oversight

SAR 75 - Semiannual Report to Congress for the period Ending March 31, 2016

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-07-14.

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

OFFICE OF INSPECTOR GENERAL


SEMIANNUAL REPORT TO CONGRESS
 FOR THE PERIOD ENDING MARCH 31, 2016




                                        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
    Integrity
  Accountability
    Courage
      Trust
   Stewardship
 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 October 1, 2015, to March 31, 2016
 AUDIT RESULTS1                                                                                                                     THIS REPORTING PERIOD

 Recommendations that funds be put to better use                                                                                              $1,625,171,302

 Recommended questioned costs                                                                                                                   $317,873,413

 Collections from audits                                                                                                                         $7,192,078

 Administrative sanctions                                                                                                                                0

 Civil actions                                                                                                                                           0

 Subpoenas                                                                                                                                               9

 Personnel action                                                                                                                                        0


 INVESTIGATION RESULTS1                                                                                                             THIS REPORTING PERIOD

 Total restitutions and judgments                                                                                                              $138,335,653

 Total recoveries and receivables to HUD programs                                                                                               $34,917,195

 Arrests                                                                                                                                               128

 Indictments and informations                                                                                                                          142

 Convictions, pleas, and pretrial diversions                                                                                                           145

 Civil actions                                                                                                                                          52

 Total administration sanctions                                                                                                                        138

      Suspensions                                                                                                                                       46

      Debarments                                                                                                                                        59

      Limited denial of participation                                                                                                                    0

      Removal from program participation                                                                                                                 5

      Evictions                                                                                                                                          7

      Other2                                                                                                                                            21

 Systemic implication reports                                                                                                                            1

 Search warrants                                                                                                                                        24

 Subpoenas                                                                                                                                             504


 JOINT CIVIL FRAUD RESULTS1                                                                                                         THIS REPORTING PERIOD

 Recoveries and receivables to HUD programs or HUD program participants                                                                          $1,892,000

 Recoveries and receivables for other entities                                                                                                     $51,0003
 Civil actions                                                                                                                                           2
 Administrative sanctions                                                                                                                                1
 Subpoenas                                                                                                                                              50

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 are not duplicated in the audit or investigation results. They include $1.9 million from J. Virgil, Inc./Mac-Clair Mortgage.
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 related 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 $1.6 BILLION IN FUNDS PUT TO

BETTER USE, QUESTIONED COSTS OF

NEARLY $318 MILLION, AND MORE

THAN $7 MILLION IN COLLECTIONS,

RESULTING FROM 36 AUDITS, AND OBTAINED

MORE THAN $138 MILLION IN RECOVERIES

DUE TO OUR INVESTIGATIVE EFFORTS. OF

THIS AMOUNT, NEARLY $35 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. Department           Mae’s current $5.4 billion in nonpooled loan assets. In addition,
                     of Housing and Urban Development (HUD),                   Ginnie Mae continues to improperly account for Federal Housing
                     Office of Inspector General’s (OIG) Semiannual            Administration reimbursable costs as an expense instead of
                     Report to Congress for the first half of fiscal year      capitalizing the costs as an asset. This error resulted in the
                     2016. This report describes the extraordinary             misstatement of assets and net income. In short, Ginnie Mae’s
                     accomplishments of the talented public servants           inadequate record keeping made it impossible for HUD OIG to
                     of HUD OIG. By promoting better stewardship               render an opinion on more than $5 billion in assets using generally
and accountability, HUD OIG staff continues to have a lasting                  accepted accounting principles.
impact on the Department and our communities for the benefit of                     In the IPA audit, HUD OIG discovered that HUD misused the
the American people.                                                           IPA mobility program, which is intended to broaden the experience
    Our mission at HUD OIG is simple. We reinforce HUD’s mission               of temporarily assigned employees from other agencies, who
to create strong, sustainable, inclusive communities and quality,              then return to their organizations. Rather than returning to their
affordable homes for all by conducting and supervising audits,                 agencies or leaving the government, these IPA participants were
evaluations, and investigations of instances of waste, fraud, and              offered permanent jobs at HUD and in many cases, received
abuse in HUD programs and operations. This is done primarily                   improper reimbursement for relocation expenses. These actions
through the Office of Audit, Office of Evaluation, and Office                  violated the spirit and requirements of the program and were
of Investigation within HUD OIG. These offices are supported                   instead used to circumvent Federal hiring rules.
by the Office of Legal Counsel and Office of Management and                         During the first half of fiscal year 2016, the Office of
Technology. Working as a collaborative team, these offices                     Investigation completed 308 investigations to improve
combine their skills and abilities to accomplish the goals and                 departmental operations and address program abuses, recovering
mission of HUD OIG.                                                            more than $138 million. Of this amount, nearly $ 35 million was
    As we looked outward this past 6 months, we also looked                    returned to HUD programs, and the remainder went to victims of
inward to ensure that our own house was in order. This was why we              fraud and abuse. We continue to focus on HUD’s performance
launched the HUD OIG Integrity and Compliance Program (ICP) on                 and accountability in its single-family and public and Indian
October 6, 2015. The ICP demonstrates HUD OIG’s commitment to                  housing programs, both of which are significant concerns for the
the public to maintain its high level of integrity and dedication to make      Department and taxpayers.
values-based ethics the standard for its conduct. A vital first step of             In one investigation, the owner of two fraudulent Indiana
the ICP was to survey our own 620-member staff, which was done                 foreclosure relief companies was sentenced to serve 121 months
in December 2015. We reviewed the survey results with our staff in             incarceration and pay $1.4 million in restitution to affected
an all-hands meeting in March 2016. In conjunction with the Ethics             homeowners. These companies preyed on thousands of distressed
Research Center, we are analyzing the implications of the survey               borrowers through false advertising stating that they had an
results to guide us going forward. This program is discussed in detail         experienced legal team and a 97 percent success rate to help
on the next page of this report.                                               homeowners obtain loan modifications to avoid foreclosure. None
   During the first reporting period of fiscal year 2016, the Office of        of these assertions was true, and many of the homeowners lost their
Audit issued 36 reports. These reports resulted in the following:              homes after paying these companies thousands of dollars.
                                                                                    In another case regarding HUD’s public and Indian housing
•T
  he identification of more than $1.6 billion in funds that could to be put   program, the former assistant commissioner of the New York
 to better use in HUD programs to more appropriately serve its mission,        City Department of Housing Preservation and Development was
•Q
  uestioned costs of nearly $318 million in situations in which               convicted of racketeering conspiracy and bribery for accepting
 it was not clear that these expenditures were for legitimate                  $2.5 million in kickbacks from developers in exchange for awarding
 purposes, and                                                                 contracts for affordable housing over a 10-year period. He was
                                                                               sentenced by the U.S. District Court to 3 years incarceration,
•M
  ore than $7 million in collections for reimbursement to HUD
                                                                               ordered to pay $2.5 million in restitution, and ordered to serve 500
 programs or the U.S. Treasury for situations in which fraud and
                                                                               hours of community service.
 abuse were proven.
                                                                                    In closing, I would like to express my continued gratitude to
 Of these, two audits performed by the Office of Audit during this             Congress and the Department for their sustained commitment
reporting period were especially noteworthy:                                   to improving HUD’s programs. I also want to reiterate my sincere
•A
  n audit of the Government National Mortgage Association’s                   appreciation of the people of HUD OIG for their dedication to the
 (Ginnie Mae) financial statements for fiscal years 2015 and 2014              critically important work that they do. Through their collective
 (restated) and                                                                effort, HUD OIG has achieved its goals and fulfilled its mission and
                                                                               responsibilities to our Nation.
•A
  n audit of HUD’s Intergovernmental Personnel Act (IPA)
 mobility program.
    Since fiscal year 2014, we have not been able to obtain
sufficient, appropriate evidence to express an opinion on Ginnie               David A. Montoya | Inspector General
TRENDING




                          PROGRAM

THE INTEGRITY AND COMPLIANCE PROGRAM: A PROGRESS REPORT
OVERVIEW OF OUR PROGRAM
On October 6, 2015, the Office of Inspector General (OIG) for the U.S. Department of Housing and Urban
Development (HUD) publicly announced the launch of an effort to establish an Integrity and Compliance
Program (ICP). The program is the first of its kind in a Federal OIG. Its purpose is to demonstrate HUD
OIG’s commitment to the public to maintain a high standard of integrity by making values-based ethics the
standard for its conduct. HUD OIG also expects the new ICP to provide a model for the entire Department.

The establishment of the ICP involves several initial steps. These steps include
•	   Information gathering: Interviews with senior leaders and employee focus groups to help HUD OIG
     identify priorities for the ICP;
•	   Culture assessment: A confidential survey to all OIG employees to assess their views about the culture of
     the organization, emerging integrity and compliance risks, and the need for resources;
•	   Analysis of existing program elements: A review of the existing ombudsman, whistleblower, ethics, and
     other related programs to determine their best alignment with the ICP;
•	   Establishment of new resources: Where needed, creating new program activities to support the ICP
     effort;
•	   Revising the code of conduct based on core values: Updating and distributing the existing standards of
     conduct;
•	   Training of all employees: Case-based training, led by managers, on the core values, standards of
     conduct, and process for raising concerns; and
•	   Ongoing communications: Regularly communicating, both internally and externally, OIG’s progress
     with the ICP and its commitment to integrity.
INFORMATION GATHERING AND CULTURE ASSESSMENT
We are eager to share our first developmental steps for the ICP. To help gather information from HUD OIG
employees across the country and to ensure that the ICP adopts best practices in its design, we selected a
third party – the Ethics Research Center (ERC), the research arm of the Ethics and Compliance Initiative – to
provide independent and objective guidance and support to the process.
    Establishment of the ICP began with a thorough examination of our current culture. We asked ERC to
conduct focus groups, review our current materials, and conduct an assessment of all HUD OIG employees
in regard to integrity and compliance in the workplace. Collecting employee opinions about our current
environment and culture-building efforts will help us measure where we are effective and how we can build a
best-in-class ICP. To this end, ERC embarked on gathering information from employees via a survey.
    The HUD OIG Integrity and Compliance survey was available for more than 20 days in December of 2015.
Participation was voluntary, and the survey took no more than 25 minutes to complete. Through ERC, we
were able to ensure that answers to the assessment were kept strictly confidential; only summarized data
were provided to HUD OIG. HUD OIG sent email invitations to every employee. ERC, in turn, collected the
survey responses.
    Although the data are still in the analysis phase, a few results were evaluated. First and foremost,
HUD OIG employees determined core values as integrity, accountability, courage, trust, and stewardship.
Additionally, three quarters of our population (74 percent) elected to participate.


NEXT STEPS
We understand that we are pursuing a unique and ambitious path, and we will need innovative thinking
and new approaches to be successful. This is an exciting program, and we 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 ethics, 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.
TABLE OF CONTENTS
Chapter 1 – Single-Family Programs.............................................................................................................. 14
Audit...........................................................................................................................................................................................14
Investigation.............................................................................................................................................................................14



Chapter 2 – Public and Indian Housing Programs.........................................................................................17
Audit........................................................................................................................................................................................... 17
Investigation.............................................................................................................................................................................18



Chapter 3 – Multifamily Housing Programs.................................................................................................. 20
Audit.......................................................................................................................................................................................... 20
Investigation............................................................................................................................................................................. 21



Chapter 4 – Community Planning and Development Programs................................................................. 22
Audit...........................................................................................................................................................................................22
Investigation.............................................................................................................................................................................24



Chapter 5 – Disaster Recovery Programs...................................................................................................... 25
Audit...........................................................................................................................................................................................25
Investigation............................................................................................................................................................................ 26


Chapter 6 – Other Significant Audits and Investigations............................................................................ 28
Audit.......................................................................................................................................................................................... 28


Chapter 7 – Evaluation Initiatives.................................................................................................................. 31

Chapter 8 – Legislation, Regulations, and Other Directives....................................................................... 36

Chapter 9 – Audit Resolution.......................................................................................................................... 41

Chapter 10 – Whistleblower Ombudsman Program..................................................................................... 58

Appendix 1 – Peer Review Reporting............................................................................................................. 60

Appendix 2 – Audit Reports Issued................................................................................................................. 61

Appendix 3 – Tables.......................................................................................................................................... 65

OIG Telephone Directory................................................................................................................................. 89

Acronyms and Abbreviations List.................................................................................................................... 93

Reporting Requirements.................................................................................................................................. 95
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 1 – SINGLE-FAMILY PROGRAMS

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.

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

          Key program results                Questioned costs            Funds put to better use

     Audit               2 audits                 $359,514                      $696,185



REVIEW OF HUD’S LOSS MITIGATION PROGRAM
The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
Provident Bank of Iselin, NJ, regarding its servicing of FHA-insured mortgages and its implementation of
HUD’s Loss Mitigation program to determine whether it (1) properly serviced FHA-insured mortgages, (2)
properly implemented HUD’s Loss Mitigation program, (3) accurately reported borrower and loan status data
for the FHA-insured mortgages it serviced, and (4) implemented an effective quality control plan.
     Provident Bank did not adequately implement HUD’s Loss Mitigation program for loans that went into
default.  Specifically, it did not (1) adequately document its loss mitigation efforts for nine loans with original
mortgage amounts of more than $1.9 million, (2) accurately report default status data in HUD’s Single Family
Default Monitoring System, and (3) implement an effective quality control plan.
     OIG recommended that Provident Bank support that its servicing practices were acceptable for seven
active loans identified with mortgages insured by HUD, which could result in more than $696,000 in funds
being put to better use.  Further, HUD should take appropriate administrative actions to indemnify any of
these loans for which it determines that Provident Bank’s servicing practices or forbearance procedures were
inadequate. In addition, Provident Bank should (1) reimburse the HUD FHA insurance fund nearly $360,000
for two loans for which the required loss mitigation options were not made available to the borrower, (2)
implement verification procedures to ensure that information in HUD data systems is accurately reported,
(3) modify its quality control plan to ensure that its loss mitigation policies and procedures are complete, and
(4) objectively evaluate how its policies are written and applied to FHA borrowers to ensure that they follow
HUD FHA regulations and guidelines. (Audit Report:  2016-NY-1001)


INVESTIGATION
PROGRAM RESULTS

          Administrative-civil actions                       92

     Convictions-pleas-pretrial diversions                   53

              Financial recoveries                      $23,648,601




14
                                                                                       CHAPTER 1 SINGLE FAMILY PROGRAMS




BRANCH MANGAGER TO SERVE 41 MONTHS IN PRISON FOR CONSPIRACY
The former branch manager for Phoenix Housing Group, a manufactured housing retailer, was sentenced
in U.S. District Court to 41 months incarceration and 3 years of supervised release and ordered to pay $4.17
million in restitution to FHA, jointly and severally among the defendants. The former branch manager was
also required to pay a separate money judgment of $500,000 to the United States. The sentencing was related
to her earlier guilty plea to conspiracy related to her involvement in a scheme to provide false documents
for the purpose of assisting potential borrowers in obtaining FHA-insured mortgages. HUD OIG, the U.S.
Department of Agriculture OIG, the North Carolina State Bureau of Investigation, the North Carolina
Office of the Commissioner of Banks, and the North Carolina Attorney General’s Office conducted this
investigation.  (Statesville, NC)


MORTGAGE COMPANY OWNER SENTENCED TO PRISON FOR LOAN MODIFICATION SCAM
The owner of two mortgage companies was sentenced in U.S. District Court to 12 months incarceration and
ordered to pay $1.4 million in restitution to the affected homeowners following his May 2015 conviction of
wire fraud and money laundering. The investigation determined that the company made inaccurate and
false claims to victims, leading them to believe that U.S. Mortgage Bailout would be able to achieve a loan
modification for them in exchange for an upfront fee. The investigation identified more than 1,100 victims
from various locations across the country and confirmed at least 64 victims with FHA-insured mortgages,
including 28 with claims paid by HUD totaling $4.99 million. HUD OIG and the Internal Revenue Service,
Criminal Investigations (IRS-CI) conducted this investigation.  (South Bend, IN)


TWO IN PRISON FOR IDENTITIY THEFT IN MORTGAGE INSURANCE PREMIUM
REFUND SCHEME
A facilitator of a scheme to defraud FHA through the theft of upfront mortgage insurance premiums (UFMIP)
was sentenced in U.S. District Court to 30 months incarceration and ordered to pay $562,602 in restitution,
while another facilitator was sentenced to 66 months incarceration and ordered to pay $871,781 in restitution,
related to their convictions of mail fraud, wire fraud, conspiracy, and tax fraud. Of the restitution ordered,
$456,213 is payable to FHA. From August 2010 through January 2012, the conspirators used a HUD Web site
to obtain the names of individuals who were owed an UFMIP, which is normally refunded as part of an FHA
mortgage that is terminated before the duration of the mortgage note. The subjects used stolen personally
identifiable information, sent the information to a HUD FHA contractor, and requested reimbursement. The
subjects received more than 200 refund checks, written to the victims, which they cashed thorough the use
of bank accounts that they registered as money-servicing businesses. HUD OIG, the U.S. Postal Inspection
Service, and IRS-CI conducted this investigation. (Detroit, MI)


LOAN OFFICER SENTENCED FOR WIRE FRAUD
A former loan officer was sentenced in U.S. District Court to 6 months of supervised release and credit for
1 day of time served and ordered to pay $2.3 million in restitution, with $824,000 due to FHA, related to her
conviction of committing wire fraud. The investigation determined that the loan officer participated in
the fraudulent origination of 13 loans, 11 of which were FHA insured, by recruiting straw buyers, falsifying
employment information, and receiving side payment compensation for running credit reports in her
capacity as a loan officer. In addition, the loan officer used her sister’s identity to purchase an FHA-insured
property and paid her $11,000 for the use of her identity and credit. HUD OIG and the Federal Bureau of
Investigation (FBI) conducted this investigation. (Chicago, IL)




                                                                                                                    15
SEMIANNUAL REPORT TO CONGRESS




REAL ESTATE SPECULATOR SENTENCED TO 5 YEARS IN PRISON
A real estate speculator was sentenced in U.S. District Court to 61 months incarceration, followed by 5 years
of supervised release, and ordered to pay $3.36 million in restitution to the U.S. Treasury following his
conviction of conspiracy to commit wire fraud, wire fraud, and aggravated identity theft.  From September
2009 through November 2010, the speculator enticed straw borrowers to purchase properties in Baltimore,
MD, and told them they would not need to provide money toward the closing costs or make the mortgage
payments.  The speculator paid the straw borrowers $5,000 to $8,000 for their role in the transaction.  Further,
the speculator told the straw borrowers that in 3 years, he would sell the houses and they would receive
between 20 and 80 percent of the sales proceeds.  The investigation identified 35 FHA-insured mortgages
affected by the scheme, which caused Cardinal Financial Company to lend approximately $3.8 million in
mortgage loans.  To date, HUD has paid a claim on 15 of the 35 properties, totaling more than $1.6 million.
HUD OIG, the Federal Housing Finance Agency OIG, the Federal Deposit Insurance Corporation, and the FBI
conducted this investigation.  (Baltimore, MD)




16
                                                                              CHAPTER 2 PUBLIC AND INDIAN HOUSING PROGRAMS




CHAPTER 2 – PUBLIC AND INDIAN
HOUSING PROGRAMS

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 resi-
dent 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.


