLED ALLEGATIONS OF MAKING FALSE CLAIMS TO
THE SEATTLE HOUSING AUTHORITY, ISSUE DATE: MARCH 30, 2015
Based on a referral from HUD’s Seattle Office of Labor Relations, OIG reviewed certain payrolls of the owner of
Civic Construction, LLC, of Portland, OR.  The payrolls were subject to the Davis-Bacon Act. OIG completed
the review and referred alleged violations to HUD’s Office of Program Enforcement for action under PFCRA.
     On October 7, 2014, HUD’s Office of Program Enforcement issued a complaint to Civic Construction
and its owner alleging that they were liable for 17 civil penalties of $7,500 each under PFCRA.  To arrive at a
mutually satisfactory resolution of the matter without the expense and uncertainty of further litigation, Civic
Construction and its owner agreed to pay HUD $34,000.  The settlement agreement did not constitute an
admission of liability or fault by any party. OIG recommended that HUD’s Office of Program Enforcement
allow OIG to record the $34,000 settlement in ARCATS as funds put to better use. (Memorandum: 2015-SE-
1801)




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 three audits.


HUD Subsidized an Estimated 2,094 to 3,046 Households That Included Lifetime
Registered Sex Offenders, Issue Date: August 14, 2009
OIG audited HUD’s requirement prohibiting lifetime registered sex offenders from admission to HUD-




62
                                                                                        CHAPTER TEN AUDIT RESOLUTION



subsidized housing to determine the extent to which lifetime registered sex offenders occupied HUD-
subsidized housing.  OIG determined that HUD subsidized an estimated 2,094 to 3,046 households, which
included lifetime registered sex offenders.  This number included individuals who were ineligible at the time
of admission due to lifetime registration status, individuals who were admitted and convicted before the
current law was enacted, and individuals who were eligible at the time of admission but later became lifetime
registered sex offenders.
    Among other things, OIG recommended that HUD seek legislative changes and if legislative changes were
passed, (1) require properties to ask households at each recertification whether any member is subject to a
lifetime registration requirement, (2) require properties to check the Dru Sjodin National Sex Offender Web
site for all household members at each recertification, and (3) develop and implement controls to monitor
properties’ use of the required recertification questions and the use of the sex offender Web site. 
    In its original management decision, HUD agreed to publish in the Federal Register a proposed program
rule change to require the items OIG recommended and revise its monitoring form accordingly.  On June 6,
2015, HUD submitted a revised management decision to close these recommendations without further action
because they were predicated on legislative changes, and no legislative changes have occurred.  
    On June 25, 2015, OIG agreed with the revised significant management decisions and closed the
recommendations.  (Audit Report:  2009-KC-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 3F, OIG identified $400,000 in markups
of Community Development Block Grant Disaster Recovery (CDBG-DR) funds that the Authority may have
spent under a prohibited cost-plus-percentage-of-cost contract. CPD’s Office of Block Grant Assistance
proposed requiring detailed documentation from Harris County showing that the funds were not spent under
a prohibited cost-plus contract. On November 20, 2013, OIG agreed with this management decision.
    The Office of Block Grant Assistance determined that the markups were ineligible and should be repaid
but concluded that since HUD’s grant agreement was with the State of Texas rather than with Harris County,
the State of Texas would be responsible for repayment, after which the State could require the Authority to
repay it. However, HUD gave the State an opportunity to review actual invoices to determine the specific
amount of CDBG-DR funds that were paid to the contractor through the ineligible cost-plus provision.
    The State reviewed each voucher that contained ineligible markups and determined that the actual
amount of CDBG-DR funds spent through the cost-plus provision was nearly $336,000. HUD reviewed the
support and concurred with the amount.
    HUD revised its management decision to require the State to repay nearly $336,000 from its general
revenue to its CDBG-DR fund by September 30, 2015, and HUD would verify receipt by October 9, 2015. OIG
agreed with the revised management decision, effective July 1, 2015. (Audit report: 2013-FW-1006)




THE JEFFERSON PARISH, LA, DEPARTMENT OF COMMUNITY DEVELOPMENT DID NOT
ALWAYS SUPPORT EXPENDITURES, COMPLY WITH PROCUREMENT REQUIREMENTS, OR
PROVIDE ADEQUATE OVERSIGHT OF SUBRECIPIENTS, ISSUE DATE: SEPTEMBER 30, 2014
OIG issued an audit report entitled “The Jefferson Parish, LA, Department of Community Development Did
Not Always Support Expenditures, Comply with Procurement Requirements, or Provide Adequate Oversight of




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SEMIANNUAL REPORT TO CONGRESS



Subrecipients.” For recommendations 1A, 2A, and 3A, effective January 26, 2015, OIG and HUD concurred on the
proposed management decisions to require the Jefferson Parish Department of Community Development to


         1A. 	Support or repay its CDBG [Community Development Block Grant] program $1,039,105
              from non-Federal funds for costs that lacked adequate supporting documentation.


         2A. 	 Support the cost reasonableness of the 16 contracts or repay $267,497 to its CDBG program with
              non-Federal funds.


         3A. 	 Support the data reported in the CAPER [consolidated annual performance evaluation report]
              regarding the three projects or repay to its CDBG program $93,975 from non-Federal funds.


The final action target date on these recommendations and the remaining recommendations in the report
was June 30, 2015.
     In August of 2015, HUD submitted a revised management decision in which HUD requested that
OIG reduce the questioned costs based upon HUD’s review of supporting documentation provided by the
Jefferson Parish Department of Community Development. Based upon HUD’s review, it required the Jefferson
Parish Department of Community Development to repay unsupported costs totaling more than $144,400
for recommendation 1A and nearly $25 thousand for recommendation 3A. For recommendation 2A, OIG
concurred with the revised management decision effective August 31, 2015. (Audit report: 2014-FW-1007)




SIGNIFICANT MANAGEMENT DECISION WITH WHICH OIG DISAGREES
During the reporting period, there was one report in which the OIG disagreed with the significant
management decision.


Follow-up of the Inspections and Evaluations Division on Its Inspection of the State of
Louisiana’s Incentive Program Homeowner Compliance (IED-09-002, March 2010),
Issue Date: March 29, 2013
OIG conducted a followup inspection of the State of Louisiana’s Road Home Elevation Incentive program
homeowner compliance that was completed in March 2013. As of August 31, 2012, the State’s documentation
showed that a total of 24,042 homeowners either were noncompliant, including those who had not elevated
their homes; were nonresponsive; or did not provide sufficient supporting documentation. Therefore, the
State did not have conclusive evidence that the $698.5 million in CDBG-DR program funds had been used
to elevate homes. For the remaining recommendation regarding the recovery of $3.8 million awarded to 158
noncompliant homeowners, documentation showed that the State had recovered only approximately $200,900
of the award funds. As a result, this recommendation remains open and has been revised based on OIG’s
followup review due to the increased noncompliance among homeowners who received elevation grants.
     To correct these deficiencies, OIG recommended that CPD require the State to enforce program remedies
for noncompliance as stated in grant agreements. Specifically, the State should (1) recover $437.3 million in
elevation grant funds from the 15,027 homeowners who did not elevate their homes within 3 years of the grant
agreement date (recommendation 1A) and (2) determine whether the 8,462 homeowners who did not respond
to its monitoring survey used the $245 million in elevation grant funds to elevate their homes and if not,
recover these funds from the noncompliant homeowners (recommendation 1B). In addition, the State should
(1) obtain documentation to validate whether the 553 homeowners who received $16 million in grant funds
elevated their homes or (2) recover these funds from the noncompliant homeowners (recommendation 1C).




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                                                                                           CHAPTER TEN AUDIT RESOLUTION