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              9 audits                   $553,444                     $534,983,999



SECTION 8 HOUSING CHOICE VOUCHER PROGRAM
HUD’s Office of Inspector General (OIG) audited the Section 8 Housing Choice Voucher program of the Puerto
Rico Department of Housing in San Juan, PR, to determine whether the Department’s inspection process
adequately ensured that its units complied with HUD’s housing quality standards.
    The Department’s inspections did not ensure compliance with HUD’s housing quality standards.  Of
94 program units inspected, 64 failed to comply with HUD’s minimum housing quality standards, and 35 of
those were in material noncompliance with the standards.  For the 35 units in material noncompliance, the
Department’s inspectors failed to observe or report 166 violations that existed when they conducted their last
inspections.  In addition, 44 inspections were not performed in a timely manner.  As a result, some tenants
lived in inadequately maintained units, and the Department disbursed more than $101,000 in housing
assistance payments and received more than $11,000 in administrative fees for the 35 units in material
noncompliance with HUD standards. 
    OIG recommended that HUD require the Department to (1) reimburse its program more than $112,000
from non-Federal funds for the 35 units that materially failed to meet HUD’s requirements, (2) ensure that all
violations cited for the units failing to meet housing quality standards have been corrected and certify that
the units meet the standards, and (3) improve its quality control inspection program to ensure that all units
meet HUD’s housing quality standards and prevent more than $19.3 million in program funds from being
spent over the next year on units that do not comply with HUD’s requirements. (Audit Report:  2016-AT-1004)



HUD OIG audited the Section 8 Housing Choice Voucher program of the Virgin Islands Housing Authority in
St. Thomas, VI, to determine whether the Authority’s inspection process adequately ensured that its units
complied with HUD’s housing quality standards.




                                                                                                                       17
SEMIANNUAL REPORT TO CONGRESS




    The Authority’s inspections were not adequate for enforcing HUD’s housing quality standards.  Of 65
program units inspected, 62 failed to comply with HUD’s minimum housing quality standards, and 44 of
those were in material noncompliance with the standards.  For the 44 units in material noncompliance, the
Authority’s inspectors failed to observe or report 467 violations that existed when they conducted their last
inspections.  As a result, some tenants lived in inadequately maintained units, and the Authority disbursed
nearly $140,000 in housing assistance payments and received nearly $13,000 in administrative fees for the 44
units in material noncompliance with HUD standards. 
    OIG recommended that HUD require the Authority to (1) reimburse its program more than $152,000 from
non-Federal funds for the 44 units that materially failed to meet HUD’s requirements; (2) ensure that all
violations cited for the units failing to meet housing quality standards have been corrected and certify that
the units meet the standards; and (3) implement adequate policies and procedures, including staff training,
to ensure that all units meet HUD’s housing quality standards to prevent more than $6.2 million in program
funds from being spent over the next year on units that do not comply with HUD’s requirements. (Audit
Report:  2016-AT-1001)



OVERSIGHT OF PUBLIC HOUSING AGENCIES’ DECLARATIONS OF TRUST
HUD OIG audited HUD’s oversight of PHAs’ declarations of trust to determine whether HUD had adequate
oversight of PHAs’ compliance with its declaration of trust requirements.
    HUD did not always ensure that PHAs maintained valid and sufficient declarations of trust for HUD-
assisted properties.  Specifically of the 115 projects reviewed, 2 did not have declarations of trust, and 20 had
declarations of trust with deficiencies that impaired their validity.  Further, OIG was unable to determine
whether the declarations of trust for 47 projects were sufficient.  As a result, HUD’s interests and investments
were not always protected to prevent potential conveyances or encumbrances of public housing property
without HUD approval.  In addition, HUD could provide more than $509 million in operating subsidies over
the next year for projects in which its interests are not protected.
    OIG recommended that HUD require the PHAs to (1) record new declarations of trust for 22 projects to
ensure that HUD’s interests are protected and (2) support that 47 projects have sufficient declarations of trust
that cover all HUD-assisted properties.  OIG also recommended that HUD (1) amend the declaration of trust
form and (2) implement adequate procedures and controls to ensure that PHAs maintain valid and sufficient
declarations of trust that are recorded in public records to prevent HUD-assisted properties from being
conveyed or encumbered. (Audit Report:  2016-CH-0001)


INVESTIGATION
          Administrative-civil actions                      61

     Convictions-pleas-pretrial diversions                  74

              Financial recoveries                      $8,526,536




18
                                                                          CHAPTER 2 PUBLIC AND INDIAN HOUSING PROGRAMS




ASSISTANT COMMISSIONER SENTENCED FOR RECEIVING $2.5 MILLION IN BRIBES
The former assistant commissioner of the New York City Department of Housing Preservation and
Development was sentenced in U.S. District Court to 3 years incarceration, ordered to pay $2.5 million in
restitution to the Department, and ordered to serve 500 hours of community service in connection with his
earlier guilty plea to racketeering, conspiracy, and bribery.  Between January 2000 and October 2011, the
assistant commissioner accepted $2.5 million in bribes from developers in exchange for awarding contracts
while he was responsible for overseeing affordable housing developments across New York City.  HUD OIG,
the Federal Bureau of Investigation (FBI), the Internal Revenue Service, Criminal Investigations (IRS-CI),
the U.S. Department of Labor OIG, and the New York City Department of Investigation conducted this
investigation. (Brooklyn, NY)


CONSULTANT SENTENCED FOR BRIBERY
A consultant was sentenced to 1 year and 1 day imprisonment, followed by 3 years probation, for his
conviction of conspiracy to commit bribery in connection with a program receiving Federal funds.  From
January 2007 through February 2012, the subject, who owned and operated several consultant and finance
contracting businesses in the State of Connecticut, made more than $349,000 in corrupt payments to the
executive director of the West Haven Housing Authority and Four Star Development Company, LLC, which
was owned and controlled by the executive director.  In return, the executive director directed business for
or with the West Haven Housing Authority and its two affiliated instrumentalities to the consultant and his
businesses.  HUD OIG, the FBI, and IRS-CI conducted this investigation. (Hartford, CT)


HOUSING AUTHORITY MANAGER SENTENCED FOR EMBEZZLEMENT
A former site manager at the Wilmington Housing Authority’s Crestview Apartments was sentenced in U.S.
District Court to 1 year and 1 day imprisonment, followed by 3 years of supervised release, and ordered to
pay $190,800 in restitution to the Authority’s insurance carrier in connection with his earlier conviction of
embezzlement.  The manager was also ordered to forfeit a Mercedes-Benz sedan.  From early 2012 through
October 2014, the manager stole more than 700 money orders and checks totaling more than $200,000, which
were remitted by public housing tenants for rent. The manager then converted the checks and money orders
to his personal use. HUD OIG conducted this investigation. (Wilmington, DE)




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SEMIANNUAL REPORT TO CONGRESS




CHAPTER 3 – MULTIFAMILY HOUSING PROGRAMS

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


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

          Key program results                Questioned costs           Funds put to better use

     Audit                3 audits                $9,015                       $105,324



REVIEW OF MULTIFAMILY SECTION 8 HOUSING ASSISTANCE PAYMENTS
HUD’s Office of Inspector General (OIG) audited Homewood Terrace Mutual Homes in Auburn, WA, regarding
its Section 8 housing assistance payments to determine whether Homewood Terrace conducted timely
reexaminations, correctly calculated and requested assistance payments, and verified income information.
     Homewood Terrace did not always conduct timely reexaminations, properly request assistance payments,
or verify income information.  As a result, HUD paid for ineligible and unsupported housing assistance.  In
addition, Homewood Terrace received nearly $72,000 less in assistance payments than it was entitled to receive.
     OIG recommended that HUD require Homewood Terrace to (1) hire, train, and maintain sufficient staff to
adequately perform its housing assistance payment functions; (2) repay HUD from non-Federal funds nearly $6,000
in ineligible housing assistance; (3) perform all past-due reexaminations, determine the correct amount of housing
assistance due to Homewood Terrace, and adjust the next request for assistance to account for these corrections;
and (4) verify the unsupported income amount for the member whose reexamination relied on unverified income
information, reimburse HUD up to more than $3,000 for any amount that remains unsupported, and adjust the next
request for assistance to account for the appropriate amount. (Audit Report:  2016-SE-1001)



OWNER OF MULTIFAMILY PROPERTY SETTLES PROPOSES DEBARMENT
HUD OIG reviewed the bank records of The Retreat at Church Ranch in Westminster, CO, and found that the
owner allegedly made payments for personal expenses from the project’s bank account.  OIG also requested
that HUD pursue appropriate actions against the owner. Although the owner denied HUD’s allegations,
the parties negotiated a settlement in which the owner agreed to pay HUD $500,000 over a 5-year period.
We reported this settlement in final action memorandum 2015-DE-1802 in the prior SAR period. OIG also
requested that HUD pursue appropriate actions against the owner.
    On July 22, 2015, HUD notified the owner of his proposed debarment from future participation in
procurement and nonprocurement transactions, as a participant or principal, with HUD and throughout the
Executive Branch of the Federal Government for an indefinite period.  The owner denied HUD’s allegations. 
However, to avoid the uncertainty of litigation, the parties reached a settlement in which the owner will




20
                                                                         CHAPTER 3 MULTIFAMILY HOUSING PROGRAMS




be debarred from participating in any procurement and nonprocurement transactions with the Executive
Branch of the Federal Government for 5 years. (Audit Memorandum:  2016-DE-1801)

INVESTIGATION
        Administrative-civil actions                     6

   Convictions-pleas-pretrial diversions                 7

           Financial recoveries                       $104,818




PROPERTY MANAGER CHARGED WITH THEFT
The property manager of the Harriet Tubman Terrace Apartments, a project-based multifamily development,
was charged in U.S. District Court with theft of public money and theft or bribery concerning programs
receiving Federal funds. The investigation determined that the property manager allegedly diverted HUD
funds belonging to Harriet Tubman Terrace for personal use. The estimated loss is $300,000. HUD OIG
conducted this investigation. (White Plains, NY)




                                                                                                            21
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 4 – COMMUNIT Y PL ANNING
AND DEVELOPMENT PROGRAMS

The Office of Community Planning and Development (CPD) seeks to develop viable communities by promot-
ing 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                   13 audits4                        $25,402,691                               $18,122,757



The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
the Community Development Block Grant (CDBG) and Section 108 Loan Guarantee programs.

COMMUNITY DEVELOPMENT BLOCK GRANT
HUD OIG audited the City of Jersey City, NJ’s CDBG program to determine whether allegations included in a
complaint had merit and whether City officials had established and implemented adequate controls to ensure
that the City’s CDBG program was administered in compliance with program requirements.
     Some complaint allegations had merit, and others could not be substantiated.  The City’s CDBG program
was not always administered in compliance with program requirements.  Specifically, (1) program income was
not always collected, recorded, or supported; (2) funds were used for unsupported costs; (3) CDBG activities
and the City’s home-ownership program were not administered in compliance with program requirements; (4)
unnecessary drawdowns were made; and (5) the City’s Integrated Disbursement and Information System (IDIS)
information was not accurate or traceable to that in its accounting records.  As a result, (1) more than $12.6
million was not made available for eligible activities; (2) more than $1.6 million and nearly $10,000 were used
for unsupported and ineligible costs, respectively; (3) more than $1.9 million was spent on properties that did
not have recorded mortgages to ensure compliance with program requirements; (4) $148,000 was unsupported
program income; (5) nearly $606,000 was misclassified in IDIS; and (6) there was no assurance that more than
$1.1 million in future Section 108 income would be recorded in IDIS.
     OIG recommended that HUD instruct City officials to (1) reimburse more than $11.5 million in program
income to the City’s CDBG bank account, (2) record Section 108 income of more than $930,000 and program
income of nearly $52,000 in IDIS, (3) provide support for more than $1.8 million in unsupported program
income and costs, (4) record mortgages so that HUD’s interest of more than $1.9 million is protected, (5)
reimburse nearly $111,000 to the CDBG line of credit for ineligible and unreasonable costs, (6) reclassify
nearly $606,000 in IDIS, and (7) strengthen controls to ensure that more than $1.1 million in future Section
108 income will be recorded in IDIS. (Audit Report:  2016-NY-1007)

4T
  he total CPD audits, questioned costs, and funds put to better use amounts include any disaster recovery type audits conducted in the community plan-
 ning and development area (five audits). The writeups for these audits may be shown separately in chapter 5 of this semiannual report.




22
                                                                 CHAPTER 4 COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS




HUD OIG audited the City of Rochester, NY’s CDBG program to determine whether City officials had estab-
lished and implemented adequate controls to ensure that the program was administered in accordance with
applicable requirements.
    City officials had not established and implemented adequate controls to ensure that CDBG funds were
always administered in accordance with applicable requirements.  Specifically, they did not always spend
CDBG funds for eligible and supported costs, draw down and disburse Section 108 loan funds in a timely
manner, make adequate efforts to collect a delinquent float loan, execute a procurement in compliance with
Federal procurement regulations, and adequately monitor subrecipients.  As a result, the City spent CDBG
funds for ineligible and unsupported costs and did not ensure that other funds were spent as intended.
    OIG recommended that HUD instruct City officials to (1) reimburse from non-Federal funds more than
$153,000 spent for ineligible costs, (2) provide documentation for the eligibility of more than $291,000 in
unsupported costs, (3) justify the untimely drawdown and disbursement of more than $6.7 million in Section
108 loan funds, (4) reimburse $1.5 million disbursed for a delinquent float loan through one of the options
identified in HUD regulations, (5) support that a $1.2 million contract was fair and reasonable and that the
sole-source method was appropriate, (6) develop and implement controls and comprehensive procedures to
ensure the proper administration of the CDBG program, and (7) request CDBG program training from HUD.
(Audit Report:  2016-NY-1003)


HUD OIG audited the CDBG program of the City of Baton Rouge, LA, and Parish of East Baton Rouge (City) to
determine whether the City properly administered and adequately documented its CDBG program activities
in accordance with HUD regulations. 
     The City did not always properly administer and adequately document its CDBG program activities
in accordance with HUD regulations.  Specifically, it did not maintain documentation supporting that its
projects met a national objective and did not ensure that subrecipients met agreement terms.  In addition, it
did not follow procurement requirements as it did not always have documentation showing that it performed
independent cost estimates and ensured full and open competition for some contracts, and the contracts did
not include all required provisions.  Further, the City inappropriately used CDBG administrative funds to pay
for other HUD program costs and could not always support how it determined amounts it repaid to the CDBG
program or reconciled costs charged and funds repaid.  As a result, it could not support that it used more
than $1.5 million in accordance with requirements or the cost reasonableness of more than $670,000 spent or
provide HUD with reasonable assurance that it properly used its program funds. 
     OIG recommended that HUD require the City to (1) support or repay more than $2.2 million, (2) amend
its active contracts to include all required contract provisions, (3) immediately stop using CDBG funds
for other program costs, (4) provide a full reconciliation of its administrative expenditure and transfer
transactions and repay any unsupported or ineligible costs identified, (5) develop CDBG program-specific
policies, (6) train its staff, (7) maintain complete files, and (8) update its payroll computer system.  (Audit
Report:  2016-FW- 1001)



SECTION 108 LOAN GUARANTEE
HUD OIG audited the Municipality of Toa Alta, PR’s Section 108 Loan Guarantee program to determine whether
program funds were effectively used to meet a CDBG program national objective and provide the intended
benefits and whether the Municipality complied with loan application, contract, and HUD requirements.
    The Municipality did not ensure that it completed two Section 108 Loan Guarantee activities that showed
signs of slow progress.  As a result, HUD had no assurance that more than $9.5 million disbursed for two Section
108-funded activities met a national objective of the CDBG program and fully provided the intended benefits.




                                                                                                                   23
SEMIANNUAL REPORT TO CONGRESS




     The Municipality used more than $139,000 for ineligible expenditures and did not support the eligibility
of $12,000 in program disbursements.  In addition, it did not (1) comply with environmental requirements, (2)
disburse loan proceeds within the loan agreement timeframe, (3) provide HUD the required loan collateral,
(4) establish a financial management system in accordance with HUD requirements, and (5) ensure that
deposits were fully collateralized.  As a result, HUD lacked assurance that funds were adequately accounted
for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.
     OIG recommended that HUD (1) determine the eligibility of the unsupported Section 108 program costs
and activities that showed signs of slow progress, (2) require the repayment of the ineligible expenditures,
and (3) obtain documentation supporting compliance with environmental requirements. (Audit Report: 
2016-AT-1002)


INVESTIGATION
                  Administrative-civil actions                             7

             Convictions-pleas-pretrial diversions                         9

                       Financial recoveries                           $2,551,019



EXECUTIVE DIRECTOR OF NONPROFIT SENTENCED FOR THEFT
The executive director of Angel Docs, Inc., a nonprofit organization that received a HUD-funded Economic
Development Initiative grant, was sentenced in U.S. District Court to 36 months incarceration. Between
2010 and 2011, the executive director embezzled grant funds, earmarked for her health-care facility, and used
the funds for her personal use. The investigation determined that some of the embezzled funds were used
to purchase vehicles that were then shipped to Nigeria or to make mortgage payments on her nonprofit’s
building. The loss to HUD is $237,500. HUD OIG, the U.S. Department of Health and Human Services OIG,
the New York State Attorney General’s Office, and the New York State Comptroller’s Office conducted this
investigation. (Queens, NY)




24
                                                                                                                          CHAPTER 5 DISASTER RELIEF PROGRAMS




CHAPTER 5 – DISASTER RECOVERY 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 Recovery grants has been closed out, and $44.1 billion
remains active. Of the $44.1 billion in active Disaster Recovery grants, the funds have been allocated nationwide,
with nearly $36.3 billion obligated and $32.3 billion disbursed as of March 31, 2016.

                                                            Funds                       Funds                      Funds
                                                                                                                                          Percentage of
     Disaster                                             allocated                   obligated                  disbursed
                                                                                                                                           funds used
                                                         (in billions)               (in billions)              (in billions)
     Hurricane Sandy                                          $14.2                       $6.6                        $5.2                         37

     Hurricanes Katrina,
                                                              $19.5                      $19.6                       $18.8                        96
     Rita & Wilma

     Hurricanes Ike, Gustav
                                                               $6.1                       $6.0                        $4.7                         77
     & Dolly

     9-11                                                      $3.5                       $3.5                        $3.1                        89

     Other                                                     $0.8                       $0.6                       $0.51                        64



Keeping up with communities in the recovery process can be a challenging position for HUD. HUD’s Office
of Inspector General (OIG) continues to take steps to ensure that the Department remains diligent in assisting
communities with their recovery efforts. 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                     5 audits5                           $2,104,568                                  $300,000



HUD OIG audited the State of Missouri’s Community Development Block Grant Disaster Recovery (CDBG-DR)
program to determine whether the State adequately supported salary distributions for its CDBG-DR grants.
    The State did not correctly allocate salaries to its CDBG-DR grants.  It distributed salaries to its grants
by using distribution percentages based on project listings and employee feedback instead of requiring
employees to report their individual activities on their timesheets, which would have enabled it to determine
the amount of time spent on each activity. 
5 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.




                                                                                                                                                           25
SEMIANNUAL REPORT TO CONGRESS




    OIG recommended that HUD (1) require the State to support more than $1.2 million in unsupported
salary costs for its B-08-DI-29-0001 grant or reimburse HUD from non-Federal funds any portion of that
amount that it cannot support, (2) require the State to support more than $279,000 in unsupported salary
costs for its B-08-DF-29-0001 grant or reimburse HUD from non-Federal funds any portion of that amount
that it cannot support, (3) require the State to implement a detailed payroll tracking system to ensure that
only salaries incurred in administering the CDBG-DR program are charged to its CDBG-DR grants, (4) ensure
that the State receives training on salary distribution methods and documentation requirements for Federal
grants, and (5) monitor the State to ensure that it establishes and implements a new time-keeping system.
(Audit Report:  2016-KC-1001)


HUD OIG audited the State of New York Governor’s Office of Storm Recovery’s administration of the Small
Business Grants and Loans program funded with CDBG-DR funds provided by HUD.  The objectives of the
audit were to determine whether State officials (1) approved and disbursed CDBG-DR funds for the Small
Business Grants and Loans program to assist eligible businesses in accordance with the guidelines estab-
lished under the HUD-approved action plan and amendments and applicable Federal requirements and
(2) established and maintained a financial management system that adequately safeguarded the funds and
prevented misuse.
     State officials (1) did not always adequately verify the eligibility of award recipients and their awarded
funds and (2) did not recapture preliminary award funds disbursed to ineligible businesses in a timely
manner.  As a result, they could not assure HUD that CDBG-DR funds were adequately safeguarded and
disbursed for eligible, reasonable, and necessary expenses and assisted qualified businesses in compliance
with program requirements.
     OIG recommended that HUD instruct State officials to (1) reimburse the State’s line of credit from non-
Federal funds for the more than $272,000 in CDBG-DR funds disbursed to 4 businesses for ineligible costs,
(2) provide documentation to support the nearly $153,000 in unsupported CDBG-DR funds disbursed to
4 businesses, (3) strengthen controls over program operations to ensure that costs charged to the CDBG-
DR program are for eligible activities and supported by all required documentation at the time of the
disbursement, (4) strengthen administrative controls to ensure that ineligibility determinations are reviewed
and approved and recapture procedures are carried out in a timely manner, (5) incorporate and implement
a recapture policy and procedures, and (6) recapture more than $300,000 in CDBG-DR funds disbursed to 35
businesses. (Audit Report:  2016-NY-1006)


INVESTIGATION
          Administrative-civil actions                        0

     Convictions-pleas-pretrial diversions                    5

              Financial recoveries                       $235,088




26
                                                                                   CHAPTER 5 DISASTER RELIEF PROGRAMS




COUNTY SUPERVISOR SENTENCED FOR ACCEPTING BRIBES
A county supervisor on the Harrison County Board of Supervisors, who was also a board member for the
Harrison County Utility Authority, was sentenced in U.S. District Court to 60 months incarceration, followed
by 2 years of supervised release, and ordered to pay a $20,000 fine for his conviction of conspiracy to commit
bribery concerning programs receiving Federal funds. The Authority was a recipient of a multi-million-
dollar CDBG-DR grant awarded after the devastation of Hurricane Katrina. As a board member for the
Authority, the county supervisor received kickbacks and bribes from S.H. Anthony Construction, LLC, in
return for his favorable recommendations to persuade other board members to select and award S.H. Anthony
Construction, LLC, contracts associated with the improvements of the Harrison County water, waste, and sewer
infrastructure. HUD OIG, the Federal Bureau of Investigation (FBI), the Internal Revenue Service, Criminal
Investigations, and the Mississippi State Auditor’s Office conducted this investigation. (Gulfport, MS)


CONTRACTOR PLEADS GUILTY TO CONSPIRACY TO COMMIT FRAUD
The owner of a lumber company pled guilty in U.S. District Court to conspiracy to commit wire and mail
fraud.  From 2007 through November 2015, the contractor conspired with his employees and several public
officials to fraudulently obtain $708,386 from the New York City Housing Authority, the New York City
Department of Corrections, the Philadelphia Housing Authority, Rutgers University, the City of Newark,
the Plainfield Board of Education, the City of Elizabeth, Con Edison, and AMTRAK, through schemes that
included bribery, product substitution, and false billing.  The investigation determined that approximately
$300,000 was fraudulently billed to HUD CDBG and public and Indian housing entities when the company
provided substandard lumber labeled as construction grade.  HUD OIG, the U.S. Attorney’s Office, the FBI,
and AMTRAK OIG conducted this investigation. (Newark, NJ)




                                                                                                                 27
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 6 – 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           $291,745,577                 $1,071,263,037

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



AUDIT OF HUD’S FISCAL YEARS 2015 AND 2014 FINANCIAL STATEMENTS
In accordance with the Chief Financial Officers Act of 1990, as amended, HUD OIG is required to annually
audit HUD’s consolidated financial statements and the stand-alone financial statements of the Federal
Housing Administration (FHA) and Government National Mortgage Association (Ginnie Mae). The objective
of the audit was to express an opinion on the fairness of the financial statements in accordance with generally
accepted accounting principles (GAAP).  This report presented the results of OIG’s audit on fiscal years 2015
and 2014 (restated) HUD consolidated financial statements, including its report on HUD’s internal controls
and a test of compliance with applicable laws and regulations.
    OIG expressed a disclaimer of opinion on HUD’s fiscal years 2015 and 2014 (restated) consolidated
financial statements because of the significant effects of certain unresolved audit matters, which restricted
OIG’s ability to obtain sufficient, appropriate evidence to express an opinion.  These unresolved audit matters
relate to (1) HUD’s improper use of cumulative and first-in, first-out budgetary accounting methods of
disbursing community planning and development program funds, (2) $5.4 billion in nonpooled loan assets
from Ginnie Mae’s stand-alone financial statements that OIG could not audit because Ginnie Mae could
not provide adequate support for testing these asset balances, (3) $19.8 billion in Ginnie Mae’s budgetary
resources that OIG could not audit because of inaccurate reporting from its budgetary system, and (4)
improper accounting for HUD’s assets resulting from advances made to public housing agencies and Indian
Housing Block Grant grantees and loans receivable from the Emergency Homeowners’ Loan Program. 
    This audit report contained nine material weaknesses, eight significant deficiencies in internal controls,
and six instances of noncompliance with applicable laws and regulations.  These weaknesses were due to an
inability to establish a compliant control environment, implement adequate financial accounting systems,
retain key financial management staff, and identify appropriate accounting principles and policies.
    OIG’s recommendations regarding each of the components’ findings were made in audit reports 2016-FO-
0001, 2016-FO-0002, and 2016-FO-0003. Most significantly in audit report 2016-FO-0003, OIG recommended
that HUD (1) properly account for all financial transactions occuring from the Office of Public and Indian
Housing’s cash management process in accordance with GAAP and transition as much as $507.5 million in
excess funding, (2) validate grant accrual estimates to ensure reliable and accurate financial reporting, and




28
                                                                     CHAPTER 6 OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS




(3) implement adequate resources and controls to ensure the reliable and accurate reporting of Ginnie Mae’s
budgetary resources. (Audit Reports:  2016-FO-0003 and 2016-FO-0004)



AUDIT OF THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS
2015 AND 2014 FINANCIAL STATEMENTS
This report presented the results of HUD OIG’s audit of Ginnie Mae’s fiscal years 2015 and 2014 (restated)
financial statements, including its report on Ginnie Mae’s internal controls and a test of compliance with
selected provisions of laws and regulations that apply to Ginnie Mae. 
    For the second consecutive year, in fiscal year 2015, OIG was unable to obtain sufficient, appropriate
evidence to express an opinion on the fairness of the $5.4 billion (net of allowance) in nonpooled loan
assets from Ginnie Mae’s defaulted issuers’ portfolio as of September 30, 2015.  Ginnie Mae also continued
to improperly account for FHA’s reimbursable costs as an expense instead of capitalizing them. Further,
in October 2015, Ginnie Mae made $720 million in net restatement adjustments to correct its fiscal year
2014 financial statements, which OIG was unable to review for accuracy and appropriateness due to Ginnie
Mae’s late notification of the adjustments.  The combination of the unresolved issues in fiscal year 2014 and
restatement adjustments made in fiscal year 2015 were both material and pervasive because they impacted
multiple financial statement line items across all of Ginnie Mae’s basic financial statements.  As a result of
the scope limitation in its audit work and the effects of material weaknesses in internal controls, OIG could
not obtain sufficient, appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s fiscal years
2015 and 2014 (restated) statements. Accordingly, OIG did not express an opinion on Ginnie Mae’s fiscal years
2015 and 2014 (restated) financial statements.  A combination of financial management governance issues
contributed to these deficiencies. 
    OIG identified four material weaknesses and one significant deficiency as well as one reportable
noncompliance with selected provisions of laws and regulations that apply to Ginnie Mae.  
    OIG’s audit recommendations were directed toward improving and strengthening Ginnie Mae’s
governance of its financial operations. (Audit Report:  2016-FO-0001)



AUDIT OF THE FEDERAL HOUSING ADMINISTRATION’S FINANCIAL STATEMENTS FOR
FISCAL YEARS 2015 AND 2014
In accordance with the Chief Financial Officers Act of 1990 (Public Law 101-576), as amended, HUD OIG is
required to audit the financial statements of FHA annually. The scope of the audit included FHA’s fiscal years
2015 and 2014 financial statements, which are composed of the balance sheets and the related statements of
net cost and changes in net position and the combined statements of budgetary resources for the years then
ended, and the related notes to the financial statements. This report presented the results of OIG’s audit of
FHA’s fiscal years 2015 and 2014 financial statements, including its report on FHA’s internal controls and a test
of compliance with selected provisions of laws and regulations that apply to FHA. 
    In OIG’s opinion, FHA’s fiscal years 2015 and 2014 financial statements were presented fairly, in all
material respects, in accordance with GAAP.  OIG identified three significant deficiencies and no reportable
noncompliance with selected provisions of laws and regulations that apply to FHA.  
    OIG recommended that FHA develop, document, implement, or strengthen its internal control policies
and procedures to support reliable financial reporting of its receivable, liability for loan guarantee, and
budgetary balances.  Additionally, OIG recommended that FHA bill the appropriate parties for the $291
million in loans receivable that were unsupported as of fiscal yearend. (Audit Report:  2016-FO-0002)




                                                                                                                      29
SEMIANNUAL REPORT TO CONGRESS




REVIEW OF THE INTERGOVERNMENTAL PERSONNEL ACT MOBILITY PROGRAM
HUD OIG audited HUD’s implementation and oversight of the Intergovernmental Personnel Act (IPA or Act)
mobility program to determine whether (1) HUD’s use of IPA agreements met the purpose and intent of the
IPA mobility program, (2) HUD’s policies and procedures related to IPA agreements were adequate to ensure
that its agreements met requirements and established proper oversight and monitoring of the personnel and
activities involved, and (3) HUD used IPA agreements to circumvent other requirements.
     HUD failed to ensure that its IPA agreements met the purpose of the Act because it did not have
sufficient policies and procedures for negotiating, reviewing, and executing agreements and its staff ignored
requirements, altered standard documents, and did not disclose information to decision makers. HUD
abused the IPA mobility program to circumvent other hiring authorities and had no assurance that the
agreements were in its best interest, negotiated at a reasonable cost, or free from conflicts of interest. Also,
HUD did not properly manage assignees.
     OIG recommended that HUD establish an independent, central point of review for IPA agreements to
ensure that they are reasonable, meet requirements, and avoid potential conflicts of interest. Further, the
Office of General Counsel should review all IPA agreements before their effective dates. In addition, HUD
should ensure that all IPA assignees receive required training and that it promptly outprocesses them when
they leave. HUD should also follow procedures to address the payment of nearly $225,000 in ineligible costs
for two invalid IPA agreements and have organizations support or repay nearly $50,000 in unsupported
payments to employers. (Audit Report: 2016-FW-0001)




30
                                                                                        CHAPTER 7 EVALUATION INITIATIVES




CHAPTER 7 – 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 multidisci-
plinary, collaborative approach and multiple methods for gathering and analyzing data. The program evalu-
ation 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
OIG policy. At the end of this 6-month period, OIG had completed seven projects and numerous evaluations had
been initiated. In addition, it had provided a wide range of statistical and analytical support to OIG headquar-
ters and field components and completed two management assistance reviews within OIG.


EVALUATIONS
COMPLETED PROJECTS:
Risk-Based Enforcement Could Improve Program Effectiveness
HUD established the Departmental Enforcement Center (DEC) in 1997 as part of the HUD 2020 reform
initiative, giving DEC independent enforcement authority because programs did not enforce program
requirements. In 2004, DEC lost independent enforcement authority, along with control over funding and
staffing, when it moved from the Deputy Secretary’s office to the Office of General Counsel. DEC, working
with the Office of Multifamily Housing Programs and the Real Estate Assessment Center, had improved both
financial management and housing physical conditions of troubled multifamily properties, making housing
safer for occupants. However, program managers in other programs had been reluctant to enforce program
requirements, limiting DEC’s effectiveness in their programs. OIG recommended that leadership provide DEC
with the authority, independence, and resources to address HUD-wide enforcement risks. (2014-OE-0002)


Buildings at Three Public Housing Authorities Did Not Have Flood Insurance Before
Hurricane Sandy
HUD OIG evaluated HUD’s public housing agencies (PHA) that did not have flood insurance before Hurricane
Sandy to determine why some buildings were not insured as required. Flood insurance is necessary to
ensure that PHAs remain financially viable, continue to provide safe and habitable housing to low-income
residents, and minimize costs to taxpayers for keeping public housing units operational. OIG’s evaluation
identified three PHAs with some buildings in a flood zone that did not have flood insurance before the
October 2012 hurricane. Two PHAs relied upon insurance companies to keep abreast of updates to flood
plain maps to ensure that all buildings were insured, and the other was aware of the need to obtain flood
insurance but did not do so. All sustained some level of flood-related damage as a result of the storm. OIG
made three recommendations designed to help PHAs ensure that all of their buildings in a flood zone are
covered by flood insurance. (2015-OE-0007S)


Comprehensive Strategy Needed To Address HUD Acquisition Challenges
HUD has been working to address acquisition issues since 2001, when the U.S. Government Accountability
Office (GAO) identified acquisition management as a significant management challenge at HUD. An OIG
contractor reported on HUD’s efforts to implement acquisition initiatives. While HUD had made progress
in several areas, including revising and updating HUD’s Procurement Handbook and redesigning its Web



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SEMIANNUAL REPORT TO CONGRESS




site, many improvement initiatives did not follow successful program management practices or meet GAO’s
criteria for achieving an efficient, effective, and accountable acquisition function. The Office of the Chief
Procurement Officer (OCPO) and the program offices did not collaborate or communicate effectively and did
not agree on the best way to address acquisition problems. HUD had not maintained cost and performance
metrics to determine where inefficiencies existed. Program offices experienced challenges working with
OCPO, and some sought alternatives in shared services arrangements with Federal agencies to accomplish
their acquisition objectives. OIG identified successful practices of other Federal agencies that would improve
HUD’s acquisition function by using measurable objectives and goals, building partnerships, engaging
stakeholders, managing change, streamlining functions, and training staff. HUD concurred with all of OIG’s
recommendations. (2015-OE-0004)


Energy Star Building Standard Alternatives
In response to a HUD Office of Community Planning and Development (CPD) request, OIG reviewed State
qualified allocation plans (QAP) to see whether States used other standards, equivalent to Energy Star, which CPD
could count toward achieving a HUD priority goal. States did not include the level of detail on building standards
that CPD anticipated in its QAPs, so OIG was unable to determine with certainty that alternative standards in
any QAP were equivalent to Energy Star certification requirements. OIG referred CPD to the U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Web site and the International Code Council Web site
for information on State and jurisdiction adoption of energy and construction codes. (2015-OE-0005)


Federal Information Security Modernization Act Report
OIG completed its annual evaluation of the HUD cybersecurity program in accordance with the Federal
Information Security Modernization Act (FISMA). The fiscal year 2015 evaluation report provided to Congress,
the Office of Management and Budget (OMB), and the HUD Secretary included 20 recommendations for
improvements to the agency cybersecurity program. Key IT recommendations for improvement addressed the
following FISMA assessment areas: continuous monitoring, incident response, risk management, contractor
systems, and plan of action and milestone programs. HUD has satisfied and closed more than 30 OIG IT
recommendations from the fiscal years 2013 and 2014 FISMA evaluations, enhancing its IT security posture.
OIG and HUD have established an IT recommendation tracking process and quarterly meetings to ensure
continued progress in correcting weaknesses in the HUD cybersecurity program. (2015-OE-0001)


Departmentwide Approach Needed To Address HUD Contractor Employee Security Risks
In 2013, the Office of Investigation issued a report describing weaknesses in HUD’s background investigation
process, which included the suitability of contractor employees to work at HUD. Contractors comprise around half
of HUD’s workforce. An OIG contractor reviewed HUD’s progress in addressing background investigation issues.
The contractor observed that the Personnel Security Division had reduced the backlog of suitability adjudication
cases but on average, it took about four times longer than the Office of Personnel Management standard of 90 days
to complete a case, resulting in several hundred contractor employees working at HUD without a final suitability
determination. The Personnel Security Division had not issued comprehensive policies and procedures or
implemented an automated case management system. Administrative and program offices within HUD that were
responsible for personnel, physical, and information security did not collaborate effectively at the policy-making
level. During the evaluation, the Office of Administration established a security council to identify and address
cross-HUD security issues. OIG identified successful practices of other Federal agencies that would address HUD’s
contractor employee security risks and made recommendations to improve the timeliness and reliability of security
processes. (2015-OE-0008)



32
                                                                                       CHAPTER 7 EVALUATION INITIATIVES




Federal Audit Executive Council IT Subcommittee Continuous Monitoring Maturity
Model for FISMA
As a lead participant, OIG collaborated in a Federal Audit Executive Council (FAEC) IT Subcommittee project
that developed a maturity model for Federal agency information security continuous monitoring (ISCM)
programs. This is the first maturity model to be developed and included in the OIG FISMA assessment
metrics. This model will enable more consistent assessments of agency ISCM programs across all agencies
by the inspector general community. HUD OIG was one of five volunteer OIG offices to develop this model,
which was included in fiscal year 2015 and will be included in all future IG FISMA assessment metrics.