The State should also enforce its grant review and recovery procedures to ensure that homeowners comply
with the terms of their elevation grant agreements (recommendation 1D) and reimburse the uncollectible
elevation grant funds from non-Federal funds (recommendation 1E).
     On July 24 2014, CPD’s Acting Deputy Assistant Secretary for Grant Programs submitted CPD’s original
revised management decision. OIG concurred with CPD’s management decision on September 29, 2014, with
a final action target date of April 30, 2015. OIG received CPD’s supplement to the revised management decision,
on May 15, 2015, in which CPD’s Deputy Assistant Secretary for Grant Programs stated that she agreed with all of
OIG’s recommendations and presented a plan of action that described CPD’s proposed management decision
revisions. CPD’s draft plan consisted of a series of steps that both HUD and the State would take. However, it also
stated that CPD had not secured the State’s commitment and expected changes to its plan of action.
    On May 27, 2015, OIG informed CPD that its proposed corrective actions differed from the originally
agreed-to decisions by OIG and CPD. Specifically, CPD was expanding its original management decision to
demonstrate compliance with the Road Home Elevation Incentive Program and proposing onsite inspections
of each home to determine “eligible rehabilitation costs” using a cost estimation process. Therefore, CPD’s
new proposal would require additional revised management decisions.
    On August 25, 2015, OIG received CPD’s significantly revised management decisions for all of OIG’s original
recommendations. Within this decision, CPD proposed a number of actions that differed from OIG’s original
recommendations. These actions included (1) allowing the State to establish an alternative method of documenting
Road Home compliance; (2) allowing the State to establish the payment of interim housing expenses as an eligible
expense; and (3) requiring the State to ensure prioritized funding for the elevation of homes in designated flood
hazard areas for low- and moderate-income homeowners, receiving road home grants, who are noncompliant and
cannot demonstrate that they used these funds for another eligible activity.
    On September 28, 2015, OIG informed CPD that it disagreed with its action when it allowed the State to
amend its action plan for the CDBG-DR program. OIG is concerned that 2 years have elapsed since it issued
its report and CPD has not made a determination regarding homeowners’ compliance, or noncompliance and
the amount of ineligible funding that should be returned to HUD. Instead, CPD has nullified the homeowners’
elevation incentive agreements and allowed the State to accept rehabilitation and prior interim housing
expenditures as proof of compliance with the Road Home program.
    OIG remains concerned with HUD’s approval of the State’s action plan amendment 60, which allowed
homeowners who received a grant under Road Home to use those funds to either elevate or rehabilitate their
home. This is contrary to the elevation incentive agreement, which stated that the funds were intended to
assist homeowners to only elevate their home. If the funds were not used for this sole purpose, the funds were
to be repaid to the State.
    OIG believes that CPD has either waived the program requirements or retroactively approved the State’s
amended action plan when grantees fail to comply with the agreed-to program requirements. The first
example of this was CPD’s approval of the State’s amendment 60, which allowed homeowners who received a
grant under Road Home to prove that they used those funds to either elevate or rehabilitate their home, while
the grant was specifically intended for elevation only. In a letter to Governor Jindal on July 26, 2013, CPD’s
Deputy Assistant Secretary for Special Needs Programs stated, “Without this amendment, homeowners who
use Road Home Elevation Incentive Program funds to repair or rebuild their homes would be in violation of
the Elevation Incentive Program and would have to repay those funds to the State.”
    CPD’s August 25, 2015, revised management decision is another example of CPD’s waiving the Road Home
program requirements. Specifically, CPD changed its 2013 documentation requirement for rehabilitation
expenses to now permit an affidavit by the homeowner and a “valuation inspection” by the State to determine
the value of home repairs that were previously performed. This new approach does not consider whether
recipients previously received grants or insurance funds for rehabilitation and could result in a duplication




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SEMIANNUAL REPORT TO CONGRESS



of benefits. While Congress provided considerable flexibility in the use of CDBG-DR funds, it specifically
required HUD to establish procedures that prevent duplication of benefits. This amendment appears to not
meet that requirement.
     The revised management decision also references a new action plan amendment that retroactively adds
interim housing expenses as an eligible expense under amendment 58. Again, recipients may not be required
to provide evidence of actual expenditures and may be credited for up to 2 years at the level of area fair market
rent for interim housing expenses. According to CPD’s Deputy Assistant Secretary for Programs, the effect
of this amendment is to reduce the Road Home noncompliant repayment amount and allow the State to
determine whether there is any remaining unmet need for the Road Home noncomplaint homeowners. This
credit also increases the unmet need of the homeowners.
     Additionally, OIG takes exception to CPD’s use of the Homelessness Prevention and Rapid Re-Housing
Program interim housing expenses waiver to support this amendment because this program was intended
to address specific homeless activities. These homeowners, however, are not homeless, and the use of this
program for that purpose is potentially inappropriate.
     OIG believes that CPD’s proposed alternative methods for documenting compliance 10 years after
entering into the grant agreements are contrary to the original intent to elevate homes to mitigate damage
from future catastrophic flooding. CPD’s revised management decision includes future elevation activity,
policy decisions, and the establishment of a rehabilitation program to use the remaining Road Home program
funds on properties affected by Hurricane Katrina. OIG is concerned that both the management decision and
the closeout plan of action provide that Road Home homeowners who are noncomplaint and cannot prove
that they used Road Home funds for another eligible activity will be eligible for new funding to elevate their
homes on a priority basis. Part of this concern is that these funds may include unobligated or unbudgeted
CDBG funds, which might not become available.
     As a result of the multiple instances of waiving program requirements or retroactively approving amended
action plans, as well as the amount of time that has passed since Hurricane Katrina and the present state of
the properties in the targeted area, OIG is concerned that CPD’s actions weaken HUD’s ability to properly
administer grant agreements and reduce the affected homeowners’ trust and confidence that HUD maintains
the highest standards of integrity, efficiency, and fairness in its grant award process. Therefore, we continue to
disagree with CPD’s revised management decisions.




FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996
HUD did not substantially comply with FFMIA during fiscal year fiscal year 2015.  HUD’s continued noncompliance
is largely due to a reliance on its legacy financial systems (including primary or general ledger accounting systems
and “mixed” or subsidiary systems) and information security weaknesses. While HUD has continued to work
toward financial management system modernization and FFMIA compliance, significant challenges remain.
     FFMIA requires OIG to report in its Semiannual Reports to Congress instances and reasons when an
agency has not met the intermediate target dates established in its remediation plan required by FFMIA. 
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 United States Standard General Ledger at the transaction level.
     At the end of 2015, 5 of 40 HUD financial systems were not in substantial compliance with FFMIA.  These




66
                                                                                                                              CHAPTER TEN AUDIT RESOLUTION



five systems are the (1) Integrated Disbursement and Information System (IDIS), (2) Facilities Integrated
Resources Management System (FIRMS), (3) HUD Procurement System (HPS), (4) Small Purchase System
(SPS), and (5) Ginnie Mae Financial and Accounting System (GFAS).
      Like many other agencies, HUD struggled to modernize its legacy financial systems. 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 (HIFMIP), was based on plans to implement a solution
that replaced two of the applications currently used for core processing. In March 2012, work on HIFMIP was
stopped, and the project was later canceled. HUD spent more than $35 million on the failed HIFMIP project.
In the fall of 2012, HUD started work on the New Core Project to move HUD forward to implement a new core
financial system. The project will transition HUD’s financial management function to a shared service provider,
the U.S. Department of the Treasury, Bureau of Fiscal Service’s Administrative Resource Center.
      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, covering
the time and attendance function, was implemented on February 8, 2015. Release 3 covers migration of the
core financial services that are owned by OCFO. This includes the migration of accounting system services
associated with budget execution, accounting, finance, data warehouse reporting, and an interface solution.
Release 3 was recently implemented, and OIG will perform procedures in fiscal year 2016 to validate the
effectiveness of this implementation. Release 4 is scheduled to address HUD’s grant and loan accounting
systems; however, 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 Ginnie Mae as well as
the migration of the functionality of the Line of Credit Control System (LOCCS). LOCCS is a disbursement
and cash management system that services more than 100 major HUD program areas, 68,000 grantees, and
100,000 projects and disburses more than $20 billion annually. Details regarding phases 2 and 3 have not been
finalized, and there are no scheduled dates for implementation.
      IDIS does not comply with applicable Federal accounting standards or the United States General Ledger
at the transaction level.8 CPD is the system owner of IDIS, and the system is FFMIA noncompliant largely
due to the use of the FIFO method to account for grant expenditures. In addition to completely eliminating
FIFO, HUD will need to add new data elements to the application and configure new automated controls and
accounting logic to remediate this weakness. While CPD has made progress in addressing this issue, updating
the application to specifically identify grants initiated during 2015 and going forward, funding constraints
delayed further remediation. The FIFO elimination project was put on hold until adequate funding was
available, which was substantially approved in August 2015. The halt in work has caused the remediation of
this instance of noncompliance to be delayed.
      The FIRMS application does not comply with Federal financial management systems requirements.
While HUD has 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 2015. While HUD had initially hoped to
remediate the issue by February 2014, resource constraints have resulted in significant delays. The Office




8 The U.S. Department of the Treasury publishes the United States Standard General Ledger supplement to the Treasury Financial Manual, which directs agencies to post
transactions to the financial system in accordance with general ledger accounting requirements.




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SEMIANNUAL REPORT TO CONGRESS



of Administration is working with the Office of the Chief Information Officer on a two-phase plan to replace
FIRMS and transition to an automated property management application hosted by a Federal shared service
provider, the Federal Aviation Administration, during fiscal year 2016.
     HUD’s legacy procurement applications, HPS and SPS, do not comply with Federal financial management
systems requirements. HUD implemented a new procurement system in 2012, the HUD Integrated
Acquisition Management System (HIAMS), to replace the noncompliant HPS and SPS. As of 2015, HPS and
SPS remain operational in order to modify and close out purchase orders and contracting actions that have
not been entered into HIAMS. In fiscal year 2015, the Office of the Chief Procurement Officer was working to
migrate the data in HPS and SPS to the HIAMS Enterprise Acquisition Reporting Tool Data Warehouse. HUD
will be able to report on historical data with this tool. HUD has deactivated a majority of HPS and SPS users,
leaving only those needing continued access to perform contracting closeout functions. To remediate this
weakness, HUD expects to deactivate all HPS and SPS users and decommission HPS and SPS in fiscal year 2016.
     GFAS is not compliant with FFMIA primarily due to four material weaknesses related to Ginnie Mae’s
internal controls over financial reporting and its inability to properly account for its loan portfolio. In addition,
OIG noted weaknesses related to the budgetary accounting module of the GFAS application implemented in
2014. Specifically, due to system configuration issues, large manual adjustments were needed to reconcile
budgetary balances. To remediate its FFMIA noncompliance, Ginnie Mae will need to address the material
weaknesses first identified during 2014, which remain outstanding. Ginnie Mae’s plans to address these
material weaknesses were in process as of September 30, 2015.
     In addition to the specific financial system weaknesses identified above, financial process weaknesses will
need to be remediated for HUD to achieve FFMIA compliance. For example, current process weaknesses include
manual cash management processes implemented by PIH that do not comply with FFMIA requirements. We will
continue to assess HUD’s ongoing efforts to modernize its legacy systems and financial processes.