NEW PROJECTS:
Cybersecurity Act of 2015 Review of Agency Security Measures
HUD OIG is initiating a review of agency security measures associated with systems that provide access to
personally identifiable information. The Cybersecurity Act requires inspectors general to assess and report
on specific controls and practices currently in use by the agency in association with these systems by August
2016. These controls and practices focus on system access control, monitoring and detection of exfiltration
and other threats, and oversight of the information security practices of third-party providers associated with
systems containing personally identifiable information. (2016-OE-0008)


Risk Analysis Process for Monitoring of Hurricane Sandy Grants
OIG is assessing the validity of HUD’s risk analysis process for determining what level of monitoring is
required for Hurricane Sandy grantees. HUD policies require performing a risk analysis to target resources
to grantees or activities that pose the greatest risk to the integrity of its programs. Additionally, the risk
analysis helps to determine the type of monitoring—indepth, limited, onsite, remote—that HUD should
perform. The evaluation will determine whether HUD’s risk analysis process identifies those grantees and
activities that represent the greatest vulnerability to fraud, waste, abuse, and mismanagement of Hurricane
Sandy disaster relief and recovery funds. (2016-OE-0004S)


Performance Metrics for Affordable Housing
Since 2012, the Office of Multifamily Housing Programs (Multifamily) has funded interagency agreements
with the Corporation for National and Community Service to fund Volunteers in Service to America to
engage tenants and community members in revitalization efforts to preserve and sustain affordable housing.
Multifamily requested that OIG evaluate the effectiveness of past program performance metrics and whether
they contributed to affordable housing preservation. An OIG contractor is assessing interagency agreement
results to identify lessons learned and to create a framework Multifamily can use to improve metrics to
clearly demonstrate program accomplishments. (2016-OE-0003)


ONGOING PROJECTS:
HUD Web Application Security Evaluation	
OIG is completing a targeted, publicly accessible Web application security evaluation of HUD in support of the
Counsel of the Inspectors General on Integrity and Efficiency’s (CIGIE) Web application Federal cross-cutting
project. The evaluation will assess HUD’s capability to identify and mitigate critical IT vulnerabilities in the
Department’s publicly accessible Web applications. OIG will evaluate technical and programmatic criteria
established from Federal regulations and policies and industry best business practices. This evaluation is being
jointly conducted between the Office of Evaluation and the Office of Audit. (2016-OE-0002)



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SEMIANNUAL REPORT TO CONGRESS




Federal Information Security Modernization Act Evaluation
OIG is conducting the fiscal year 2016 evaluation of the HUD cybersecurity program. Inspectors general
are required to conduct an annual, independent review of agency IT security programs based on U.S.
Department of Homeland Security metrics. These metrics currently consist of 10 topic areas that measure
the agency’s IT security posture. The review is due to OMB by mid-November each year. OIG will provide
a written submission for the U.S. Department of Homeland Security metrics, along with a narrative report
deliverable to OMB, Congress, and the HUD Secretary. (2016-OE-0006)


Hospital Mortgage Insurance Program
Section 242 of the National Housing Act makes mortgage insurance available to facilitate affordable financing
of acute care hospital construction projects. HUD’s Office of Hospital Facilities (OHF) administers the
program, and hospitals in its portfolio range from small rural facilities to some of the Nation’s top urban
teaching hospitals. A recent OIG audit of one of the hospitals in the Section 242 portfolio found that OHF
relied on inaccurate and incomplete financial information to make its decision to approve mortgage
insurance for a supplemental loan for the hospital.6 Because some of the problems uncovered during the
audit involved the process for underwriting hospital mortgage insurance, OIG is assessing whether OHF
issued commitments for mortgage insurance in accordance with the appropriate process and how paper and
electronic application materials are stored and controlled. (2016-OE-0001)


FAEC IT Subcommittee FISMA Metrics Workgroup
HUD OIG has volunteered to participate in the FAEC IT Subcommittee FISMA metrics workgroup.
The scope of the workgroup is to continue developing and identifying key gaps between the U.S. Department
of Homeland Security’s annual FISMA metrics for all Federal Inspectors General and those of the Chief
Information Officer. This group will continue successful work conducted by the FAEC IT Subcommittee
continuous monitoring maturity model group and will develop additional maturity models for each FISMA
topic area to improve the Inspector General FISMA metrics.


CIGIE Web Application Federal Cross-Cutting Project
HUD OIG is leading a CIGIE Federal cross-cutting Web application security project consisting of 18 OIG
offices. The project will examine controls to manage and secure the Federal Government’s publicly
accessible Web applications and assess efforts to control or reduce the number of publicly accessible Web
applications. It is critical to develop methods to efficiently and effectively assess Federal Government
agencies’ Web application security programs, given that Federal agencies face increasing numbers of cyber
attacks while striving to be more accessible to the public. A CIGIE publicly available report will be developed
at the conclusion of this project with an expected completion date of the end of fiscal year 2016.




6 St. Francis Hospital, Inc., Did Not Comply With the Executed Regulatory Agreement and Federal Regulations for HUD Section 242 Program, 2015-AT-1009,
   September 5, 2015




34
                                                                                        CHAPTER 7 EVALUATION INITIATIVES




DATA ANALYTICS
The Office of Evaluation (OE), as a support function for HUD OIG, analyzed HUD internal and housing-
related external data to identify program mismanagement patterns. These factors have led to identifying
internal control weaknesses and detecting potential fraudulent activity, lending to improvements in long-
term OIG planning and strategic decision making. The statistics documented below, as tallied in other places
in the Profile of Performance, represent the significant contributions by the OE to the Offices of Audit and
Investigation.
•	   Completed 170 data and statistical analyses assistance requests.
•	   Quantified nearly $12 billion in statistically estimated monetary impact associated with work
     performed for the annual OIG audit of HUD’s financial statements.
•	   Contributed to the $70 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 and risk-based targeting systems designed to identify high-risk
     multifamily non-health-care project operations and FHA lenders with significant delayed conveyances
     directly associated with ineligible insurance claim payments.
•	   Prototyped and fielded a comprehensive FHA mortgage insurance claim predictive model.
•	   Established a geospatial data analyses capability.
•	   Enhanced its predictive analyses infrastructure by improving data visualization and linkage capabilities,
     and incorporating key HUD single-family, multifamily, and other Federal beneficiary and employment
     income-related data sources.



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 improvements in
management and operations. During this 6-month period, OIG
•	   Performed a special assessment of the headquarters and Joint Civil Fraud Divisions focused on
     administrative procedures;
•	   Issued summaries of management assistance reviews, including an annual summary of reports issued
     in fiscal year 2015 and a 3-year recurring issues summary for the  Offices of Investigation and Audit; and
•	   Reviewed the Region 6, Fort Worth, TX, audit and investigation activities.




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SEMIANNUAL REPORT TO CONGRESS




CHAPTER 8 – 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 more than 900 hours to reviewing 108 issuances. The draft directives consisted of 61 notices, 12 mort-
gagee letters, and 35 other directives. OIG provided comments on 40 (or 37 percent) of the issuances, nonconcurred
on 4, and resolved a nonconcurrence on 1. A summary of selected reviews for this 6-month period is below. Of the 35
other directives, we reviewed 15 final, proposed, and interim rules. Of these 15, OIG provided comments on
2 and had no position on 13. A summary of selected reviews for this 6-month period is 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. The update is part of an FHA initiative
to provide borrowers with greater access to credit and make working with FHA more efficient and effective for
lenders. The Handbook reconciled more than 900 mortgagee letters and other policy guidance into a single,
authoritative document to serve as the definitive guide on all aspects of FHA’s single-family programs. Major
sections of the Handbook became effective September 14, 2015. On March 14, 2016, FHA added new sections and
updated existing sections.
     During this reporting period, OIG reviewed new sections that were added to the Handbook as well as content
updates to existing sections. Specifically, OIG reviewed section IV, Claims and Disposition. The majority of OIG’s
comments for this section focused on clarifying terms and requirements as well as determining OIG’s enforcement
authority. For example, regarding current inspection reports for the reacquisition package prepared to convey
a property to HUD, OIG stated that HUD should clarify who is qualified to complete the inspection review and
reports to support that the property is in conveyance condition. Regarding postclaim reviews, there was a reference
to a 3-year period for postclaim reviews by HUD. OIG stated that language is needed to clarify that this does not
limit enforcement reviews by OIG. Lastly, OIG made a number of comments regarding the requirements specified
in this section to conform with the Code of Federal Regulations (CFR). OIG also reviewed updates made to existing
sections in the Handbook, including the Doing Business with FHA section and the Quality Control, Oversight, and
Monitoring section.
     Changes to HUD/VA [U.S. Department of Veterans Affairs] Addendum Uniform Residential Loan Application
(form HUD-92900-A) and lender-level certifications – On May 1, 2015, HUD published a notice requesting public
comment on its proposed revisions to the addendum. The purpose of the revisions was to (1) differentiate 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 Policy Handbook 4000.1. After the
comment period, HUD removed from loan-level form HUD-92900-A the lender certification related to convictions,
civil judgments, indictments, and terminations of public transactions for cause or default. These requirements
were moved to FHA’s lender certifications for initial approval and annual renewal to assess at the lender level.
     Additionally, in February 2016, OIG reviewed a mortgagee letter (2016-06) announcing the updated form HUD-
92900-A for case assignments on or after August 1, 2016. OIG stated that HUD will need to ensure that the updated
form and the lender certification form are both effective as of August 1, 2016. This is because of the addition of



36
                                                                            CHAPTER 8 LEGISLATION, REGULATION, AND OTHER DIRECTIVES




language on the lender certification form requiring lenders to certify that they have not been involved in fraud or
other serious criminal or civil violations that would call into question their ability to carry out the responsibilities of
the program. This language was previously in form HUD-92900-A.
     Loan-level and annual lender-level certifications – On March 15, 2016, FHA released the latest loan-level and annual
lender-level certifications. The final loan-level certification states that lenders will be held accountable for decisions that
affect the approval decision for FHA insurance. FHA’s Principal Deputy Assistant Secretary (PDAS) issued a statement
regarding the release of the loan- and lender-level certifications. OIG has concerns on a number of items in this release
and wrote a memorandum to the PDAS addressing those concerns. As a preliminary matter, OIG disagreed with the
statement’s assertion that the certifications were final. This is because the lender-level certification was supposed
to be open for a 30-day comment period. OIG would then have an opportunity to comment officially through the
departmental clearance process before the certifications became final. OIG also was concerned regarding the PDAS’
oversimplification of FHA’s overall enforcement policy on lender compliance with FHA program requirements.
     Expanded permissive loss mitigation for home equity conversion mortgages (HECM) and lenders’ optional
extension to submitting a due and payable request – OIG reviewed Mortgagee Letter 2016-07, issued March 30, 2016.
The purpose of this letter is to provide lenders an extension to submit a due and payable request in situations in
which borrowers are behind on the payment of their property taxes or hazard insurance premium. The mortgagee
letter also provides an opportunity for lenders to review, for permissive loss mitigation, HECM borrowers that were
in foreclosure before the issuance of Mortgagee Letter 2015-11. OIG is concerned that the proposed mortgagee letter
does not address unpaid homeowner association (HOA) fees and assessments that could result in HOA liens being
given “super lien” priority status over the first mortgage holder. Approximately 20 States have laws that give HOA
assessment liens and in some cases, give condo association liens super lien status under certain circumstances.
When the HOA lien is given super lien status, FHA is at risk that the HOA super lien can extinguish a first deed of
trust in a foreclosure. The proposed mortgagee letter did not address past-due HOA fees and assessments. It is
OIG’s position that the proposed mortgagee letter should address these issues. The servicing and loss mitigation
section of Handbook 4000.1 addresses unpaid condo or HOA fees. Specifically, it states that if a borrower fails to pay
condo or HOA fees, the servicer must take any action necessary to protect the first lien position of the FHA-insured
mortgage against foreclosure actions brought on by the condo or HOA or any other junior lien holder. However, the
HECM chapter of the updated Handbook has been neither finalized nor published. OIG believes a reference to the
current Handbook language on past-due HOA fees and assessments in the draft mortgagee letter is needed to help
FHA mitigate risk to the insurance fund.
     Methodology for assessing loan quality – On June 18, 2015, FHA published its single-family loan quality
assessment methodology in its online, public forum known as 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. These are (1) identifying a defect, (2) capturing the sources and
causes of a defect, and (3) assessing the severity of a defect. OIG told 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. OIG
is concerned that the general references to “qualitative issues of eligibility” do not clearly identify significant issues
affecting the eligibility of the loan. OIG is also concerned that HUD does not identify the remedy related to each
specific defect based on the assessment. Further, OIG recommended creating a matrix of remedies to outcomes.
However, as of the end of this semiannual period, defect taxonomy had not been implemented.


PUBLIC AND INDIAN HOUSING
Strengthening oversight of overincome tenancy in public housing advance notice of proposed rulemaking – On
February 3, 2016, HUD announced that it is considering rulemaking to ensure that individuals and families
residing in public housing need HUD’s housing assistance. As a result, HUD sought comments from public
housing agencies, other interested parties, and the public. HUD’s consideration of rulemaking was prompted
by OIG audit report 2015-PH-0002, issued on July 21, 2015. OIG proposed changes to the summary section of the



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SEMIANNUAL REPORT TO CONGRESS




notice to accurately describe the audit results, which HUD included in the published document. Additionally,
while OIG recognizes that this notice is a request for input into the development of a regulatory change and a
part of the process, it recommends that HUD direct public housing agencies (PHA) to establish written policies to
reduce the number of overincome families in public housing. This issue was not addressed in the notice.
    Process for PHA voluntary transfers and consolidations of housing choice vouchers, 5-year mainstream
vouchers, project-based vouchers, and project-based certificates – On December 16, 2015, HUD’s Office
of Public and Indian Housing (PIH) issued Notice PIH-2015-22, which applies to PHAs that administer
the Housing Choice Voucher, project-based voucher or certificate, and 5-year mainstream programs. OIG
recommended that HUD consider processing this notice as a regulation with public comment under 24 CFR
Part 10 rather than as a notice. OIG believes this is a significant rule and that communication should also
include making presentations to industry groups and incorporating processing details into a handbook. This
measure would ensure that those affected by the rule have a chance to comment and provide input before
the rule goes into effect. HUD declined to implement OIG’s comment and issued the notice rather than going
through the rulemaking process.
    Streamlining administrative regulations – On March 8, 2016, HUD published the final rule (FR [Federal
Register] 5743-F-03) that streamlines the administrative regulations for public and Indian housing programs
and other HUD programs. This final rule contains several changes to the United States Housing Act of 1937.
For example, it provides a streamlined income determination for any fixed source of income, even if a person
or a family with a fixed source of income also has a nonfixed source of income. Specifically, it requires that,
upon admission to a program, third-party verification of all income be obtained for all family members.
In addition, a full reexamination and redetermination of income must be performed every 3 years. This
provision applies to project-based rental assistance and Sections 202 and 811 programs. HUD also revised
the definition of an extremely low-income family to include the phrase, “a very low-income family,” which is
included in the statutory definition. This provision applies to project-based rental assistance.


OFFICE OF MULTIFAMILY HOUSING PROGRAMS
Changes in mortgage insurance premiums – On January 28, 2016, HUD published its notice, FR–5876–N–02, which
addressed changes in certain multifamily mortgage insurance premiums (MIP). The MIP changes focused on strategic
mission areas, namely affordable housing and green and energy-efficient housing. Under this proposed rate structure,
portfolio and actuarial analysis determined that premium revenues will exceed losses for the foreseeable future. For
multifamily mortgage insurance, the annual rates will be structured in four categories as follows:
•	   Market rate housing – Upfront and annual MIP rates will remain unchanged for all FHA-insured multifamily loan
     types on market rate properties except properties that meet the criteria for green and energy-efficient housing.
•	   Broadly affordable housing – Annual MIP will change from the current rates, which are generally between 45 and
     50 basis points, to 25 basis points for all multifamily FHA-insured loan types that meet certain criteria. All loans
     originated by housing finance agencies under FHA’s section 542(c) risk-sharing program and by qualified partic-
     ipating entities, including Fannie Mae and Freddie Mac under FHA’s section 542(b) risk-sharing program, will be
     eligible for this proposed 25 basis points rate, multiplied by the percentage of risk assumed by FHA. For all others
     to qualify, the property must have Section 8 assistance or another recorded affordability restriction or low-income
     housing tax credits.
•	   Affordable housing – Annual MIP will change from current rates, which are generally between 45 and 70 basis
     points, to 35 basis points for all multifamily FHA-insured loan types.
•	   Green and energy-efficient housing – Annual MIP will change from current rates, which are generally between 45
     and 70 basis points, to 25 basis points for all multifamily FHA-insured loan types. For programs under FHA’s Office
     of Healthcare Programs, including health care facilities and hospital insurance programs, the MIP rates will not
     change.


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                                                                       CHAPTER 8 LEGISLATION, REGULATION, AND OTHER DIRECTIVES




Changes in certain multifamily mortgage insurance premiums and regulatory waiver for the section 542(c) risk-sharing
program – On March 31, 2016, through its notice FR-5876-N-03, HUD announced that the fiscal year 2016 MIP changes
for certain FHA multifamily housing insurance programs, including the 542(b) and 542(c) risk-sharing programs,
are being implemented for commitments issued or reissued beginning April 1, 2016. These new MIP changes reflect
the health of the FHA multifamily portfolio, simplify the rate structure, and show HUD’s commitment to promote its
mission initiatives. This document also provides a regulatory waiver for the 542(c) risk-sharing program to participate
in the fiscal year 2016 MIP changes for the remainder of fiscal year 2016 and for fiscal year 2017.


COMMUNITY PLANNING AND DEVELOPMENT
Section 108 program change – On November 3, 2105, HUD announced that it will collect a fee of 2.58 percent
of the principal amount of new loans guaranteed under the Section 108 Loan Guarantee program. The fee
will offset the credit subsidy costs of the guaranteed loans.
    Community Development Block Grant accounting change – On November 12, 2015, HUD published an
interim final rule that made several changes to the existing Community Development Block Grant program
regulations to better track the use of grant funds and improve accounting procedures. For fiscal year 2015
and succeeding fiscal year grants, grantees are required to track obligations and expenditures of funds for
each specific fiscal year grant, rather than tracking the information cumulatively. The rule also specified that
on September 30 of the fifth fiscal year after the period of availability for obligation or a fixed appropriation
account ends, the U.S. Treasury account will be canceled and any remaining balance will be canceled and
unavailable for obligation or expenditure.
    Change regarding properties in disaster risk reduction area – In response to a request from the State of
Colorado, on November 18, 2015, HUD published a notice authorizing grantees in receipt of Community
Development Block Grant Disaster Recovery funds under Public Law 113-2 to acquire property for an amount
equal to either the property’s predisaster or postdisaster value for the buyout of properties in “Disaster Risk
Reduction Areas,” as defined by criteria established by the grantee, subject to the limitations of the notice.
    The notice also allowed the State of Colorado’s waiver to increase its spending on its tourism industry
from $500,000 to more than $1.2 million. In addition, the revised waiver permits the State to support its
tourism industry and promote travel to the most impacted and distressed counties that had a declared major
disaster in 2011, 2012, or 2013. This waiver includes those States impacted by disasters other than flooding.


FAIR HOUSING AND EQUAL OPPORTUNITY
On July 22, 2015, HUD published a notice of funding availability announcing $39.2 million to be used for the
Fair Housing Initiatives Program (FHIP). On December 29, 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.


HUD ISSUES A NOTICE OF FUNDING WITHOUT OIG CONCURRANCE
Contrary to HUD’s written policies and despite OIG’s strong objection, HUD issued the notice of funding for the
Juvenile Reentry Assistance Program (JRAP) without OIG’s concurrence on November 15, 2015. The HUD Deputy
Secretary did not provide a written justification for overriding OIG’s May 15, 2015, nonconcurrence with JRAP.
    Through JRAP, HUD made nearly $1.8 million available to public housing agencies (PHA) to provide legal
services, including expunging or sealing juvenile and criminal records, for youth up to age 24 who reside in PHAs
or are members of surrounding communities. JRAP was funded through Section 211 of the Second Chance Act
(Public Law 110-199) by the U.S. Department of Justice. The notice of funding availability was sent to OIG through
departmental clearance on May 6, 2015. OIG provided nonconcurrence comments on May 15, 2015.



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SEMIANNUAL REPORT TO CONGRESS




     OIG believes that JRAP goes beyond the scope intended by Section 211, but its primary concern is the program’s
emphasis on expunging or sealing criminal records. OIG also believes that providing funds to PHAs to expunge or
seal criminal records is more appropriately left to legal assistance organizations or law enforcement agencies and
is contrary to HUD’s priority of providing safe housing. Further, OIG is concerned that the grant funds are being
used to expunge the records of those under 24 years of age when there has not been sufficient time to determine the
rehabilitative potential of the offenders.

CONSUMER ADVISORIES AND ALERTS
As a way to assist in fraud prevention, HUD OIG issues consumer advisories and alerts, as well as industry
advisories and bulletins, on its Web site, www.hudoig.gov. The intent of these publications is to provide information
about the risks and illegal activities associated with certain products and services in the housing industry. These
advisories are intended to ensure that industry professionals (mortgage brokers, real estate agents, counselors,
appraisers, etc.) as well as consumers are well informed of the perils associated with emergent frauds and other
illegal activities that jeopardize the integrity of otherwise legitimate housing programs. During this semiannual
period, HUD OIG issued two industry-related bulletins, which are summarized below.
     Reverse Mortgage Refinancing Industry Alert - HUD OIG issued an industry alert to warn lenders, originators,
and sponsors that HUD OIG had identified instances of fraudulent appraisals being used to increase home equity
conversion mortgage (HECM) loan amounts to qualify senior borrowers for HECM refinancing. HUD OIG has
analyzed more than 5,000 HECM refinances over the last several years. An initial analysis shows that a small group
of HECM originators is responsible for a large percentage of potentially fraudulent HECM refinances, generally
within relatively small geographic areas. Analyses of these refinances revealed one of the hallmarks of mortgage
fraud: unexplained, large increases in appraised values in a relatively short period. HUD OIG’s preliminary
investigations have revealed HECM appraisals in which appraisers claim that the property values have increased by
60 to 100 percent, while other properties in the area are appreciating by only 3 to 4 percent.
     It was noted in the alert that underwriters should carefully scrutinize appraisals and appraisal comparables
on all HECM originations, particularly on HECM refinances. They should look for fraud indicators, such as a
large increase in value over a relatively short period from the original HECM; changes in property descriptions,
including square footage and neighborhoods; appraisal comparables located relatively far from the subject property
(particularly in urban areas); and the same appraisers or a small group of appraisers being used by originators on
refinances. Underwriters were also reminded that they are responsible for being familiar with geographic areas in
which properties are located and should question appraised values if they are out of line with the market. HUD OIG
will investigate appraisers, loan officers, originators, and sponsors who engage in fraudulent HECM transactions and
will refer them for criminal or civil prosecution or administrative sanctions as appropriate. Further, FHA plans to
adopt a system to evaluate the quality of appraisals at the time of endorsement to catch these issues earlier.
     Best Practices for PHAs’ Purchase and Travel Card Integrity - HUD expects PHAs to implement strong internal
controls over purchase and travel cards. PHAs must follow Federal regulations as well as applicable State and
local laws. Purchase and travel card abuse is among the issues commonly identified during HUD OIG’s audits and
investigations of PHAs. PHA management and staff entrusted with public funds have spent tens of thousands of
dollars on personal items, such as fine dining, casino gambling, alcohol, cameras, pet supplies, cruises, sporting
events, golf supplies, concert tickets, and manicures. While even small dollar purchases of ineligible items are not
permitted, ignoring them can lead to large losses if continued over a long period. For example, an executive director
in Ohio made $583,000 in fraudulent credit card purchases over a 5-year period. In many cases, violators create
false documents or destroy or alter original receipts to cover up the fraud. OIG’s industry advisory includes best
practices PHAs can implement to help prevent abuses.




40
                                                                                                       CHAPTER 1 XXXXXX




CHAPTER 9 – AUDIT RESOLUTION

In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing and Urban De-
velopment (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 audit reports issued before the start of the period that have no management decision, significantly
revised management decisions, and 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 MARCH 31, 2016
Section 5(a)(10) of the Inspector General Act, as amended, requires that OIG report information concerning
audit reports issued before the semiannual period in which a management decision has not been reached.
During the current reporting period, OIG has 24 reports issued in a prior period in which a management
decision has not been reached.


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 (GAAP). 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 (2C) that HUD PIH implement a cost-effective method for
automating the cash management process to include an electronic interface of transactions to the United
States Standard General Ledger (USSGL).
    HUD issued three proposals to address recommendation 2C. 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.
    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, and a few
months later, OIG followed up with PIH, requesting a meeting to discuss the recommendation; however, PIH did
not respond, and a new proposal had not been made as of March 31, 2016. (Audit Report: 2014-FO-0003)




                                                                                                                   41
SEMIANNUAL REPORT TO CONGRESS




U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, WASHINGTON, DC, IMPROPER
PAYMENTS ELIMINATION AND RECOVERY ACT OF 2010, 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 (AFR). The report also recommended that OCFO conduct
a current billing study and, if not performed annually in future years, report the reason in the AFR 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 AFRs.
     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 on 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 disagreed with OCFO’s management decisions because they disregarded
IPERA reporting requirements and Office of Management and Budget (OMB) guidance and the management
decisions did 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 report on April
20, 2015, and in August 2015, meetings were held with OCFO to discuss what was needed to come to agreement. As of
March 31, 2016, management decisions had been agreed upon for all recommendations except two.
     OCFO submitted a new management decision for one of these recommendations on March 23, 2016. OIG
disagreed with the management decision because OCFO believes its contractor is measuring deceased tenant
improper payments, when OIG’s audit work shows that the contractor is not. OIG met with OCFO on March
29, 2016, to discuss this matter, and OCFO agreed to contact the contractor for clarification. OCFO submitted
a management decision for the other recommendation on March 31, 2016; however, OIG disagrees with
this management decision also. This management decision gives HUD the option to continue reporting its
improper payments in a way that masks the true error rate in certain programs, which is not in compliance
with OMB’s guidance. (Audit Report: 2014-FO-0004)




42
                                                                                        CHAPTER 9 AUDIT RESOLUTION




THE DATA IN CAIVRS DID NOT AGREE WITH THE DATA IN FHA’S DEFAULT AND CLAIMS
SYSTEMS, ISSUE DATE: JULY 2, 2014
HUD OIG audited the Credit Alert Verification Reporting System (CAIVRS) to determine whether the default
and claims data in CAIVRS agreed with the data in the Federal Housing Administration’s (FHA) default
and claim systems. OIG determined that CAIVRS did not contain information on all borrowers’ default,
foreclosure, and claim activity. It would incorrectly return accept codes for more than 260,000 borrowers
who had been in default, foreclosure, or claim within the past 3 years. In addition, CAIVRS did not contain
information for FHA borrowers with claims older than 3 years. Therefore, HUD did not provide other
Federal agencies with sufficient information on FHA borrowers with delinquent Federal debt to meet the
requirements of the Debt Collection Improvement Act of 1996 (DCIA).
     Among other things, OIG recommended that HUD notify the users of CAIVRS that the system may have
incomplete information for FHA delinquent debtors. In its October 17, 2014, management decision, HUD
disagreed in part with this recommendation; however, it agreed to consult with the users of CAIVRS to
determine their need for information on individuals with defaults or claims on FHA loans that do not result
in delinquent Federal debt. On February 2, 2015, HUD submitted another management decision, stating that
CAIVRS was being updated to ensure that it reports all delinquent Federal debt resulting from FHA insurance
claims until such debt is resolved as provided for in DCIA. In connection with this revision to the system,
the Office of Single Family Program Development agreed that it should consult with the users of CAIVRS,
including Treasury, to ensure that they were aware that CAIVRS was being updated and would no longer
report credit worthiness information; for example, the existence of defaults and claims on FHA-insured loans
and 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.  On December 8, 2015, the Deputy Secretary and her staff met with OIG to
discuss the referral. She agreed to review the information and decide how to proceed. OIG is awaiting receipt
of the final management decision. (Audit Report: 2014-KC-0002)




                                                                                                              43
SEMIANNUAL REPORT TO CONGRESS




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 more than $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
believes the funds questioned by OIG are non-Federal cost savings, which could be better used for HOPE
VI-eligible activities in the Center Court neighborhood. OPHI believes there is no authority to require non-
Federal cost savings to be returned to the U.S. Treasury. OIG disagrees with the proposed management
decisions for recommendations 1A, 1B, and 1C and believes that all of the questioned funds should be
returned to 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 the 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 since 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 more than $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. As of March 31, 2016, the
Deputy Secretary had not provided a decision. (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




44
                                                                                              CHAPTER 9 AUDIT RESOLUTION




Disposition (ACD) program or the Claims Without Conveyance of Title (CWCOT) program or loans that went
into default before the indemnification agreement expired but were not in default on the expiration date.
There were a total of 486 loans from January 2004 to February 2014 that had enforceable indemnification
agreements and losses to HUD but were not billed. This condition occurred because HUD’s Financial
Operations Center was not able to determine loss amounts for loans that were part of the ACD program, was
not aware of the CWCOT program, and considered the final default date for billing only. As a result, HUD did
not attempt to recover a loss of $37.1 million for 486 loans that had enforceable indemnification agreements.
    In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that
were streamline refinanced. As a result, HUD incurred losses of more than $373,000 for 5 loans, and 16 loans
had a potential loss to HUD of nearly $1 million. The remaining 43 loans were either terminated or did not go
into delinquency before the indemnification agreement expired, or the agreement did not state that it would
extend to loans that were streamline refinanced.
    OIG rejected three management decisions proposed by the Offices of Single Family Housing and Finance
and Budget because they did not follow the plain language explicitly stated in signed indemnification
agreements. The Offices of Single Family Housing and Finance and Budget disagree with OIG’s
determination that HUD should have billed lenders for FHA loans that either were in default or went into
default during the indemnification agreement period.
    OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on
January 8, 2015. OIG met with 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 OIG’s Office of Legal
Counsel continued discussions.
    Single Family Housing received two legal opinions from OGC, dated January 26, 2015, and February 24,
2015, respectively. Combined, the legal opinions support 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.” 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 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,
which supports OIG’s position.
    OIG has had discussions with OGC, Single Family Housing, and Finance and Budget regarding the
recommendations in question but has not reached agreeable management decisions. On March 31, 2015, OIG
referred the recommendations to the Deputy Secretary for a decision and is awaiting 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 GAAP.  The continued use of the FIFO
method allowed HUD’s financial statements to be materially misstated.