68
                                                                                   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 Treasury Inspector General for Tax
Administration on September 30, 2015.  There were no recommendations included in the System Review
Report. The report stated:
     In our opinion, the system of quality control for the audit organization of the HUD OIG in effect
     for the year ended March 31, 2015, 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. 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 USPS OIG
HUD OIG conducted an external peer review of the United States Postal Service (USPS), OIG, Office of
Audit, and issued a final report September 22, 2015.  USPS OIG received a peer review rating of pass. 




                                                                                                                69
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 the HUD OIG, 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 the Inspectors General on Integrity and Efficiency and the
Attorney General’s guidelines.




70
                                                                                        APPENDIX 2 AUDIT REPORTS ISSUED




 APPENDIX 2            AUDIT REPORTS ISSUED


INTERNAL REPORTS
AUDIT REPORTS

CHIEF FINANCIAL OFFICER

2015-DP-0006       Weaknesses in the New Core Project Were Not Adequately Addressed, 06/12/2015.

2015-DP-0007       New Core Project: Release 1 of Phase 1 New Core Interface Solution, 09/03/2015.

2015-FO-0005       Compliance With the Improper Payments Elimination and Recovery Act, 05/15/2015.

CHIEF PROCUREMENT OFFICER

2015-FO-0006       The Government Purchase Card Program, 07/07/2015.

COMMUNITY PLANNING AND DEVELOPMENT

                   The Office of Community Planning and Development’s Reviews of Matching Contributions
2015-KC-0002
                   Were Ineffective and Its Application of Match Reductions Was Not Always Correct, 08/11/2015.

DEPUTY SECRETARY

                   HUD Did Not Adequately Implement or Provide Adequate Oversight To Ensure Compliance With
2015-FW-0001
                   Environmental Requirements, 06/16/2015.

HOUSING

                   HUD’s Office of Multifamily Asset Management and Portfolio Oversight Did Not Comply With Its
2015-AT-0002
                   Requirements for Monitoring Management Agents' Costs, 08/21/2015.

                   HUD Did Not Always Provide Adequate Oversight of Its Section 203(k) Rehabilitation Loan
2015-CH-0001       Mortgage Insurance Program, 07/31/2015. Questioned: $1,331,245. Unsupported: $1,318,669.
                   Better use: $1,910,000.

                   HUD’s Claim Payment System Did Not Always Identify Ineligible FHA-HAMP Partial Claims,
2015-LA-0001
                   04/20/2015. Questioned: $22,611,452. Unsupported: $22,507,527.




                                                                                                            71
                                     HUD Did Not Have Effective Controls or Clear Guidance in Place for the FHA-HAMP Partial
   2015-LA-0003                      Claim Loss Mitigation Option, 09/18/2015. Questioned: $508,793. Unsupported: $94,120.
                                     Better use: $88,500,000.

                                     HUD Policies Did Not Always Ensure That HECM Borrowers Complied With Residency
   2015-PH-0004
                                     Requirements, 08/21/2015. Better use: $15,749,277.

   PUBLIC AND INDIAN HOUSING

                                     HUD Did Not Complete an Adequate Front-End Risk Assessment for the Rental Assistance
   2015-AT-0003
                                     Demonstration, 09/03/2015.

                                     HUD Did Not Provide Adequate Oversight of the Section 184 Indian Home Loan Guarantee
   2015-LA-0002
                                     Program, 07/06/2015. Better use: $79,424,436.

   2015-PH-0002                      Overincome Families Resided in Public Housing Units, 07/21/2015. Better use: $104,417,212.

                                     HUD Did Not Adequately Oversee Enhanced Vouchers Administered by New York Agencies,
   2015-PH-0003
                                     07/29/2015. Questioned: $1,122,707. Unsupported: $1,122,707. Better use: $1,244,784.

   AUDIT-RELATED MEMORANDUMS9

   CHIEF FINANCIAL OFFICER

   2015-FO-0801                      Potential Antideficiency Act Violation HOME Investment Partnerships Program, 06/16/2015.

   COMMUNITY PLANNING AND DEVELOPMENT

                                     HUD’s Approval of the City of High Point’s Use of a 15 Percent Margin for Procurement Bids,
   2015-AT-0801
                                     08/25/2015.

                                     HUD's Office of Affordable Housing Programs Could Improve Its Oversight of Participating
   2015-CH-0801                      Jurisdictions' HOME Investment Partnerships Program-Funded Rental Housing Projects' Leases,
                                     06/25/2015.

   PUBLIC AND INDIAN HOUSING

                                     HUD’s Office of Public Housing Investments Could Improve Its Oversight of the Chicago
   2015-CH-0802                      Housing Authority's Exception Payment Standards Under Its Moving to Work Housing Choice
                                     Voucher Program, 08/26/2015.

                                     Very Small and Small Housing Agencies Reviewed Had Common Violations of Requirements,
   2015-FW-0802
                                     09/16/2015.




9 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, to report on the results of a survey, or to report the results of civil or administrative
outcomes from civil fraud efforts.




          72
                                                                                        APPENDIX 2 AUDIT REPORTS ISSUED




EXTERNAL REPORTS
AUDIT REPORTS

COMMUNITY PLANNING AND DEVELOPMENT

                Virgin Islands Community AIDS Resource & Education, Inc., Did Not Administer Its Program in
2015-AT-1004    Accordance With HUD Requirements, 07/02/2015. Questioned: $694,252. Unsupported:
                $681,805.

                The State of Florida, Tallahassee, FL, Did Not Properly Support the Eligibility of Some Funds Used
2015-AT-1006    for the Community Development Block Grant Disaster Recovery Program, 07/27/2015.
                Questioned: $2,324,058. Unsupported: $2,324,058.

                Broward County, Fort Lauderdale, FL, Did Not Properly Administer One of Its Projects and Did
2015-AT-1008    Not Comply With Some Match Requirements, 08/23/2015. Questioned: $78,231. Better use:
                $195,975.

                The Alabama Department of Economic and Community Affairs Administered Its CDBG Disaster
2015-AT-1010
                Recovery Funds for Infrastructure in Accordance With HUD Requirements, 09/28/2015.

                The New Hampshire Housing Finance Authority Administered Its HOME Investment Partnerships
2015-BO-1005
                Program in Accordance with HUD Requirements, 09/30/2015.

                The State of Illinois' Administrator Lacked Adequate Controls Over the State's CDBG Disaster
2015-CH-1009    Recovery Program-Funded Projects, 09/30/2015. Questioned: $1,461,842. Unsupported:
                $1,211,842. Better use: $4,346,358.

                The State of Wyoming Did Not Always Administer Its CDBG Program in Accordance With
2015-DE-1001
                Applicable Requirements, 05/26/2015. Questioned: $871,586. Unsupported: $766,072.

                The City Used Grant Funds for Unsupported Salary and Project Costs and Did Not Properly
2015-DE-1002    Complete Environmental Reviews of Its Projects, 06/30/2015. Questioned: $7,075,682.
                Unsupported: $7,075,682.

                The City Of Colorado Springs Did Not Always Administer Its HOME Program in Accordance With
2015-DE-1003
                Applicable Requirements, 06/30/2015. Questioned: $4,008,239. Unsupported: $2,083,239.

                The City of New Orleans, LA, Did Not Always Comply With Requirements When Administering
2015-FW-1002    Its 2013 Disaster Relief Grant, 06/26/2015. Questioned: $2,556,409. Unsupported: $2,556,409.
                Better use: $4,539,286.

                The City of Moore, OK, Generally Had the Capacity To Expend Its CDBG Disaster Recovery
2015-FW-1003
                Funds, 08/07/2015.

                Veterans First, Santa Ana, CA, Did Not Administer and Spend Its HUD Funding in Accordance
2015-LA-1002
                With HUD Requirements, 04/16/2015. Questioned: $549,488. Unsupported: $530,808.




                                                                                                            73
SEMIANNUAL REPORT TO CONGRESS




                         The Housing Authority of the County of San Bernardino, San Bernardino, CA, Used Shelter Plus
  2015-LA-1004           Care Program Funds for Ineligible and Unsupported Participants, 05/29/2015. Questioned:
                         $3,255,794. Unsupported: $136,346. Better use: $873,428.

                         The City of West Covina, CA, Did Not Administer Its CDBG Program in Accordance With HUD
  2015-LA-1006
                         Rules and Requirements, 08/21/2015. Questioned: $218,324. Unsupported: $218,324.

                         The City of New York, NY, Generally Disbursed CDBG Disaster Recovery Assistance Funds for
  2015-NY-1004
                         Administrative Costs in Accordance With HUD Regulations, 04/23/2015.

                         The City of Paterson, NJ's HOME Investment Partnerships Program Controls Did Not Ensure
  2015-NY-1005           Compliance With Regulations, 04/30/2015. Questioned: $5,747,342. Unsupported:
                         $1,724,843. Better use: $1,684,292.

                         The City of New York, NY, Did Not Always Disburse CDBG Disaster Recovery Funds in
  2015-NY-1007           Accordance With Federal Regulations, 06/12/2015. Questioned: $241,000. Unsupported:
                         $206,000.