                                                                                                                    45
SEMIANNUAL REPORT TO CONGRESS




    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 GAAP 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 in February 2016. 
However, a gap of approximately $150,000 in funding has remained.  OIG rejected the second 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. Since the rejection, OIG has had discussions with OCFO and CPD to develop agreed-
upon language for management decisions that are related to the material weakness in this area.  However, as
of March 31, 2016, HUD and OIG had not reached an agreement. (Audit Report: 2015-FO-0002)




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 recommendations to (1) correct the financial statement misstatements identified
during the audit and (2) take steps to strengthen Ginnie Mae’s financial management operations.  OIG did
not reach consensus with Ginnie Mae on the necessary corrective actions for 9 of the 20 recommendations. 
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,
OIG rejected management’s proposed corrective actions because OIG believes they are insufficient and
inadequately responsive to the recommendations. OIG’s audit recommendations call for HUD OCFO to
provide oversight of Ginnie Mae’s financial management operations. HUD’s plan of action for providing
oversight of Ginnie Mae lacked specificity. OIG referred this matter to the Deputy Secretary for a decision on
September 21, 2015. (Audit Report: 2015-FO-0003)




THE STATE OF NEW JERSEY DID NOT COMPLY WITH FEDERAL PROCUREMENT AND
COST PRINCIPLE REQUIREMENTS IN IMPLEMENTING ITS DISASTER MANAGEMENT
SYSTEM, ISSUE DATE: JUNE 4, 2015
HUD OIG audited the State of New Jersey’s Community Development Block Grant Disaster Recovery (CDBG-
DR)-funded Sandy Integrated Recovery Operations and Management System (system). OIG conducted the
audit based on the significant amount of funds associated with the system and the importance of the system
to the successful implementation of the State’s entire CDBG-DR grant. OIG’s objective was to determine
whether the State procured services and products for its system in accordance with Federal procurement and
cost principle requirements.
    The OIG report found that 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




46
                                                                                          CHAPTER 9 AUDIT RESOLUTION




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. Also, the State 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 issues identified showed that the State’s process was not equivalent to Federal procurement standards;
therefore, its certification to HUD was inaccurate. The State began taking corrective actions during the audit
and began providing documentation to resolve these deficiencies. HUD needed to assess the documentation
to determine the appropriateness of all contract costs.
     The OIG report included recommendations for HUD’s Deputy Assistant Secretary for Grant Programs to
determine whether the documentation the State provided was adequate to (1) show that the $38.5 million
contract price for the initial 2-year period was fair and reasonable, (2) show that the $1.1 million disbursed
for software was a fair and reasonable price, and (3) support the nearly $468,000 disbursed for wages and
salaries charged to the program by contractors’ employees and if not, direct the State to repay HUD from
non-Federal funds any amount that it cannot support. OIG also recommended that HUD determine whether
the documentation the State provided was adequate to show that the price for the 3 additional option years
was fair and reasonable and if not, direct the State to rebid for the additional option years, thereby putting
$9.1 million to better use. OIG further recommended that HUD direct the State to update its procurement
processes and standards to ensure that they are fully aligned with applicable Federal procurement and cost
principle requirements.
     The Deputy Assistant Secretary for Grant Programs provided proposed management decisions for all
of the recommendations. OIG concurred with the proposed management decision for recommendation
1D. However, for recommendations 1A, 1B, 1C, and 1E, HUD maintains that it has an ongoing disagreement
with OIG regarding the applicability of the procurement regulations at 24 CFR 85.36(b) through (i) to State
CDBG-DR grantees. HUD also disagreed with OIG concerning the interpretation of the March 5, 2013, Federal
Register notice for CDBG-DR grants under Public Law 113-2, which provides that States must have fiscal and
administrative requirements for spending and accounting for all funds. HUD contends that the requirements
at 24 CFR 85.36(b) through (i), including the cost estimate requirements, do not apply to States unless a State
elects to adopt the provisions at 24 CFR 85.36(b) through (i) as its procurement standards. Otherwise, the State
must comply with regulations at 24 CFR 570.489(g) and follow its procurement policies and procedures.
     OIG rejected the proposed management decisions for recommendations 1A, 1B, 1C, and 1E because they
did not meet the intention of the recommendations. The regulations at 24 CFR 570.489(g) require a State
grantee to follow its procurement policies and procedures. However, for this disaster recovery effort, unlike
previous efforts, a HUD notice7 required the State to either adopt the specific procurement standards at 24
CFR 85.36 or have a procurement process and standards that were equivalent to the procurement standards
at 24 CFR 85.36. The State acknowledged in its procurement policy for CDBG-DR grants that it was required
as a grantee to follow the requirements at 24 CFR 85.36 and that its procurement process and standards were
equivalent to the procurement standards at 24 CFR 85.36. Accordingly, the State certified to HUD that its
policies and procedures were equivalent to the procurement standards at 24 CFR 85.36. However, the audit
showed that the State’s procurement process was not equivalent to Federal procurement standards.
     OIG has had discussions with HUD’s Disaster Recovery and Special Issues Division, Office of Block Grant
Assistance, regarding the issues in question but has not reached agreeable management decisions. On March
29, 2016, OIG referred the recommendations to the Deputy Secretary for a decision and is awaiting that
decision. (Audit Report: 2015-PH-1003)




7 Federal Register Notice 5696-N-01, dated March 5, 2013




                                                                                                                47
SEMIANNUAL REPORT TO CONGRESS




PROGRAM CONTROL WEAKNESSES LESSENED ASSURANCE THAT NEW YORK RISING
HOUSING RECOVERY PROGRAM FUNDS WERE ALWAYS DISBURSED FOR ELIGIBLE
COSTS, ISSUE DATE: SEPTEMBER 17, 2015
Based on a requirement of the Disaster Relief Appropriations Act to monitor the expenditure of CDBG-DR
funds, HUD OIG audited the New York State CDBG-DR assistance-funded New York Rising Housing Recovery
Program. State officials allocated more than $1 billion in CDBG-DR funds to the Housing Recovery Program,
of which $621 million had been obligated and more than $600 million had been disbursed as of March
31, 2015. The objective of the audit was 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.
     Weaknesses in program controls 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. Of the 17 OIG recommendations, disagreement remains on 1.
     CPD disagreed with recommendation 3A (provide documentation showing that the $127.2 million contract for
construction management and environmental review services was fair and reasonable), noting that OIG and HUD
continue to disagree on the applicability of procurement regulations at 24 CFR 85.36(b) through (i) to State CDBG-
DR grantees. Specifically, HUD continues to disagree with OIG’s interpretation of HUD’s March 5, 2013, Federal
Register notice, which provides that States must certify that they have sufficient financial and procurement
controls in place. HUD maintains that the requirements of 24 CFR 85.36(b) through (i) do not apply to States
unless a State elects to adopt those provisions as its procurement standards. HUD notes that the notice indicates
that a State may meet these requirements, in part, by electing to follow either its own procurement policies or
those outlined in 24 CFR 85.36 and that the procurement policies the State submitted in support of its certification
have clearly and consistently indicated that it will follow its procurement policies and procedures.
     OIG disagrees with the proposed management decision for recommendation 3A and, despite the
continued disagreement over the applicability 24 CFR 85.36(b) through (i), notes that the procurement of
construction management and environmental review services did not comply with the State’s procurement
policies. OIG maintains that these procurements did not comply with the subrecipient agreement between
the State agency administering the CDBG-DR funds and another State agency because that agreement
required the other State agency to use the procurement policies of the CDBG-DR administering agency,
which were stricter. However, contracts were procured in accordance with the other State agency’s
procurement policy, which allowed the use of the qualification-only methodology to acquire architectural
and engineering, construction management, and surveying services, while the CDBG-DR administering
agency’s policy provided that only architectural and engineering or legal services could be selected on the
basis of qualification and performance data. OIG also maintains that these procurements did not comply
with Federal regulations because regulations at 24 CFR 85.36 (d)(3)(v) provide that the method in which
price is not used as a selection factor and final award is subject to later negotiation of fair and reasonable
compensation may be used only in the procurement of architecture and engineering services, and these
services did not qualify as architecture and engineering services.
     On March 18, 2016, OIG rejected the management decision, and on March 30, 2016, HUD stated that it was
reviewing its initial management decision. (Audit Report: 2015-NY-1011)




REVIEW OF DOWNPAYMENT ASSISTANCE FUNDS
Over the past fiscal year, HUD OIG completed three audits of HUD’s downpayment assistance program.
Specifically,




48
                                                                                            CHAPTER 9 AUDIT RESOLUTION




NOVA FINANCIAL & INVESTMENT CORPORATION’S FHA-INSURED LOANS WITH
DOWNPAYMENT ASSISTANCE GIFTS DID NOT ALWAYS MEET HUD REQUIREMENTS,
ISSUE DATE: JULY 8, 2015
LOANDEPOT’S FHA-INSURED LOANS WITH DOWNPAYMENT ASSISTANCE FUNDS DID NOT
ALWAYS MEET HUD REQUIREMENTS, ISSUE DATE: SEPTEMBER 30, 2015
LOANDEPOT’S FHA-INSURED LOANS WITH GOLDEN STATE FINANCE AUTHORITY
DOWNPAYMENT ASSISTANCE GIFTS DID NOT ALWAYS MEET HUD REQUIREMENTS,
ISSUE DATE: SEPTEMBER 30, 2015
These audits were based on a referral from HUD’s Quality Assurance Division detailing a separate lender,
which originated FHA-insured loans that contained ineligible downpayment assistance gifts. The HUD
OIG analysis identified NOVA and loanDepot as lenders with high FHA origination volume in the geographic
region that participated in similar downpayment assistance gift and secondary financing programs.
     OIG’s report found that NOVA’s FHA-insured loans with downpayment assistance gift funds did
not always comply with HUD FHA rules and regulations, putting the FHA 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. This condition occurred because NOVA did not do its due diligence, relied
on development authorities’ program guidelines, and assumed downpayment assistance eligibility based on
the reputation of the participating master loan servicer. The premium rate attached to the ineligible loans
put borrowers at a distinct disadvantage due to higher monthly mortgage payments imposed on them.
     OIG’s report found that loanDepot’s FHA-insured loans with downpayment assistance gift funds and
secondary financing did not always comply with HUD requirements, putting the FHA 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. Looking forward 1 year, this is
equivalent to at least $25.4 million in potential losses for loans that could contain ineligible assistance and
have a higher risk of loss in the first year. 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 imposed on them resulting from a premium interest rate.
     OIG did a second audit of loanDepot’s FHA-insured loans with Golden State Finance Authority
downpayment assistance gifts, which found that loanDepot did not always comply with HUD requirements,
putting the FHA 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. Looking forward 1
year, this is equivalent to at least $16 million in potential losses for loans that would contain ineligible gifts
and have a higher risk of loss in the first year. Also, loanDepot inappropriately charged borrowers nearly
$14,000 in fees that were not customary or reasonable. This condition occurred because loanDepot relied
on Golden State; accepted the Platinum Downpayment Assistance Program structure; and did not conduct
its own due diligence with regard to premium pricing, gifts, and fees. 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.
     In summary, OIG recommended that HUD require NOVA and loanDepot to (1) stop originating FHA loans
with ineligible downpayment assistance, (2) indemnify HUD for the FHA loans that were originated with
ineligible downpayment assistance, (3) reimburse borrowers for misrepresented discount fees and fees that were
not customary or reasonable, (4) reduce the interest rate for borrowers who received ineligible downpayment
assistance, and (5) reimburse borrowers for overpaid interest as a result of the premium interest rate.




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SEMIANNUAL REPORT TO CONGRESS




     The Office of Single Family Housing disagrees with OIG’s audit report conclusions that the downpayment
assistance used by NOVA and loanDepot, provided by housing finance agencies through premium pricing,
is not consistent with established law, guidance, and practice. According to Single Family Housing, the
downpayment assistance funding mechanisms used do not constitute premium pricing, nor do they
violate FHA guidance regarding downpayment assistance by government entities. Single Family Housing
stated that premium pricing is defined only as a higher interest rate in exchange for a credit to be applied
toward a borrower’s closing costs or other prepaid items and repeated that there are no restrictions on
how a government entity may fund its downpayment assistance programs. It considers the downpayment
assistance funding mechanisms to be permissible, including the generation of funds through capital market
vehicles, which may result in a negotiated interest rate that is higher than a negotiated interest rate for
mortgage loans without downpayment assistance.
     In response to OIG’s audit report, Single Family Housing publicly issued a letter to the lending industry,
dated July 20, 2015. The letter reaffirmed FHA’s support for certain downpayment assistance programs,
like those run by State housing finance agencies. It further stated that the intent of HUD rules regarding
downpayment assistance is clear and allows housing finance agencies the discretion necessary to fund these
programs appropriately. On August 11, 2015, before an audit resolution or substantive discussions between
Single Family Housing and OIG, HUD publicly issued a legal opinion. HUD OGC determined that neither
HUD’s Interpretative Rule Docket No. FR-5679-N-01 nor Mortgagee Letter 2013-14 placed restrictions on how
a government entity may fund its downpayment assistance programs. According to this opinion, FHA’s rules
and guidance do not place restrictions or prohibitions on how a government entity raises funds to support
its downpayment assistance programs. The use of funds derived from the sale of a mortgage with a higher
than market interest rate does not constitute premium pricing. There is no violation of FHA restrictions on
premium pricing when the rates agreed upon by the borrower and lender are generally the rates available
to borrowers participating in downpayment assistance programs. OGC concluded that it found no basis to
challenge the legality of NOVA’s downpayment assistance programs.
     Single Family Housing’s position is that the downpayment assistance provided by housing finance agencies
through premium pricing is consistent with established law, guidance, and practice. OIG disagrees. OIG
determined that NOVA and loanDepot originated FHA loans containing downpayment assistance that violated
FHA rules and guidance. Because downpayment assistance programs are intended to help creditworthy families
obtain housing they might not otherwise obtain, OIG found downpayment assistance programs structured to
repay the downpayment assistance at the expense of the borrowers to be objectionable. The audit reviewed
downpayment assistance gifts in which (1) downpayment assistance gift funds were indirectly derived from a
premium-priced mortgage and (2) the gifts were not true gifts but were repaid by the borrower through higher
interest rates and fees. The audit determined that these downpayment assistance programs violated established
law and guidance when the borrowers were burdened with higher interest rates to indirectly repay the gift.
     OIG recognizes that housing finance agencies provide home-ownership opportunities to low- and
moderate-income families and does not disagree with Interpretative Rule Docket No. FR-5679-N-01 and
Mortgagee Letter 2013-14 that housing finance agencies, as instrumentalities of State or local governments,
may provide downpayment assistance. The audit report did not dispute that housing finance agencies are an
acceptable source of funds. However, FHA loans that contain downpayment assistance from a housing finance
agency must meet all HUD requirements, including those on premium pricing and the definition of gift funds.
     As lenders, NOVA and loanDepot were obligated to conduct their due diligence to ensure that planned
downpayment assistance gifts met the requirements described in HUD Handbook 4155.1. OIG determined
that NOVA did not ensure that FHA loans with downpayment assistance met all HUD requirements,
specifically those governing premium pricing and gift funds. Neither HUD’s Interpretative Rule Docket
No. FR-5679-N-01 nor its related Mortgagee Letter 2013-14 contemplate the use of premium pricing by a
lender to reimburse the housing finance agency. The Housing and Economic Recovery Act of 2008 amended




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section 203(b)(9)(C) of the National Housing Act to preclude the abuse of the program when a seller (or other
interested or related party) funds the home buyer’s cash investment after the closing by reimbursing third-
party entities, specifically, private nonprofit charities. Similarly, it would be contrary to the intended purpose
of the Housing and Economic Recovery Act to allow a local government entity to do the same thing.
    On December 1, 2015, the Office of Housing issued a response to OIG’s NOVA referral to the Principal
Deputy Assistant Secretary for Housing. In its response, Housing upheld the decision of the Office of Single
Family Housing in disagreeing with OIG’s determinations. The decision points to the HUD OGC legal
opinion. Housing also stated that downpayment assistance programs, such as the ones administered by
NOVA, are key instruments in FHA’s efforts to make affordable home ownership available to households that
otherwise would be shut out of the housing market. OIG referred the NOVA audit recommendations to the
Deputy Secretary on December 15, 2015, and a decision is pending.
    OIG referred the two loanDepot reports’ audit recommendations to the Principal Deputy Assistant
Secretary on March 17, 2016, and a discussion between the parties was held on March 29, 2016. During the
meeting, OIG and Office of Housing staff agreed that a disagreement referral to the Deputy Secretary should
be made so the issues cited in the two loanDepot reports could be included with the disagreement referral of
NOVA Financial & Investment Corporation. (Audit Reports: 2015-LA-1005, 2015-LA-1009, and 2015-LA-1010)




DISAGREEMENT IN HOW TO PROCESS CIVIL FRAUD ACTIONS
Currently HUD OIG has 12 civil fraud memorandums totaling nearly $162 million in questioned costs, on
which it cannot reach a management decision with OGC. The 12 memorandums in question relate to civil
actions for which settlement has been reached and in some cases, funds have been recovered.
     Beginning in 2011, when OIG’s Office of Audit was involved in a civil case that reached positive resolution,
either through a settlement agreement or court-ordered judgment, OIG documented the monetary outcome
in a civil action memorandum, which included a recommendation addressed to the Office of General
Counsel, Office of Program Enforcement. OIG routinely recommended that OGC agree to allow it to record
the monetary outcome that HUD could expect to receive from the settlement or judgment in HUD’s Audit
Resolution and Corrective Action Tracking System (ARCATS). Accounting for the expected funds in ARCATS
allows HUD and OIG to track the civil monetary outcomes.
     While there were some minor adjustments to ARCATS and the related resolution process over the next 4
years, both offices were making it work. However, beginning in early 2015, OGC began to express heightened
concerns about various aspects of the arrangement. Primarily, OGC did not want to be held responsible for
recommendations regarding the collection of monetary outcomes for which it believed it had no control,
namely those that the U.S. Department of Justice (DOJ) or U.S. Attorney’s Offices (USAO) were responsible
for collecting rather than OGC. Around this same time, OIG began to have concerns regarding the actual
recording of the funds due HUD in HUD’s accounting records, in addition to recording the funds in ARCATS.
In July 2015, OIG met with OCFO and determined that a more appropriate recommendation to OGC would
be for it to ensure that HUD records the monetary outcome due HUD in HUD’s accounting records. This
change in recommendation recognized that OGC is the liaison between HUD and DOJ-USAOs and while
OCFO records the civil monetary receivables in HUD’s accounting records, it would rely on OGC to provide
guidance on what funds HUD should expect to receive. OIG began making the changed recommendation
starting with civil action memorandums issued in mid-to-late September 2015.
     Between October 6, 2015, and February 26, 2016, OGC issued multiple disagreement management
decisions to OIG regarding the adjusted civil-related recommendations, based on various arguments.
Specifically, the Office of Program Enforcement asserted that it had no authority or responsibility to take
OIG’s recommended actions. While these civil actions have already taken place (for example, settlements




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SEMIANNUAL REPORT TO CONGRESS




and court-ordered judgments), there appears to be a difference of opinion within HUD as to which offices are
responsible for tracking funds that HUD is owed, both in ARCATS and HUD’s accounting system. The Office
of Program Enforcement agrees that as HUD’s liaison office with DOJ and USAOs, it is generally responsible
for following up on the funds coming into HUD, but OGC does not want to be held responsible for using
ARCATS to record the outcome, track collection of the funds, or track overdue or uncollectible funds when
collection is out of its control. While OIG has offered several alternatives to allow for circumstances in which
the funds are collected by another Federal agency, OGC disagrees with tracking the funds in ARCATS, and
now OGC seems to believe that these activities should be handled by OCFO rather than OGC.
     OIG believes that HUD not only has the authority but the responsibility to ensure that its offices properly
record and account for nearly $162 million in proceeds from the various settlements or court-ordered
judgments mentioned below. Further, while this may require the cooperation of multiple offices within
HUD and coordination with DOJ and USAOs, it is reasonable that the civil outcome recommendations be
addressed to the Office of Program Enforcement as the liaison among HUD, DOJ, and USAOs. Because of this
continued disagreement, OIG will continue to move the civil fraud memorandums mentioned below through
the required resolution process to the next appropriate level of management, including the Deputy Secretary,
for a decision as to which office is responsible for each action.