                         The Lower Manhattan Development Corporation, New York, NY, Generally Administered CDBG
  2015-NY-1008
                         Disaster Recovery Assistance Funds in Accordance With HUD Regulations, 06/26/2015.

                         County Officials Did Not Always Administer the County's CDBG Program in Accordance With
  2015-NY-1009
                         Program Requirements, 08/11/2015. Questioned: $362,912. Unsupported: $191,999.

                         New York State Did Not Always Administer Its Rising Home Enhanced Buyout Program in
  2015-NY-1010           Accordance With Federal and State Regulations, 09/17/2015. Questioned: $18,289,388.
                         Unsupported: $17,019,088. Better use: $18,763,894.

                         Program Control Weaknesses Lessened Assurance That New York Rising Housing Recovery
  2015-NY-1011           Program Funds Were Always Disbursed for Eligible Costs, 09/17/2015. Questioned:
                         $185,221,340. Unsupported: $182,992,106. Better use: $274,035,899.

                         The State of New Jersey Did Not Comply With Federal Procurement and Cost Principle
  2015-PH-1003           Requirements in Implementing Its Disaster Management System, 06/04/2015. Questioned:
                         $38,512,267. Unsupported: $38,512,267. Better use: $9,061,780.

                         The State of New Jersey Awarded Disaster Funds to Eligible Businesses for Eligible Expenses in
  2015-PH-1004
                         Accordance With HUD and Federal Requirements, 07/20/2015.

                         The State of Maryland Could Not Show That Replacement Homes Complied With the Green
  2015-PH-1005           Building Standard, 09/25/2015. Questioned: $1,928,646. Unsupported: $1,928,646. Better
                         use: $292,910.

                         Snohomish County Generally Administered Its Community Block Grant Entitlement Program in
  2015-SE-1002
                         Accordance With HUD Rules and Regulations, 09/30/2015.




       74
                                                                                      APPENDIX 2 AUDIT REPORTS ISSUED




GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

                LoanCare Did Not Always File Claims for Foreclosed-Upon Properties Held on Behalf of Ginnie
2015-KC-1012
                Mae and Convey Them to FHA in a Timely Manner, 09/30/2015.

HOUSING

                Prudential Huntoon Paige Associates, LTD, Did Not Underwrite and Process a $19.9 Million Loan
2015-AT-1003
                in Accordance With HUD Requirements, 06/30/2015. Questioned: $10,159,961.

                Prudential Huntoon Paige Associates, LTD, Did Not Underwrite and Process a $22 Million Loan
2015-AT-1007
                in Accordance With HUD Requirements, 08/14/2015. Questioned: $15,727,529.

                St. Francis Hospital, Inc., Did Not Comply With the Executed Regulatory Agreement and Federal
2015-AT-1009
                Regulations for the HUD Section 242 Program, 09/03/2015. Questioned: $21,438,700.

                Taliafaro, Inc., a Multifamily Housing Management Agent, Did Not Always Comply With HUD’s
                Requirements or Its Own Policies and Procedures in the Disbursement of Project Funds and
2015-AT-1012
                Collection of Its Fees, 09/30/2015. Questioned: $76,221. Unsupported: $61,119. Better use:
                $2,876.

                Member First Mortgage, LLC, Grand Rapids, MI, Generally Implemented Its Loss Mitigation and
2015-CH-1005
                Quality Control Programs in Accordance With HUD’s Requirements, 09/10/2015.

                First Source Bank, South Bend, IN, Did Not Always Properly Implement Its Loss Mitigation and
2015-CH-1006    Quality Control Programs in Accordance With HUD Requirements, 09/11/2015. Questioned:
                $172,872. Unsupported: $139,487. Better use: $191,074.

                The Cooperative and Management Agent Lacked Adequate Controls Over the Operation of
2015-CH-1010    Carmen-Marine Apartments, Chicago, IL, 09/30/2015. Questioned: $19,866. Unsupported:
                $19,866. Better use: $22,666,717.

                NTFN, Inc., Did Not Always Follow HUD and FHA Requirements, 05/26/2015. Questioned:
2015-FW-1001
                $146,230. Unsupported: $61,419.

                Belle Maison Nursing Home, Hammond, LA, Generally Complied With the Owner and Operator
2015-FW-1006
                Regulatory Agreements and HUD Requirements for Its Section 232 Loan, 09/23/2015.

                Christian Care Home Did Not Always Accurately Maintain Resident Trusts and Accounts
2015-KC-1003
                Receivable, 06/30/2015.

                The Operator Generally Complied With Its Executed Regulatory Agreement and HUD
2015-KC-1004    Requirements But Did Not Properly Establish Its Management Agent and Management
                Agreement, 06/30/2015.




                                                                                                          75
   SEMIANNUAL REPORT TO CONGRESS




                     Berkadia Approved a Mortgage for the Temtor Project That Was Not Economically Sound,
2015-KC-1005
                     08/04/2015. Questioned: $11,312,956.

                     Sutton Irvine Residence, Inc., Irvine, CA, Did Not Operate Its Section 202-Funded Project in
2015-LA-1003         Accordance With HUD Rules and Requirements, 04/24/2015. Questioned: $186,032.
                     Unsupported: $159,843.

                     NOVA Financial & Investment Corporation’s FHA-Insured Loans With Downpayment Assistance
2015-LA-1005         Gifts Did Not Always Meet HUD Requirements, 07/09/2015. Questioned: $383,212. Better use:
                     $48,490,784.

                     The Owner of Coconut Grove Apartments Did Not Always Operate Its HUD-Insured Project in
2015-LA-1008         Accordance With HUD Rules and Requirements, 09/22/2015. Questioned: $72,547.
                     Unsupported: $72,547.

                     loanDepot’s FHA-Insured Loans With Downpayment Assistance Funds Did Not Always Meet
2015-LA-1009
                     HUD Requirements, 09/30/2015. Questioned: $72,210. Better use: $60,060,031.

                     loanDepot’s FHA-Insured Loans With Golden State Finance Authority Downpayment Assistance
2015-LA-1010         Gifts Did Not Always Meet HUD Requirements, 09/30/2015. Questioned: $13,726. Better use:
                     $37,646,644.

                     First Niagara Bank, Lockport, NY, Did Not Always Properly Implement HUD's Loss Mitigation
2015-NY-1006
                     Requirements in Servicing FHA-Insured Mortgages, 05/22/2015. Better use: $5,978,360.

                     Morris Park Did Not Always Comply With Its Regulatory Agreement and HUD Requirements,
2015-NY-1012
                     09/30/2015.

                     The Pennsylvania Housing Finance Agency, Harrisburg, PA, Properly Implemented HUD’s Loss
2015-PH-1006         Mitigation Requirements for Servicing Loans Insured by the Federal Housing Administration,
                     09/28/2015.

                     The Virginia Housing Development Authority, Richmond, VA, Did Not Always Accurately Report
2015-PH-1007
                     Its Servicing Actions in HUD’s Single Family Default Monitoring System, 09/30/2015.

                     Redwood Juniper Tacoma Apartments Did Not Always Administer Its Program in Accordance
2015-SE-1001
                     With HUD Rules and Regulations, 04/14/2015. Questioned: $42,700. Unsupported: $42,700.

LEAD HAZARD CONTROL

                     The City of High Point Did Not Properly Administer Its Lead-Based Paint Hazard Control Grants
2015-AT-1005         in Compliance With Federal Requirements, 07/09/2015. Questioned: $1,081,338.
                     Unsupported: $874,241.




   76
                                                                                       APPENDIX 2 AUDIT REPORTS ISSUED




PUBLIC AND INDIAN HOUSING

                 The Housing Authority of the City of Comer Did Not Comply With Conflict-of-Interest and
2015-AT-1002
                 Procurement Requirements, 04/24/2015. Questioned: $55,322. Unsupported: $33,144.

                 The Housing Authority of the City of Durham, NC, Did Not Always Comply With HUD’s and Its
2015-AT-1011     Own Section 8 Housing Choice Voucher Program Requirements, 09/30/2015. Questioned:
                 $49,565. Unsupported: $34,414.

                 Allocation of Costs to the Waterbury Housing Authority Asset Management Projects Was
2015-BO-1004
                 Generally Supported, 09/30/2015. Questioned: $169,081. Unsupported: $169,081.

                 The Detroit Housing Commission, Detroit, MI, Did Not Always Manage Its Program Projects in
2015-CH-1002
                 Accordance With HUD’s Requirements, 08/26/2015. Questioned: $111,761.

                 Brown County Housing Authority, Green Bay, WI, Did Not Always Ensure That Its Section 8
2015-CH-1003     Housing Choice Voucher Program Files Complied With HUD’s and Its Own Requirements,
                 08/28/2015. Questioned: $53,889. Unsupported: $48,560. Better use: $2,429.

                 The Jefferson Metropolitan Housing Authority, Steubenville, OH, Did Not Always Ensure That Its
                 Section 8 Housing Choice Voucher Program Files Complied With HUD’s and Its Own
2015-CH-1004
                 Requirements, 09/09/2015. Questioned: $446,372. Unsupported: $421,285. Better use:
                 $107,104.

                 The Jefferson Metropolitan Housing Authority, Steubenville, OH, Did Not Adequately Enforce
2015-CH-1007     HUD’s Housing Quality Standards and Its Own Requirements, 09/24/2015. Questioned:
                 $38,522. Better use: $1,946,865.

                 The Housing Authority of the City of South Bend, IN, Did Not Always Comply With HUD
                 Requirements and Its Own Policies Regarding the Administration of Its Section 8 Housing
2015-CH-1008
                 Choice Voucher Program, 09/25/2015. Questioned: $534,902. Unsupported: $411,382. Better
                 use: $829,497.

                 The Mesilla Valley Public Housing Authority, Las Cruces, NM, Miscalculated Housing Choice
2015-FW-1004     Vouchers and Incorrectly Paid Rental Assistance, 08/17/2015. Questioned: $23,618.
                 Unsupported: $21,479. Better use: $22.

                 The Housing Authority of the City of Victoria, TX, Allowed Improper and Unsupported Payments,
2015-FW-1005
                 09/02/2015. Questioned: $782,333. Unsupported: $400,938. Better use: $33,557.

                 The York Housing Authority Did Not Fully Comply With Procurement Requirements and Spent
2015-KC-1006     $21,047 for Ineligible and Unsupported Costs, 08/20/2015. Questioned: $42,295.
                 Unsupported: $30,933.




                                                                                                           77
       SEMIANNUAL REPORT TO CONGRESS




                           The Stromsburg Housing Authority Did Not Fully Comply With Procurement Requirements and
  2015-KC-1007             Spent Funds for Ineligible Expenses, 08/20/2015. Questioned: $45,304. Unsupported:
                           $41,133.

                           The Fairmont Housing Authority Did Not Fully Comply With Procurement Requirements and
  2015-KC-1008
                           Spent Funds for Ineligible Expenses, 09/01/2015. Questioned: $48,902. Unsupported: $47,417.

                           The Pineville Housing Authority Mismanaged Its Public Housing Program, 09/30/2015.
  2015-KC-1009
                           Questioned: $71,006. Unsupported: $69,773.

                           The Anderson Housing Authority Mismanaged Its Public Housing Program, 09/30/2015.
  2015-KC-1010
                           Questioned: $103,785. Unsupported: $100,607.

                           The Lanagan Housing Authority Mismanaged Its Public Housing Program, 09/30/2015.
  2015-KC-1011
                           Questioned: $65,407. Unsupported: $64,185.

                           The Fresno Housing Authority’s Procurement of Goods and Services Did Not Always Comply
  2015-LA-1007
                           With HUD Regulations, 09/11/2015.

                           The Bucks County Housing Authority, Doylestown, PA, Did Not Always Ensure That Its Program
  2015-PH-1002
                           Units Met Housing Quality Standards, 05/05/2015.

                           The Richmond Redevelopment and Housing Authority, Richmond, VA, Did Not Comply With
  2015-PH-1008             HUD Requirements When Procuring Services, 09/30/2015. Questioned: $6,565,897.
                           Unsupported: $6,565,897.

  AUDIT-RELATED MEMORANDUMS10

  COMMUNITY PLANNING AND DEVELOPMENT

                           Veterans First Did Not Administer or Spend Its Supportive Housing Program Grants in
  2015-LA-1802             Accordance With HUD Requirements, 09/24/2015. Questioned: $409,169. Unsupported:
                           $401,086.

                           The City of Richmond, CA, Did Not Adequately Support Its Use of HUD-Funded Expenses for Its
  2015-LA-1803
                           Filbert Phase 1 and Filbert Phase 2 Activities, 09/30/2015. Questioned: $2,379,877.

  GENERAL COUNSEL

                           Final Civil Action: First Tennessee Settled Allegations of Failing To Comply With HUD’s Federal
  2015-AT-1801
                           Housing Administration Loan Requirements, 09/29/2015. Questioned: $142,000,000.

                           Property Owner Debarred for Violating Federal Housing Administration Insurance Requirements
  2015-CF-1805
                           for Multifamily Properties, 09/09/2015.




10 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, to
report on the results of a survey, or to report the results of civil or administrative outcomes from civil fraud efforts.




       78
                                                                                         APPENDIX 2 AUDIT REPORTS ISSUED




                 Taylor, Bean & Whitaker Mortgage Corporation and Home America Mortgage, Inc., Settled Civil
2015-CF-1806     Claims Related to Failing To Comply With FHA Underwriting Requirements, 09/09/2015.
                 Questioned: $596,984.

                 Mason-McDuffie Mortgage Corporation Settled Allegations of Failing To Comply With HUD’s
2015-CF-1807
                 FHA Loan Requirements, 09/28/2015. Questioned: $465,981.

                 Reverse Mortgage Solutions, Inc., Settled Alleged Violations of FHA Loan Requirements Related
2015-CF-1808
                 to Home Equity Conversion Mortgages, 09/28/2015. Questioned: $13,693,035.

                 Iron Mountain Settled Allegations of Making False Disclosures and False Statements Regarding
2015-CF-1809     Discounts and Prices Relevant to Contracts It Had With HUD, 09/29/2015. Questioned:
                 $202,237.

                 Final Civil Action: GTL Investments, Inc., Doing Business as John Adams Mortgage Company,
2015-CH-1801     Settled Allegations of Failing To Comply With HUD’s FHA Loan Requirements, 09/30/2015.
                 Questioned: $4,263,931.

                 Owner of HUD-Insured Multifamily Property Settled Allegations of Authorizing and Paying Out
2015-DE-1802
                 Project Funds for Unallowable Expenses, 09/30/2015. Questioned: $500,000.

                 Final Civil Action, Bank of America, NA, Lender Settled Alleged Violations of Home Equity
2015-PH-1806
                 Conversion Mortgage Program, 08/26/2015. Questioned: $98,492.

                 Final Civil Action, Borrower Settled Alleged Violations of Home Equity Conversion Mortgage
2015-PH-1807
                 Program, 09/16/2015. Better use: $2,500.

HOUSING

                 Opportunity in Living, Centennial, CO’s Participation in the HUD Single Family Property
2015-DE-1801
                 Disposition Program, 08/25/2015.

PUBLIC AND INDIAN HOUSING

2015-BO-1801     The Cambridge Housing Authority Appropriately Handled Exception Payments, 09/16/2015.

                 The Covington Housing Authority, Covington, LA, Generally Ensured That It Followed Federal
2015-FW-1804
                 Requirements When Administering Its Section 8 Housing Choice Voucher Program, 04/08/2015.

                 The Housing Authority of the City of Lockney, Lockney, TX, Did Not Operate Its Public Housing
2015-FW-1805     Programs in Accordance With Requirements, 04/10/2015. Questioned: $37,506. Unsupported:
                 $17,178. Better use: $46,950.

                 The Housing Authority of Bexar County, TX, Did Not Operate Its HUD Public Housing Programs
2015-FW-1806     in Accordance With Regulations and Other Requirements, 06/11/2015. Questioned: $583,756.
                 Unsupported: $580,733. Better use: $2,557.




                                                                                                             79
   SEMIANNUAL REPORT TO CONGRESS




                     The Hot Springs Housing Authority, Hot Springs, AR, Did Not Comply With Federal Regulations
2015-FW-1807         and Other Requirements When Administering Its Public Housing Programs, 08/14/2015.
                     Questioned: $677,459. Unsupported: $662,808.

                     The Duson Housing Authority, Duson, LA, Failed To Administer Its Public Housing Program in
2015-FW-1808
                     Accordance With HUD Requirements, 09/10/2015.

                     The Oakland Housing Authority Complied With HUD Requirements on the Use of Housing
2015-LA-1801
                     Choice Voucher Exception Payment Standards, 04/15/2015.

                     The Chicago Housing Authority, Chicago, IL, Did Not Always Make Payments for Outside Legal
2015-PH-1805         Services in Compliance With Requirements, 04/20/2015. Questioned: $503,744. Unsupported:
                     $503,744.

                     The Housing Authority of the City of Pittsburgh, PA, Did Not Always Make Payments for Outside
2015-PH-1808         Legal Services in Compliance With Applicable Requirements, 09/30/2015. Questioned:
                     $141,164. Unsupported: $141,164.