 Memorandum                                                                               Monetary
                       Issue date            Title
 number                                                                                   outcomes
                                             Borrower Settled Alleged Violations
 2015-PH-1803          January 30, 2015      of Home Equity Conversion                               $3,000
                                             Mortgage Program
                                             Court Ordered a Former Executive
                       February 19, 2015     Director of the Philadelphia Housing
 2015-PH-1804                                Authority To Pay Civil Penalties for                   $75,000
                                             Violating Federal Lobbying Disclosure
                                             Requirements and Restrictions
                                             Group One Mortgage, Inc., Settled
                                             Allegations of Failing To Comply
 2015-CF-1801          March 27, 2015                                                              $376,523
                                             With Federal Housing Administration
                                             Underwriting Requirements
                                             Borrower Settled Allegations of
                                             Not Complying With the Primary
 2015-CF-1804          March 27, 2015                                                               $15,000
                                             Residence Requirement of the Federal
                                             Housing Administration Program
                                             Civic Construction, LLC, Settled
 2015-SE-1801          March 30, 2015        Allegations of Making False Claims                    $34,000
                                             to the Seattle Housing Authority
                                             Borrower Settled Alleged Violations
 2015-PH-1807          September 16, 2015    of Home Equity Conversion                               $2,500
                                             Mortgage Program
                                             Mason-McDuffie Mortgage Corporation
                                             Settled Allegations of Failing To
 2015-CF-1807          September 28, 2015                                                          $465,981
                                             Comply With HUD’s Federal Housing
                                             Administration Loan Requirements
                                             Reverse Mortgage Solutions, Inc., Settled
                                             Alleged Violations of Federal Housing
 2015-CF-1808          September 28, 2015                                                       $13,693,035
                                             Administration Loan Requirements Related
                                             to Home Equity Conversion Mortgages



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 Memorandum                                                                                Monetary
                    Issue date               Title
 number                                                                                    outcomes
                                             First Tennessee Settled Allegations
                                             of Failing To Comply With HUD’s
 2015-AT-1801       September 29, 2015                                                        $142,000,000
                                             Federal Housing Administration
                                             Loan Requirements
                                             Iron Mountain Settled Allegations
                                             of Making False Disclosures and
 2015-CF-1809       September 29, 2015       False Statements Regarding                            $202,237
                                             Discounts and Prices Relevant to
                                             Contracts It Had With HUD
                                             GTL Investments, Inc., Doing Business
                                             as John Adams Mortgage Company,
 2015-CH-1801       September 30, 2015                                                            $4,263,931
                                             Settled Allegations of Failing To Comply
                                             With HUD’s FHA Loan Requirements
                                             Owner of HUD-Insured Multifamily
                                             Property Settled Allegations of
 2015-DE-1802       September 30, 2015                                                             $500,000
                                             Authorizing and Paying Out Project
                                             Funds for Unallowable Expenses
                                             TOTAL                                             $161,631,207


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, OIG had three reports in which there were significantly revised management decisions.

REVIEW OF CONTROLS OVER HUD’S MOBILE DEVICES, ISSUE DATE: SEPTEMBER 28, 2012
HUD OIG audited HUD’s mobile devices to determine whether HUD had adequate mobile device
management controls in place. Mobile device technology continues to advance so rapidly that capabilities
for controlling and protecting the information on mobile devices are lagging behind. At the time of the audit,
HUD had taken some steps to address the rapidly changing mobile device environment. However, additional
work was needed. OIG identified security and management control weaknesses that could negatively affect
HUD’s mobile devices and put HUD’s computing information technology infrastructure at risk. Specifically,
1.	 HUD did not fully assess the security of its mobile device program. Additionally, it did not complete
    the development of policies and procedures governing the security and management of mobile devices.
    These weaknesses occurred because the Office of the Chief Information Officer was unable to develop or
    update mobile device policies and procedures as rapidly as mobile device technology advanced.
2.	 Management controls, such as security configuration settings and monitoring of mobile device use, was
    not effectively implemented. Also, not all hardware or software used by HUD’s mobile devices were
    Configuration Change Management Board approved. HUD had not been able to update its policies and
    procedures as quickly as mobile device technology has evolved.
    Among other things, OIG recommended that HUD require mobile device security features, such as
encryption, content protection, and password complexity, to comply with HUD policy and be enabled for all
devices. OIG also recommended that these requirements be published as standard operating procedures for
users and support contractors.




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SEMIANNUAL REPORT TO CONGRESS




     In its original management decision, HUD agreed to review the encryption, content protection, and password
complexity settings for mobile devices and ensure that they comply with HUD policy. For those devices that HUD
determined unable to comply, a risk-based decision and request for waiver would be documented. HUD began
moving forward with several projects, based on enterprise solutions in existence at the time of the audit that
would result in the implementation of a mature, comprehensive mobile device program. However, due to changes
in software licensing requirements and increased costs, as well as HUD’s mobile device strategy based on current
technology, HUD modified its approach to be more robust and cost effective.
     HUD recently submitted a revised management decision documenting its modified mobile device strategy.
HUD has undertaken several projects that are implementing new mobile devices, mobile management tools
(Microsoft Intune), and capabilities by using the Federal Strategic Sourcing Initiative8 (FSSI). The Wireless FSSI
program will improve procurement and management of wireless services across government. This will result
in a more effective and efficient mobile device management program. On October 13, 2015, OIG agreed with the
revised significant management decision. (Audit Report: 2012-DP-0005)	




POTENTIAL ANTIDEFICIENCY ACT VIOLATIONS-INTERGOVERNMENTAL PERSONNEL
ACT AGREEMENTS, ISSUE DATE: MAY 30, 2014
Based upon a complaint, HUD OIG reviewed two Intergovernmental Personnel Act (IPA) agreements.  The
objective was to determine whether HUD violated the Antideficiency Act (ADA) when it obtained the services
of two people through IPA agreements.  OIG identified potential ADA violations with one of the agreements. 
Specifically, HUD incorrectly used more than $620,000 in PIH and Office of Housing-Federal Housing
Commissioner personnel compensation funds to pay the salary of a senior advisor to the HUD Secretary. 
Additionally, HUD paid more than the agreement allowed and made payments without an agreement in
place.  HUD did not have procedures in place to prevent these potential ADA violations.
    In recommendation 1A, OIG recommended that HUD OCFO investigate whether ADA violations of more
than $622,000 occurred and if so, report the violation(s) in accordance with OMB Circular A-11 and HUD
Handbook 1830.2, REV-5.  HUD performed an investigation, and on October 28, 2015, reported ADA violations
totaling nearly $184,000 to the President, the Senate, the House of Representatives, and the Comptroller
General.  HUD did not seek a deficiency appropriation associated with the violation.  In its revised management
decision, HUD explained that the costs were not recoverable because HUD received a benefit for the funds it
spent.  OIG closed the recommendation, effective February 8, 2016.  (Audit memorandum: 2014-FW-0801)




THE OWNER AND FORMER MANAGEMENT AGENTS LACKED ADEQUATE CONTROLS
OVER THE OPERATION OF LAKE VILLAGE OF AUBURN HILLS, AUBURN HILLS, MI, ISSUE
DATE:  SEPTEMBER 30, 2014
HUD OIG audited Lake Village of Auburn Hills to determine whether the project’s owner and former
management agents operated the project in accordance with the regulatory agreement and HUD’s
requirements.  OIG found that the project’s owner and former management agents did not ensure that (1)
adequate documentation was maintained to support disbursements or that funds were used for reasonable
operating expenses or necessary repairs of the project, (2) the project’s housing units were used for their
intended purpose, and (3) tenants’ security deposits were appropriately maintained.  As a result, HUD lacked
assurance that more than $7.1 million was used for reasonable operating expenses or necessary repairs of the

8 Strategic sourcing is the structured and collaborative process of critically analyzing an organization’s spending patterns to better leverage its purchasing
   power, reduce costs, and improve overall performance. The primary goals of FSSI are to strategically source across Federal agencies, collaborate with
   industry to develop optimal solutions, and establish mechanisms to increase total cost savings.




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project and nearly $116,000 in additional rental revenue was not lost.  Further, more than $8,400 in project funds
and nearly $134,000 in lost rental revenue was not available for reasonable operating expenses and necessary
repairs of the project.  In addition, nearly $192,000 in tenant security deposits was not available to (1) pay for
damages to the project’s housing units, (2) apply toward tenants’ unpaid rent, or (3) reimburse households.
    OIG recommended that HUD require the owner to (1) support or reimburse the project for the unsupported
disbursements and rental credits; (2) reimburse the project from nonproject funds for the non-revenue-generating
housing units, ineligible expenditures, and underfunded security deposit account; and (3) implement adequate
procedures and controls to address the finding cited in this report.  OIG also recommended that HUD pursue
double damages, civil money penalties, and administrative sanctions as appropriate.  
    HUD’s original management decision, dated December 4, 2014, agreed with the recommendations. 
On December 14, 2015, HUD submitted a revised management decision requesting closure of the
recommendations since the owner executed a settlement agreement with HUD and then sold the FHA-
insured property.  The property was sold at a financial gain, and the new owner’s mortgage is not FHA
insured, thus presenting no future risk to HUD or the tenants.  On December 15, 2015, OIG concurred with
the revised management decision. (Audit Report: 2014-CH-1010)


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


THE CITY OF PHOENIX, AZ, DID NOT ALWAYS COMPLY WITH PROGRAM REQUIREMENTS
WHEN ADMINISTERING ITS NSP1 AND NSP2 GRANTS, ISSUE DATE: JUNE 15, 2012
HUD OIG reviewed the City of Phoenix’s Neighborhood Stabilization Program (NSP) grants NSP1 and NSP2.
OIG determined that the City did not administer its NSP1 and NSP2 grants in accordance with HUD rules
and regulations. Specifically, the City’s rehabilitation contract administration was not adequate and did
not comply with the NSP2 grant agreement, resulting in an insufficient contract scope of work, inadequate
oversight and verification of contract work and expenditures, insufficient maintenance of procurement
documentation, inappropriate contract modifications, installation of substandard air conditioning units,
and noncompliance with the grant’s buy American requirements.
     Among other things, OIG recommended that CPD require the City to (1) support that more than $1.7
million in NSP1 project funds was used only for its intended purpose and met the terms, conditions, and
specifications of the contract for Park Lee Apartments rehabilitation project charges or repay HUD from
non-Federal funds; (2) support that more than $1.2 million in project funds was used only for its intended
purpose and met the terms, conditions, and specifications of the NSP2 grant charges or reimburse its NSP2
grant from non-Federal funds; (3) reimburse the City’s NSP2 grant from non-Federal funds nearly $300,000
for substandard equipment; and (4) support nearly $147,000 in charges related to the Park Lee Apartments
rehabilitation project additional payments or reimburse its NSP 2 grant from non-Federal funds.
     After lengthy disagreement and many discussions, OIG came to an agreement with CPD on four
outstanding recommendations. The revised management decision, dated March 30, 2015, stated the HUD
acknowledged that an offset exists between OIG’s recommendations and the supporting documentation
that was produced. The value of this offset was determined to be more than $320,000. While the third-party
study determined that the project costs charged to the NSP1 account were reasonable and compliant with
OMB Circular A-122, the presence of unsupported costs must be addressed. CPD agreed to require the City to
repay to HUD more than $320,000 (covering NSP1 and NSP2) with non-HUD and non-Federal funds, or HUD
would seek forgiveness of that amount from the Assistant Secretary. Additionally, based on negotiations
between CPD and OIG, if the repayment of more than $320,000 or a forgiveness action by the HUD Assistant
Secretary occurs, OIG would consider closure of all four outstanding recommendations. The revised


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SEMIANNUAL REPORT TO CONGRESS




management decision considered the more than $320,000 to be disallowed costs.
     CPD submitted a revised management decision to OIG on November 4, 2015. The revised management
decision detailed CPD’s request and later approval to HUD’s Departmental Claims Collection Officer (DCCO)
to forgive the City’s unsupported costs balance of more than $320,000. As support, CPD stated that the
unsupported costs were attributed to deficiencies in the City’s internal controls and, since the original audit
report was published, have been addressed. In its support, CPD acknowledged that the City’s documentation
was poor and procedures used by the City were rushed and imperfect and stated that the City admitted that
documentation was missing for the Park Lee Apartments project. The HUD DCCO signed off on the request,
forgiving the City’s debt of more than $320,000.
     Although the four outstanding recommendations have been closed, effective March 31, 2016, due to
HUD’s debt forgiveness, OIG disagrees with CPD’s actions to close the recommendations. Specifically,
OIG determined that CPD did not attempt to collect the more than $320,000 debt from the City before
approaching the DCCO to request forgiveness. CPD admitted that it was never its intention to collect any
portion of the debt from the City, indicating that it did not negotiate in good faith with OIG when both parties
agreed to the revised management decision, dated March 30, 2015, to reduce the repayable amount from
approximately $3.4 million to about $320,000. OIG determined that CPD did not submit evidence to support
that it exhausted efforts to collect the debt before referring it to the DCCO and asking for forgiveness and
did not follow the procedures for debt forgiveness as outlined by Audits Management Systems Handbook
2000.06, REV-4. Paragraph 1-5.B.8 states that when the administrative officer (AO) has exhausted the initial
effort and the debt remains delinquent, the AO forwards evidence of his or her attempts to collect the debt to
the DCCO and notifies the audit liaison officer (ALO). Paragraph 5-7.C.2.a states that each AO is responsible
for monitoring the recovery of disallowed costs due HUD and if the debt becomes delinquent, transfering
it through the responsible ALO to the DCCO for processing. The provisions of Handbook 1900.25 must be
followed for the forgiveness of disallowed costs due HUD. According to paragraph 2-1.B of Debt Collection
Handbook 1900.25, the more than $320,000 should have been treated as a receivable when the management
decision on March 30, 2015, was reached. Paragraph 2-3.A states that the AO should have initiated collection
by sending a demand letter to the City. CPD did not submit support that it fulfilled any of the above
provisions. (Audit Report: 2012-LA-1008)


FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996
HUD did not substantially comply with FFMIA during 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 internal control weaknesses. While HUD has continued to
work toward financial management system modernization and FFMIA compliance and will move in fiscal
year 2016 to a shared service provider for general ledger management and financial reporting functions,
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 USSGL at the transaction level.
     At the end of 2015, 5 of 40 HUD financial systems were not in substantial compliance with FFMIA.  These
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 issuance of current standards, were not designed



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to provide the range of financial and performance data currently required.  In fiscal year 2016, HUD continued
the phased transition of key financial management functions to a shared service provider, the U.S. Department
of the Treasury, Bureau of Fiscal Services’ Administrative Resource Center. To date, HUD has implemented
three “releases” of the New Core project. 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, and an interface solution.
While New Core work done to date will not solve all of the instances of FFMIA noncompliance, the transition
to more modern applications and the retirement of legacy applications should be beneficial. OIG will perform
procedures in fiscal year 2016 to validate the effectiveness of the New Core implementation to date.
     IDIS does not comply with applicable Federal accounting standards or USSGL at the transaction level.9 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 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 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
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, HUD Integrated Acquisition
Management System (HIAMS), to replace the noncompliant HPS and SPS in 2012. As of 2015, HPS and SPS
remain operational 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 a material weakness related to the budgetary accounting module of the GFAS application
implemented in 2014. Specifically, due to system configuration issues, material on top adjustments was
needed to reconcile budgetary account 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 March 31, 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. OIG will
continue to assess HUD’s ongoing efforts to modernize HUD’s legacy systems and financial processes.
9T
  he U.S. Department of the Treasury publishes the United States Standard General Ledger (USSGL) supplement to the Treasury Financial Manual, which
 directs agencies to post transactions to the financial system in accordance with general ledger accounting requirements.




                                                                                                                                                       57
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 10 – 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
these allegations 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. Within the last 6 months, the HUD OIG Whistleblower Ombudsman Program has continued to
focus on outreach and training. All HUD employees attended mandatory whistleblower training in October
of 2015. The training was presented live and then posted on OIG’s 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 of
the importance of the program. This briefing was also presented at OIG’s managers meeting, September 14, 2015.
The Whistleblower Ombudsman and senior Office of Investigation staff attended training provided by the Office
of Special Counsel in December 2015. 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. Additionally, OIG’s Whistleblower Ombudsman maintains ongoing discussions with Office of
Investigation staff handling whistleblower complaints.
     HUD, with support of OIG’s Whistleblower Ombudsman, is now certified under the Office of Special
Counsel’s 2302(c) Certification Program, confirming that the workforce has been informed about the
rights and remedies available to it under the Whistleblower Protection Act, the Whistleblower Protection
and Enhancement Act, and related civil service laws. In February 2016, HUD OIG registered for separate
2302(c) certification for its Whistleblower Protection Program. OIG certification is voluntary and held by
approximately 20 percent of Federal OIGs.
     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.




58
                                                                                                         CHAPTER 10 WHISTLEBLOWER OMBUDSMAN PROGRAM




      Number of complaints received                                                                                           69

     Number of complainants asserting whistleblower status10                                                       69 (41 to hotline)

     Employee11 complaints referred for investigation to
                                                                                                                              19
     the HUD OIG Office of Investigation (OI)     

     Employee complaint investigations opened by OI                                                                            2

     Complaints declined by OI                                                                                                 1

     Complaints currently under review by OI                                                                                  10

     Employee complaint investigations closed by OI                                                                            6




10 The complainants allege mistreatment (retaliation) by the housing authority after revealing fraud, waste, or abuse by the same housing authority.
    They define themselves as whistleblowers. These complaints are referred to OIG’s hotline for appropriate referral and disposition.
11 Employee complaints are those complaints received from employees, potential employees, and former employees of HUD as well as employees
     of contractors, subcontractors, and grantees.




                                                                                                                                                        59
SEMIANNUAL REPORT TO CONGRESS




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 assur-
ance 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 on September 22, 2015.  USPS OIG received a peer review rating of pass.  A copy
of the external quality control review report can be viewed at http://www.uspsoig.gov/sites/default/files/
document-library-files/2015/2015 HUD-OIG System Review Report.pdf.
 
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 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.


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.




60
                                                                                              APPENDIX




APPENDIX 2 - AUDIT REPORTS ISSUED


INTERNAL REPORTS
AUDIT REPORTS

CHIEF FINANCIAL OFFICER

                             Additional Details To Supplement Our Fiscal Years 2015 and 2014
2016-FO-0003                 (Restated) U.S. Department of Housing and Urban Development
                             Financial Statement Audit, 11/18/2015. Better use: $1,071,263,037.