   80
                                                                                                                APPENDIX 3 TABLES




  APPENDIX 3                TABLES

TABLE A

Audit reports issued before the start of period with no management decision at 9/30/2015
*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 HUD’s Fiscal
                                                                                      See chapter 10, page 53   12/16/2013
 Years 2013 and 2012 (Restated) Financial Statements

 * 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the Improper
                                                                                      See chapter 10, page 54   04/15/2014
 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 Adequately Monitor Central Office        See chapter 10, page 55   06/30/2014
 Cost Centers

 * 2014-KC-0002 The Data in CAIVRS Did Not Agree With the Data in FHA’s
                                                                                      See chapter 10, page 55   07/02/2014
 Default and Claims Systems

 * 2014-NY-1007 The Niagara Falls Housing Authority Did Not Always Administer
                                                                                      See chapter 10, page 56   07/10/2014
 Its HOPE VI Grant Program and Activities in Accordance With HUD Requirements

 * 2014-LA-0005 HUD Did Not Always Recover FHA Single-Family
 Indemnification Losses and Ensure That Indemnification Agreements Were               See chapter 10, page 57   08/08/2014
 Extended

 * 2015-FO-0002 Interim Report on HUD's Internal Controls Over Financial
                                                                                      See chapter 10, page 58   12/08/2014
 Reporting

 * 2015-PH-1803 Final Civil Action Borrower Settled Alleged Violations of Home
                                                                                      See chapter 10, page 60   01/30/2015
 Equity Conversion Mortgage Program

 * 2015-PH-1804 Final Civil Action Court Ordered a Former Executive Director
 of the Philadelphia Housing Authority To Pay Civil Penalties for Violating Federal   See chapter 10, page 60   02/19/2015
 Lobbying Disclosure Requirements and Restrictions

 * 2015-FO-0003 Fiscal Years 2014 and 2013 Financial Statements Audit                 See chapter 10, page 58   02/27/2015

 * 2015-CF-1801 Group One Mortgage, Inc., Settled Allegations of Failing To
                                                                                      See chapter 10, page 61   03/27/2015
 Comply With Federal Housing Administration Underwriting Requirements

 * 2015-CF-1804 Borrower Settled Allegations of Not Complying With the
                                                                                      See chapter 10, page 62   03/27/2015
 Primary Residence Requirement of the Federal Housing Administration Program

 * 2015-SE-1801 Civic Construction, LLC, Settled Allegations of Making False
                                                                                      See chapter 10, page 62   03/30/2015
 Claims to the Seattle Housing Authority




                                                                                                                     81
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           Housing Programs Operations, Tupelo,            07/03/2002   10/31/2002   07/01/2016
                                Mississippi

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

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

                                State of Louisiana, Road Home Program,
                                Funded 418 Grants Coded Ineligible or
         2008-AO-1002                                                           01/30/2008   05/12/2008   Note 1
                                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 Were
         2009-AO-1001                                                           05/05/2009   09/16/2009   Note 1
                                Eligible To Receive Additional Compensation
                                Grants, Baton Rouge, LA

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

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




       82
                                                                                       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 Requirements
2009-CH-1011   and Its Employment Contract Regarding         07/31/2009   11/24/2009   10/01/2015
               Nonprofit Development Activities, Terre
               Haute, IN

               HUD Lacked Adequate Controls to Ensure the
2009-AT-0001   Timely Commitment and Expenditure of          09/28/2009   03/18/2011   Note 2
               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, Did
2010-PH-1008   Not Support More Than $1.9 Million in         05/11/2010   11/03/2010   Note 2
               Expenditures, Washington, DC

               The DuPage Housing Authority
2010-CH-1008   Inappropriately Administered Its Section 8    06/15/2010   10/08/2010   10/30/2015
               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 Report
2011-FO-0003   on HUD's Fiscal Years 2010 and 2009           11/15/2010   08/08/2011   Note 2
               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 Dream       12/27/2010   04/26/2011   03/31/2016
               Downpayment Initiative-Funded Afford-A-
               Home Program, Cleveland, OH




                                                                                            83
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 Program and
  2011-CH-1004                                                          01/31/2011   05/25/2011   Note 2
                        American Dream Downpayment Initiative-
                        Funded First Home/PLUS Program,
                        Indianapolis, IN

                        The DuPage Housing Authority
                        Inappropriately Administered Its Section 8
  2011-CH-1006                                                          03/23/2011   07/28/2011   10/30/2015
                        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   Note 2
                        Comply With HOME Program Requirements
                        and Federal Regulations, East Orange, NJ

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

                        The City of Buffalo Did Not Always Administer
  2011-NY-1010          Its CDBG Program in Accordance With HUD         04/15/2011   01/25/2012   Note 1
                        Requirements, Buffalo, NY

                        The Office of Healthcare Programs Could
  2011-FW-0002          Increase Its Controls To More Effectively       04/26/2011   08/17/2011   Note 2
                        Monitor the Section 232 Program

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

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

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

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




       84
                                                                                         APPENDIX 3 TABLES




REPORT                                                         ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                         DATE         DATE         ACTION

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

               The Pontiac Housing Commission Did Not
               Adequately Administer Its American Recovery
2011-CH-1018                                                   09/30/2011   01/10/2012   03/31/2016
               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   Note 2
               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 Report
2012-FO-0003   on HUD's Fiscal Years 2011 and 2010 Financial   11/15/2011   05/10/2012   04/30/2016
               Statements

               HUD Did Not Adequately Support the
2012-LA-0001   Reasonableness of the Fee-for-Service           11/16/2011   03/27/2012   Note 2
               Amounts or Monitor the Amounts Charged

               The State of Indiana’s Administrator Lacked
               Adequate Controls Over the State’s HOME
2012-CH-1004   Investment Partnerships Program Regarding       02/24/2012   06/22/2012   Note 2
               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

               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   03/31/2016
               Industrial Tract Project in Accordance With
               HUD Requirements, Los Angeles, CA




                                                                                              85
REPORT                                                         ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                         DATE         DATE         ACTION

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

               The City of Phoenix Did Not Always Comply
               With Program Requirements When
2012-LA-1008                                                   06/15/2012   10/15/2012   10/30/2015
               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 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 8 Housing
2012-CH-1012   Choice Voucher Program in Accordance With       09/27/2012   01/07/2013   01/01/2023
               HUD’s and Its Own Requirements, Saginaw,
               MI

               The Flint Housing Commission Did Not
               Always Administer Its Grants in Accordance
2012-CH-1013                                                   09/27/2012   01/24/2013   02/29/2016
               With Recovery Act, HUD’s, and Its Own
               Requirements, Flint, MI

               Review of Controls Over HUD’s Mobile
2012-DP-0005                                                   09/28/2012   12/18/2012   Note 2
               Devices

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

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




   86
                                                                                        APPENDIX 3 TABLES




REPORT                                                        ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                        DATE         DATE         ACTION

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

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

               HUD Policies Did Not Always Ensure That
2013-PH-0002   Borrowers Complied With Program Residency      12/20/2012   04/19/2013   Note 1
               Requirements

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

               The City of Paterson Had Weaknesses in the
2013-NY-1004   Administration of Its Housing Opportunities    02/25/2013   04/15/2013   Note 1
               for Persons with AIDS Program, Paterson, NJ

               Bay Vista Methodist Heights Violated Its
2013-LA-1003   Agreement With HUD When Administering Its      03/14/2013   05/15/2013   Note 1
               Trust Funds, San Diego, CA

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

               Follow-up of the Inspections and Evaluations
               Division on Its Inspection of the State of
2013-IE-0803   Louisiana’s Road Home Elevation Incentive      03/29/2013   09/29/2014   Note 2
               Program Homeowner Compliance (IED-09-
               002, March 2010)

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

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




                                                                                             87
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                                DATE         DATE         ACTION

                        Nassau County Did Not Administer It's HOME
                        Investment Partnerships Program in
  2013-NY-1006                                                          05/13/2013   09/06/2013   Note 1
                        Accordance With HUD Requirements, Nassau
                        County, NY

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

                        HUD Did Not Enforce the Reporting
                        Requirements of Section 3 of the Housing
  2013-KC-0002                                                          06/26/2013   10/24/2013   Note 2
                        and Urban Development Act of 1968 for
                        Public Housing Authorities

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

                        Essex County's HOME Investment
                        Partnerships Program Was Not Always
  2013-NY-1009          Administered in Compliance With Program         08/09/2013   11/05/2013   Note 2
                        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   12/31/2015
                        Control Program Requirements, Phoenix, AZ

                        Economic Development Programs Lacked
  2013-AT-0003          Adequate Controls To Ensure Program             09/03/2013   02/04/2014   12/31/2015
                        Effectiveness

                        FHA Paid Claims for Approximately 4,457
  2013-LA-0002          Preforeclosure Sales That Did Not Meet          09/05/2013   03/31/2014   Note 1
                        Minimum Net Sales Proceeds Requirements

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




       88
                                                                                        APPENDIX 3 TABLES




REPORT                                                        ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                        DATE         DATE         ACTION

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

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

               The City of Hawthorne Did Not Administer Its
               CDBG Program Cost Allocations in
2013-LA-1010                                                  09/20/2013   01/06/2014   Note 2
               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 and        09/24/2013   01/06/2014   11/10/2015
               Reported Funds in Accordance With Program
               Requirements, New Orleans, LA

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

               The City of Auburn Did Not Always Administer
2013-NY-1010   Its CDBG Program in Accordance With HUD        09/26/2013   01/24/2014   Note 2
               Requirements, Auburn, NY

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

               The City of West Palm Beach Did Not Always
2013-AT-1008   Properly Administer Its HOME Program, West     09/30/2013   01/17/2014   Note 2
               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




                                                                                             89
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                  ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                                  DATE         DATE         ACTION

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

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

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

                        Information System Control Weaknesses
  2014-DP-0001                                                            11/07/2013   01/30/2014   Note 2
                        Identified in the Line of Credit Control System

                        The Colfax Housing Authority Did Not
                        Properly Administer Its Programs, Including Its
  2014-FW-1801                                                            11/08/2013   02/05/2014   11/15/2015
                        2009 American Recovery and Reinvestment
                        Act Grant, Colfax, LA

                        The City of Flint Lacked Adequate Controls
  2014-CH-1001          Over Its HOME Investment Partnerships             11/15/2013   03/13/2014   Note 2
                        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 Association
  2014-FO-0001          Fiscal Years 2013 and 2012 Financial              12/06/2013   05/02/2014   Note 2
                        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 Report
  2014-FO-0003          On HUD's Fiscal Years 2013 and 2012               12/16/2013   07/09/2014   Note 3
                        (Restated) Financial Statements

                        The City of Norfolk Generally Failed To Justify
  2014-PH-1001                                                            12/17/2013   04/16/2014   12/31/2015
                        Its CDBG Activities, Norfolk, VA




       90
                                                                                         APPENDIX 3 TABLES




REPORT                                                         ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                         DATE         DATE         ACTION

               The State of Mississippi Did Not Ensure That
               Its Subrecipient and Appraisers Complied With
2014-AT-1004   Requirements, and It Did Not Fully Implement    12/30/2013   04/15/2014   Note 2
               Adequate Procedures for Its Disaster
               Infrastructure Program, Jackson, MS

               The City of Detroit Lacked Adequate Controls
               Over Its Neighborhood Stabilization Program-
2014-CH-1002   Funded Demolition Activities Under the          01/06/2014   05/05/2014   Note 2
               Housing and Economic Recovery Act of
               2008, Detroit, MI

               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 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   10/16/2015
               Agencies To Minimize HUD’s Risk

               Violations Increased the Cost of Housing’s
2014-AT-0001                                                   03/14/2014   07/11/2014   Note 2
               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   Note 2
               108 Loan Guarantee Program, San Juan, PR

               HUD’s Fiscal Year 2013 Compliance With the
2014-FO-0004   Improper Payments Elimination and Recovery      04/15/2014   01/07/2015   Note 3
               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   12/31/2015
               Accordance With Requirements, Wapato, WA

               The Hamtramck Housing Commission Did
               Not Always Administer Its Grant in
2014-CH-1003                                                   04/30/2014   08/08/2014   02/29/2016
               Accordance With Recovery Act, HUD’s, or Its
               Own Requirements, Hamtramck, MI




                                                                                              91
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                  ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                                  DATE         DATE         ACTION

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

                        The County of Northumberland Did Not
                        Administer Its Homelessness Prevention and
  2014-PH-1004                                                            04/30/2014   08/28/2014   Note 2
                        Rapid Re-Housing Program Grant According
                        to Recovery Act Requirements, Sunbury, PA

                        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

                        The City of Huntsville, Community
                        Development Department, Did Not
  2014-AT-1005                                                            05/29/2014   09/23/2014   12/31/2015
                        Adequately Account for and Administer the
                        Mirabeau Apartments Project, Huntsville, AL

                        Potential Antideficiency Act Violations
  2014-FW-0801                                                            05/30/2014   09/22/2014   Note 2
                        Intergovernmental Personnel Act Agreements

                        Financial and Administrative Control
                        Weaknesses Existed in Middlesex County, NJ's
  2014-NY-1005                                                            06/10/2014   07/17/2014   Note 2
                        HOME Investment Partnerships Program,
                        Middlesex County, NJ

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

                        HUD Could Not Support the Reasonableness
                        of the Operating and Capital Fund Programs’
  2014-LA-0004                                                            06/30/2014   10/20/2014   Note 3
                        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 Control Weaknesses
  2014-NY-1006                                                            07/02/2014   08/06/2014   Note 2
                        Need To Be Strengthened, Monmouth
                        County, NJ

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




       92
                                                                                         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 Services in
2014-PH-1007                                                   07/15/2014   09/05/2014   Note 2
               Accordance With HUD Requirements,
               Lebanon, VA

               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 and Ensure
2014-LA-0005                                                   08/08/2014   12/03/2014   Note 3
               That Indemnification Agreements Were
               Extended

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

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

               The South Landry Housing Authority Did Not
               Always Comply With Federal Procurement
2014-FW-1806   and Financial Requirements, Including a         08/19/2014   12/09/2014   12/31/2015
               Procurement Using Recovery Act Funds,
               Grand Coteau, LA

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

               The City of Richmond Did Not Administer Its
2014-LA-1005   NSP in Accordance With Requirements,            08/22/2014   12/19/2014   12/16/2015
               Richmond, CA




                                                                                              93
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                                DATE         DATE         ACTION

                        The State of New Jersey Did Not Fully
                        Comply With Federal Procurement and Cost
  2014-PH-1008                                                          08/29/2014   09/02/2015   10/10/2015
                        Principle Requirements in Implementing Its
                        Tourism Marketing Program

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

                        Miami-Dade County Did Not Always Properly
  2014-AT-1010                                                          09/11/2014   12/11/2014   12/10/2015
                        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   Note 2
                        and HUD Handbooks Pertaining to Owner
                        Advances and Distributions

                        The City of Jersey City's, NJ HOME Investment
                        Partnerships Program Administration Had
  2014-NY-1009                                                          09/18/2014   01/13/2015   01/08/2016
                        Financial and Administrative Controls
                        Weaknesses, City of Jersey City, NJ

                        The Former Owner of Yale Court Apartments
                        Used Project Funds in Violation of the
  2014-FW-1005                                                          09/22/2014   02/19/2015   11/03/2015
                        Regulatory Agreement With HUD,
                        Houston, TX

                        Information System Control Weaknesses
  2014-DP-0006                                                          09/23/2014   12/01/2014   11/26/2015
                        Identified in the Program Accounting System

                        Improvements Are Needed Over
  2014-FW-0005          Environmental Reviews of Public Housing and     09/24/2014   03/17/2015   10/01/2016
                        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 and          09/24/2014   01/20/2015   12/31/2015
                        Self-Sufficiency Requirement

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




       94
                                                                                          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 Procedures Act, and
2014-FW-1006                                                    09/26/2014   03/30/2015   02/18/2016
               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   Note 2
               Sale Program, Jacksonville, FL


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

               The Owner and Former Management Agents
2014-CH-1010   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 FHA Loans
2014-AT-1013                                                    09/30/2014   02/10/2015   Note 2
               and Implementing Its Quality Control
               Program, Brentwood, TN

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

               HUD Did Not Always Provide Adequate
2014-CH-0001   Oversight of Its Property-Flipping Waiver        09/30/2014   03/24/2015   12/31/2015
               Requirements

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




                                                                                               95
SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                 ISSUE        DECISION     FINAL
                        REPORT TITLE
  NUMBER                                                                 DATE         DATE         ACTION

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

                        Complaint Allegations Substantiated - City of
  2014-DE-1802          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 With
  2014-FW-1007                                                           09/30/2014   01/26/2015   10/15/2015
                        Procurement Requirements, or Provide
                        Adequate Oversight of Subrecipients,
                        Jefferson, LA

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

                        HUD Policies Did Not Always Ensure That
  2014-PH-0001          HECM Borrowers Complied With Residency           09/30/2014   01/28/2015   01/26/2016
                        Requirements

  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 09/30/2015

                        The Management of the Housing Authority of
  2015-FW-1801          the City of Taylor Did Not Exercise Adequate     10/02/2014   01/30/2015   01/28/2016
                        Oversight of Its Programs, Taylor, TX

                        Information System Control Weaknesses
  2015-DP-0001          Identified in the Single Family Housing          10/21/2014   12/12/2014   12/01/2015
                        Enterprise Data Warehouse

                        The Rotan Housing Authority Did Not
                        Administer Its Public Housing and Recovery
  2015-FW-1802                                                           10/31/2014   02/20/2015   02/19/2016
                        Act Programs in Accordance With Regulations
                        and Other Requirements, Rotan, TX

                        Audit of the Federal Housing Administration's
  2015-FO-0001          Financial Statements for Fiscal Years 2014 and   11/14/2014   04/14/2015   10/31/2015
                        2013




       96
                                                                                        APPENDIX 3 TABLES




REPORT                                                        ISSUE        DECISION     FINAL
               REPORT TITLE
NUMBER                                                        DATE         DATE         ACTION

               The City of New York Did Not Always Disburse
               CDBG Disaster Recovery Assistance Funds to
2015-NY-1001                                                  11/24/2014   03/23/2015   03/18/2016
               Its Subrecipient in Accordance With Federal
               Regulations, New York, NY

               The Freeport Housing Authority Did Not
               Administer Its Low-Rent Housing and
2015-NY-1002                                                  12/01/2014   03/19/2015   12/31/2015
               Homeownership Programs in Accordance
               With HUD's Regulations, Freeport, NY

               HUD Did Not Always Follow Applicable
               Requirements or Use Best Practices in the
2015-NY-0001                                                  12/02/2014   05/19/2015   10/30/2015
               Procurement and Administration of Its
               Multifamily Servicing Contract

               The Office of the Commissioner for Municipal
               Affairs Needs To Make Improvements in
2015-AT-1001                                                  12/05/2014   04/03/2015   03/31/2016
               Administering Its Section 108 Loan Guarantee
               Program, San Juan, PR

               Interim Report on HUD's Internal Controls
2015-FO-0002                                                  12/08/2014   09/28/2015   Note 3
               Over Financial Reporting

               Office of the Chief Financial Officer Loan
2015-DP-0004                                                  12/09/2014   04/17/2015   11/05/2015
               Accounting System

               Glenbrook Manor Could Not Always Show
               That Project Costs Were Eligible and
2015-BO-1001                                                  12/16/2014   05/21/2015   Note 2
               Supported in Accordance With HUD
               Requirements, Stamford, CT

               Intergovernmental Personnel Act
               Appointment Created an Inherent Conflict of
2015-FW-0801                                                  01/20/2015   05/20/2015   01/04/2016
               Interest in the Office of Public and Indian
               Housing

               HUD Lacked Adequate Oversight To Ensure
               That Public Housing Agencies Complied With
2015-PH-0001                                                  01/30/2015   07/10/2015   10/01/2016
               Federal Lobbying Disclosure Requirements
               and Restrictions

               The County of Beaver Did Not Always
               Administer Its HOME Program in Accordance
2015-PH-1001                                                  01/30/2015   08/31/2015   10/30/2015
               With Applicable HUD and Federal
               Requirements, Beaver Falls, PA




                                                                                             97
       SEMIANNUAL REPORT TO CONGRESS




  REPORT                                                                     ISSUE            DECISION          FINAL
                        REPORT TITLE
  NUMBER                                                                     DATE             DATE              ACTION

                        Rhode Island Housing Did Not Always
  2015-BO-1002          Adequately Support HOME Fund                         02/04/2015       05/21/2015        02/03/2016
                        Expenditures, Providence, RI

                        HUD Subsidized More Than 106,000
  2015-KC-0001                                                               02/13/2015       06/05/2015        10/31/2016
                        Noncompliant Households

                        The Chicago Housing Authority Moving to
  2015-CH-1001          Work Housing Choice Voucher Program,                 02/24/2015       06/10/2015        04/01/2018
                        Chicago, IL

                        Fiscal Year 2014 Review of Information
  2015-DP-0005          Systems Controls in Support of the Financial         02/24/2015       07/02/2015        07/02/2016
                        Statements Audit

                        Audit of the Government National Mortgage
  2015-FO-0003          Association’s Financial Statements for Fiscal        02/27/2015       06/25/2015        Note 3
                        Years 2014 and 2013

                        The State of Rhode Island Did Not Always
  2015-BO-1003          Operate Its NSP in Compliance With HUD               03/04/2015       07/01/2015        11/01/2015
                        Regulations, Providence, RI

                        Breakthrough Living Program Did Not
  2015-KC-1001          Administer Its Program in Accordance With            03/05/2015       05/05/2015        05/06/2016
                        HUD Rules and Regulations, Topeka, KS

                        The City of Minot Did Not Fully Comply With
  2015-KC-1002          Federal and Local Procurement                        03/13/2015       06/29/2015        06/29/2016
                        Requirements, Minot, ND

                        HUD’s Office of Community Planning and
                        Development Did Not Always Pursue
  2015-AT-0001          Remedial Actions but Generally Implemented           03/31/2015       08/28/2015        04/30/2016
                        Sufficient Controls for Administering Its
                        Neighborhood Stabilization Program



AUDITS EXCLUDED:
79 audits under repayment plans
34 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




       98
                                                                                                                             APPENDIX 3 TABLES



TABLE C


Inspector General-issued reports with questioned and unsupported
costs at 9/30/2015 (thousands)

                                                                                  NUMBER
                                                                                                     QUESTIONED          UNSUPPORTED
  AUDIT REPORTS                                                                   OF AUDIT
                                                                                                         COSTS                 COSTS
                                                                                  REPORTS

            For which no management decision had been made
   A1                                                                                      17           1,658,672            1,554,483
            by the commencement of the reporting period

            For which litigation, legislation, or
   A2       investigation was pending at the                                                5              27,333                 5,170
            commencement of the reporting period

            For which additional costs were added
   A3                                                                                       -                  145                     0
            to reports in beginning inventory

   A4       For which costs were added to noncost reports                                   2                1,485                     0

   B1       Which were issued during the reporting period                                  69             535,639               297,401

   B2       Which were reopened during the reporting period                                 0                    0                     0

  SUBTOTALS (A + B)                                                                        93          2,223,274             1,857,054

            For which a management decision was made during
   C                                                                                      2411          1,627,505             1,553,997
            the reporting period

            1) Dollar value of disallowed costs:
                                                                                           812          1,570,099            1,506,341
            	         Due HUD
                                                                                           16              35,983                28,157
            	         Due program participants

            (2) Dollar value of costs not disallowed                                       413              21,423               19,499

            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 been made                                 64             568,436              297,887
    E
            by the end of the reporting period                                      <168>   14
                                                                                                     <538,054>   14
                                                                                                                            <293,078>14



11 Seven audit reports also contain recommendations with funds to be put to better use.
12 Zero audit reports also contain recommendations with funds due program participants.
13 Four audit reports also contain recommendations with funds agreed to by management.
14 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




                                                                                                                                  99
        SEMIANNUAL REPORT TO CONGRESS



TABLE D


Inspector General-issued reports with recommendations that funds be put
to better use at 9/30/2015 (thousands)


                                                                                                      NUMBER
  AUDIT REPORTS                                                                                      OF AUDIT             DOLLAR VALUE
                                                                                                      REPORTS

            For which no management decision had been made by the
   A1                                                                                                        16                   2,153,719
            commencement of the reporting period

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

   A3       For which additional costs were added to reports in beginning inventory                             -                            79

   A4       For which costs were added to noncost reports                                                     0                              0

   B1       Which were issued during the reporting period                                                    31                    783,048

   B2       Which were reopened during the reporting period                                                   0                              0

   SUBTOTALS (A + B)                                                                                        49                   2,938,700

   C        For which a management decision was made during the reporting period                           1215                    499,209

            (1) Dollar value of recommendations that were agreed to by management:
                                                                                                                2                   449,454
            	         Due HUD
                                                                                                              9                      25,547
            	         Due program participants

            (2) Dollar value of recommendations that were not agreed to
                                                                                                            216                      24,208
            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 been made by the end of the                                35                    2,437,637
    E
            reporting period                                                                           < 49 > 17
                                                                                                                               <862,639>17



15 Six audit reports also contain recommendations with questioned costs.
16 One audit report also contains recommendations with funds agreed to by management.
17 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




        100
                                                                                                         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 their 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.




                                                                                                             101
SEMIANNUAL REPORT TO CONGRESS




       HUD OIG TELEPHONE DIRECTORY


       OFFICE OF AUDIT

       HEADQUARTERS OFFICE	         Washington, DC				     202-708-0364



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



       REGION 2		               	   New York, NY				       212-264-4174
       				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			                             404-331-3369
       				Knoxville, TN			                                404-331-3369
       				Miami, FL			                                    305-536-5387
       				San Juan, PR			                                 787-766-5540


       REGION 5			                  Chicago, IL				        312-353-7832
       				Columbus, OH			                                 614-280-6138
       				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




       102
                                                  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				       202-708-5998



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




                                                                 103
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, OK	     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			




104
                                                                                                                            ACRONYMS LIST




ACRONYMS LIST


ACD.........................................................................Accelerated Claims Disposition Program

ARCATS...................................................................Audit Resolution and Corrective Actions Tracking System

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

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

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

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

CHDO......................................................................community housing development organization

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

CWCOT...................................................................Claims Without Conveyance of Title program

DCIA........................................................................Debt Collection Improvement Act of 1996

DHS..........................................................................U.S. Department of Homeland Security

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

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

ERM.........................................................................enterprise risk management

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

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

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

FHIP.........................................................................Fair Housing Initiatives Program

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

FIRMS......................................................................Facilities Integrated Resource Management System

FISMA......................................................................Federal Information Security Modernization Act of 2014

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

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

GFAS........................................................................Ginnie Mae Financial and Accounting System

Ginnie Mae.............................................................Government National Mortgage Association

HAMP......................................................................Home Affordable Modification Program

HECM......................................................................home equity conversion mortgage

HIFMIP....................................................................HUD’s Integrated Financial Management Improvement Project

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




                                                                                                                                    105
SEMIANNUAL REPORT TO CONGRESS




ACRONYMS LIST                                    (CONCLUDED)


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

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

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

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

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

LOCCS.....................................................................Line of Credit Control System

MAP.........................................................................multifamily accelerated processing

NCIS........................................................................New Core Interface Solution

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

OGC.........................................................................Office of General Counsel

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

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

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

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

PFCRA.....................................................................Program Fraud Civil Remedies Act

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

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

SHP..........................................................................Supportive Housing Program

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

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

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

VA.............................................................................U.S. Department of Veterans Affairs




106
                                                                                          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.                             50

Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating
                                                                                                      14-49
to the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with
                                                                                                         53
respect to significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation described in                     Appendix 3,
previous Semiannual Report on which corrective action has not been completed.                      Table B, 96

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the
                                                                                                      14-46
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,
for each report, where applicable, the total dollar value of questioned and unsupported
                                                                                                       71
costs and the dollar value of recommendations that funds be put to better use.

Section 5(a)(7)-summary of each particularly significant report.                                      14-49

Section 5(a)(8)-statistical tables showing the total number of audit reports and the               Appendix 3,
total dollar value of questioned and unsupported costs.                                            Table C, 99

Section 5(a)(9)-statistical tables showing the total number of audit reports and the               Appendix 3,
dollar value of recommendations that funds be put to better use by management.                     Table D, 100

Section 5(a)(10)-summary of each audit report issued before the commencement of the                Appendix 3,
reporting period for which no management decision had been made by the end of the period.          Table A, 81

Section 5(a)(11)-a description and explanation of the reasons for any significant
                                                                                                         62
revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with
                                                                                                         64
which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the
                                                                                                         66
Federal Financial Management Improvement Act of 1996.




                                                                                                              107
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.


If you suspect fraud, contact the hotline.
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.




                                                                 109
                   U.S. DEPARTMENT
                   OF HOUSING
                   AND URBAN
                   DEVELOPMENT



Report Number 74
www.hudoig.gov