                             Fiscal Years 2015 and 2014 (Restated) Consolidated Financial
2016-FO-0004
                             Statements Audit, 11/23/2015.

CHIEF INFORMATION OFFICER

                             Fiscal Year 2015 Review of Information System Controls in Support of
2016-DP-0001
                             the Financial Statements Audit, 11/13/2015.

DEPUTY SECRETARY

                             HUD Did Not Effectively Negotiate, Execute, or Manage Its
2016-FW-0001                 Agreements Under the Intergovernmental Personnel Act,
                             03/30/2016. Questioned: $255,972. Unsupported: $31,066.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

                             Audit of Fiscal Years 2015 and 2014 (Restated) Financial Statements,
2016-FO-0001
                             11/13/2015.

HOUSING

                             Single Family Insurance System and Single Family Insurance Claims
2016-DP-0002
                             Subsystem, 12/21/2015.

                             Fiscal Years 2015 and 2014 Financial Statements Audit, 11/16/2015.
2016-FO-0002
                             Questioned: $291,489,605. Unsupported: $291,489,605.

PUBLIC AND INDIAN HOUSING

                             HUD Lacked Adequate Oversight of Public Housing Agencies’
2016-CH-0001                 Compliance With Its Declaration of Trust Requirements, 02/26/2016.
                             Better use: $509,000,000.




                                                                                                    61
SEMIANNUAL REPORT TO CONGRESS




  AUDIT-RELATED MEMORANDUMS12

  CHIEF FINANCIAL OFFICER

                                                     Independent Attestation Review: U.S. Department of Housing and
                                                     Urban Development, Office of Special Needs Assistance Continuum
  2016-FO-0801
                                                     of Care, Regarding Drug Control Accounting for Fiscal Year 2015,
                                                     02/01/2016.

  GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

                                                     Review of Information System Controls Over the Government
  2016-DP-0801
                                                     National Mortgage Association, 11/30/2015.

  HOUSING

                                                     FHA Approved Nonprofits Purchasing Real Estate-Owned Homes,
  2016-KC-0801
                                                     03/17/2016.

  EXTERNAL REPORTS
  AUDIT REPORTS

  COMMUNITY PLANNING AND DEVELOPMENT

                                                     The Municipality of Toa Alta, PR, Did Not Properly Administer Its
  2016-AT-1002                                       Section 108 Loan Guarantee Program, 12/17/2015. Questioned:
                                                     $9,717,872. Unsupported: $9,578,105.

                                                     The State of Rhode Island Generally Administered Its CDBG Disaster
  2016-BO-1001                                       Recovery Assistance Grant in Accordance With Federal Regulations,
                                                     03/09/2016. Questioned: $127,750. Unsupported: $127,750.

                                                     EdgeAlliance, Inc., Chicago, IL, Did Not Administer Continuum of
                                                     Care Program Funds for The Daniel R. Ruscitti Phoenix House in
  2016-CH-1001
                                                     Accordance With Federal Regulations, 11/24/2015. Questioned:
                                                     $774,352. Unsupported: $686,701.

                                                     The City of Baton Rouge and Parish of East Baton Rouge, LA, Office
                                                     of Community Development Did Not Always Properly Administer Its
  2016-FW-1001
                                                     CDBG Program Activities, 03/21/2016. Questioned: $2,264,103.
                                                     Unsupported: $2,264,103.

                                                     The State of Missouri Did Not Correctly Allocate Salaries to Its
  2016-KC-1001                                       Disaster Recovery Grants, 02/22/2016. Questioned: $1,551,656.
                                                     Unsupported: $1,551,656.

12 T
    he memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted govern-
   ment 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 actions or settlements.




62
                                                                                              APPENDIX




                            The County of Riverside, CA, Did Not Always Support the Eligibility of
2016-LA-1002                Its CDBG Program Expenses, 02/18/2016. Questioned: $44,305.
                            Unsupported: $44,305.

                            The City of Niagara Falls Had Weaknesses in Controls Over CDBG-
                            Funded Subgrantee-Administered Rehabilitation Activities,
2016-NY-1002
                            01/07/2016. Questioned: $220,538. Unsupported: $220,538.
                            Better use: $116,249.

                            The City of Rochester, NY, Did Not Always Administer Its CDBG Program
2016-NY-1003                in Accordance With HUD Requirements, 02/05/2016. Questioned:
                            $8,335,335. Unsupported: $8,182,056. Better use: $1,500,000.

                            The Lower Manhattan Development Corporation, New York, NY,
2016-NY-1004                Generally Disbursed CDBG Disaster Recovery Funds in Accordance
                            With HUD Regulations, 02/19/2016.

                            The City of New York, NY, Generally Disbursed CDBG Disaster
2016-NY-1005                Recovery Funds for Its Temporary Disaster Assistance Program in
                            Accordance With Federal Regulations, 03/11/2016.

                            New York State Did Not Always Disburse CDBG Disaster Recovery
                            Funds in Accordance With Federal and State Regulations,
2016-NY-1006
                            03/29/2016. Questioned: $425,162. Unsupported: $152,703.
                            Better use: $300,000.

                            The City of Jersey City, NJ’s CDBG Program Had Administrative and
2016-NY-1007                Financial Control Weaknesses, 03/30/2016. Questioned: $1,941,618.
                            Unsupported: $1,830,823. Better use: $16,206,508.

HOUSING

                            Provident Bank, Iselin, NJ, Needs To Improve Controls Over Its
2016-NY-1001                Servicing of FHA-Insured Mortgages and Loss Mitigation Efforts,
                            11/30/2015. Questioned: $359,514. Better use: $696,185.

                            Homewood Terrace, Auburn, WA, Did Not Always Conduct Timely
                            Reexaminations, Properly Request Assistance Payments, or Verify
2016-SE-1001
                            Income Information, 03/09/2016. Questioned: $9,015.
                            Unsupported: $3,087. Better use: $105,324.

PUBLIC AND INDIAN HOUSING

                            The Virgin Islands Housing Authority, St. Thomas, VI, Did Not
2016-AT-1001                Adequately Enforce HUD’s Housing Quality Standards, 12/08/2015.
                            Questioned: $152,484. Better use: $6,217,059.




                                                                                                     63
SEMIANNUAL REPORT TO CONGRESS




                                                       The Huntsville Housing Authority Administered Its Section 8 Housing
  2016-AT-1003                                         Choice Voucher Program in Accordance With HUD’s and Its Own
                                                       Requirements, 02/18/2016.

                                                       The Puerto Rico Department of Housing, San Juan, PR, Did Not
  2016-AT-1004                                         Adequately Enforce HUD’s Housing Quality Standards, 03/14/2016.
                                                       Questioned: $112,215. Better use: $19,344,376.

                                                       The Lansing Housing Commission, Lansing, MI, Did Not Always Comply
                                                       With HUD’s Requirements and Its Own Policies Regarding the Administra-
  2016-CH-1002
                                                       tion of Its Section 8 Housing Choice Voucher Program, 12/16/2015.
                                                       Questioned: $143,865. Unsupported: $105,882. Better use: $391,032.

                                                       The Poplar Bluff Housing Authority Improperly Phased In Flat Rents,
  2016-KC-1002
                                                       03/09/2016. Better use: $31,532.

                                                       The Reno-Sparks Indian Colony, Reno, NV, Did Not Always Comply
  2016-LA-1001                                         With HUD Procurement Regulations, 02/10/2016. Questioned:
                                                       $6,000. Unsupported: $6,000.

                                                       The Westmoreland County Housing Authority, Greensburg, PA, Did
  2016-PH-1001                                         Not Properly Manage Its Housing Choice Voucher Waiting List and
                                                       Select Applicants as Required, 01/13/2016.

  AUDIT-RELATED MEMORANDUMS13

  COMMUNITY PLANNING AND DEVELOPMENT

                                                       The City of Jersey City’s Administration of Its Lead Paint Activities Did Not
  2016-NY-1801
                                                       Comply With Federal and New Jersey State Requirements, 02/11/2016.

  GENERAL COUNSEL

                                                       The Owner of a HUD-Insured Multifamily Property Settled Proposed
                                                       Debarment From Participating in All Procurement and
  2016-DE-1801
                                                       Nonprocurement Transactions With the Executive Branch of the
                                                       Federal Government for a 5-Year Period, 03/17/2016.

  HOUSING

                                                       Saltillo Assisted Living, Saltillo, MS, Did Not Maintain Liability and
  2016-AT-1801
                                                       Property Insurance, 12/16/2015.

  PUBLIC AND INDIAN HOUSING

                                                       The Housing Authority of the City of Pearsall, TX, Improperly Procured and
  2016-FW-1801
                                                       Paid Its Interim Executive Director, 10/02/2015. Questioned: $138,880.

13 T
    he 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 actions or settlements.




64
                                                                                                       TABLES




TABLE A

Audit reports issued before the start of period with no management decision at 3/31/2016
*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 Years 2013 and 2012 (Restated)           See chapter 9, page 41   12/16/2013
 Financial Statements

 * 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the
                                                                 See chapter 9, page 42   04/15/2014
 Improper Payments Elimination and Recovery Act of 2010

 * 2014-KC-0002 The Data in CAIVRS Did Not Agree With
                                                                 See chapter 9, page 42   07/02/2014
 the Data in FHA’s Default and Claims Systems

 * 2014-NY-1007 The Niagara Falls Housing Authority Did
 Not Always Administer Its HOPE VI Grant Program and             See chapter 9, page 43   07/10/2014
 Activities in Accordance With HUD Requirements

 * 2014-LA-0005 HUD Did Not Always Recover FHA Single-
 Family Indemnification Losses and Ensure That                   See chapter 9, page 44   08/08/2014
 Indemnification Agreements Were Extended

 * 2015-FO-0002 Interim Report on HUD’s Internal Controls
                                                                 See chapter 9, page 45   12/08/2014
 Over Financial Reporting

 * 2015-PH-1803 Final Civil Action Borrower Settled Alleged
                                                                 See chapter 9, page 52   01/30/2015
 Violations of Home Equity Conversion Mortgage Program

 * 2015-PH-1804 Final Civil Action Court Ordered a Former
 Executive Director of the Philadelphia Housing Authority To
                                                                 See chapter 9, page 52   02/19/2015
 Pay Civil Penalties for Violating Federal Lobbying Disclosure
 Requirements and Restrictions

 * 2015-FO-0003 Audit of the Government National
 Mortgage Association’s Financial Statements for Fiscal Years    See chapter 9, page 46   02/27/2015
 2014 and 2013

 * 2015-CF-1801 Group One Mortgage, Inc., Settled
 Allegations of Failing To Comply With Federal Housing           See chapter 9, page 53   03/27/2015
 Administration Underwriting Requirements

 * 2015-CF-1804 Borrower Settled Allegations of Not
 Complying With the Primary Residence Requirement of the         See chapter 9, page 52   03/27/2015
 Federal Housing Administration Program

 * 2015-SE-1801 Civic Construction, LLC, Settled Allegations
                                                                 See chapter 9, page 52   03/30/2015
 of Making False Claims to the Seattle Housing Authority


                                                                                                         65
SEMIANNUAL REPORT TO CONGRESS




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

 * 2015-PH-1003 The State of New Jersey Did Not Comply
 With Federal Procurement and Cost Principle Requirements      See chapter 9, page 46   06/04/2015
 in Implementing Its Disaster Management System

 * 2015-LA-1005 NOVA Financial & Investment Corporation’s
 FHA-Insured Loans With Downpayment Assistance Gifts Did       See chapter 9, page 50   07/09/2015
 Not Always Meet HUD Requirements

 * 2015-PH-1807 Final Civil Action Borrower Settled Alleged
                                                               See chapter 9, page 52   09/16/2015
 Violations of Home Equity Conversion Mortgage Program

 * 2015-NY-1011 Program Control Weaknesses Lessened
 Assurance That New York Rising Housing Recovery Program       See chapter 9, page 48   09/17/2015
 Funds Were Always Disbursed for Eligible Costs

 * 2015-CF-1807 Mason-McDuffie Mortgage Corporation
 Settled Allegations of Failing To Comply With HUD’s Federal   See chapter 9, page 52   09/28/2015
 Housing Administration Loan Requirements

 * 2015-CF-1808 Reverse Mortgage Solutions, Inc., Settled
 Alleged Violations of Federal Housing Administration Loan     See chapter 9, page 52   09/28/2015
 Requirements Related to Home Equity Conversion Mortgages

 * 2015-AT-1801 Final Civil Action: First Tennessee Settled
 Allegations of Failing To Comply With HUD’s Federal           See chapter 9, page 52   09/29/2015
 Housing Administration Loan Requirements

 * 2015-CF-1809 Iron Mountain Settled Allegations of Making
 False Disclosures and False Statements Regarding Discounts    See chapter 9, page 53   09/29/2015
 and Prices Relevant to Contracts It Had With HUD

 * 2015-CH-1801 Final Civil Action: GTL Investments, Inc.,
 Doing Business as John Adams Mortgage Company, Settled
                                                               See chapter 9, page 53   09/30/2015
 Allegations of Failing To Comply With HUD’s FHA Loan
 Requirements

 * 2015-DE-1802 Owner of HUD-Insured Multifamily
 Property Settled Allegations of Authorizing and Paying Out    See chapter 9, page 53   09/30/2015
 Project Funds for Unallowable Expenses

 * 2015-LA-1009 loanDepot’s FHA-Insured Loans With
 Downpayment Assistance Funds Did Not Always Meet HUD          See chapter 9, page 49   09/30/2015
 Requirements

 * 2015-LA-1010 loanDepot’s FHA-Insured Loans With
 Golden State Finance Authority Downpayment Assistance         See chapter 9, page 49   09/30/2015
 Gifts Did Not Always Meet HUD Requirements




66
                                                                                                    TABLES




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                                                                       DECISION     FINAL
                 REPORT TITLE                                    ISSUE DATE
 NUMBER                                                                       DATE         ACTION

                 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,
 2007-AT-1010    FL, 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
 2009-AO-1001    Employees Were Eligible To Receive              05/05/2009   09/16/2009   Note 1
                 Additional Compensation Grants, Baton
                 Rouge, LA

                 State of Louisiana, Road Home Program,
                 Did Not Ensure That Multiple Disburse-
 2009-AO-1002                                                    05/05/2009   09/16/2009   Note 1
                 ments to a 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

                 Review of Implementation of Security
 2009-DP-0005                                                    06/11/2009   11/17/2009   Note 1
                 Controls over HUD’s Business Partners

                 The Housing Authority of the City of Terre
                 Haute Failed To Follow Federal
 2009-CH-1011    Requirements and Its Employment                 07/31/2009   11/24/2009   12/31/2016
                 Contract Regarding Nonprofit
                 Development Activities, Terre Haute, IN



                                                                                                      67
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

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

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

                        Sasha Bruce Youthwork, Incorporated, Did
 2010-PH-1008           Not Support More Than $1.9 Million in         05/11/2010   11/03/2010   Note 1
                        Expenditures, Washington, DC

                        The DuPage Housing Authority
                        Inappropriately Administered Its Section 8
 2010-CH-1008                                                         06/15/2010   10/08/2010   10/31/2016
                        Project-Based Voucher Program, Wheaton,
                        IL

                        Additional Details To Supplement Our
 2011-FO-0003           Report on HUD’s Fiscal Years 2010 and         11/15/2010   08/08/2011   Note 2
                        2009 Financial Statements

                        The District of Columbia Did Not
                        Administer Its HOME Program in
 2011-PH-1005                                                         12/23/2010   04/22/2011   Note 1
                        Accordance With 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   Note 2
                        Downpayment Initiative-Funded Afford-A-
                        Home Program, Cleveland, OH

                        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   10/31/2016
                        Housing Choice Voucher Program,
                        Wheaton, IL

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




68
                                                                                                TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

               The City of Buffalo Did Not Always
               Administer Its CDBG Program in
2011-NY-1010                                                 04/15/2011   01/25/2012   Note 1
               Accordance With HUD 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
2011-AO-0001                                                 06/22/2011   10/13/2011   05/31/2016
               and 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   03/30/2017
               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
2011-AT-1018   Properly Manage Its HOME Investment           09/28/2011   01/12/2012   Note 1
               Partnerships Program, San Juan, PR

               The City of Cleveland Lacked Adequate
               Controls Over Its HOME Investment
2011-CH-1014   Partnerships Program-Funded Housing           09/29/2011   01/26/2012   07/01/2016
               Trust Fund Program Home-Buyer Activities,
               Cleveland, OH

               The Pontiac Housing Commission Did Not
               Adequately Administer Its American
2011-CH-1018                                                 09/30/2011   01/10/2012   06/30/2016
               Recovery and Reinvestment Act Capital
               Fund Grant, Pontiac, MI

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

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

               Additional Details To Supplement Our
2012-FO-0003   Report on HUD’s Fiscal Years 2011 and         11/15/2011   05/10/2012   04/30/2016
               2010 Financial Statements



                                                                                                  69
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        HUD Did Not Adequately Support the
 2012-LA-0001           Reasonableness of the Fee-for-Service         11/16/2011   03/27/2012   10/01/2016
                        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               02/24/2012   06/22/2012   Note 2
                        Regarding CHDOs’ Activities and Income,
                        Indianapolis, IN

                        The State of Texas Did Not Follow
                        Requirements for Its Infrastructure and
 2012-FW-1005           Revitalization Contracts Funded With CDBG     03/07/2012   07/05/2012   Note 1
                        Disaster Recovery Program Funds, Austin,
                        TX

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

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

                        The Hammond Housing Authority Did Not
                        Administer Its Recovery Act Grants in
 2012-CH-1009                                                         08/03/2012   11/30/2012   12/30/2016
                        Accordance With Recovery Act, HUD’s, and
                        Its Own Requirements, Hammond, IN

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




70
                                                                                               TABLES




REPORT                                                                   DECISION     FINAL
               REPORT TITLE                                 ISSUE DATE
NUMBER                                                                   DATE         ACTION

               The Saginaw Housing Commission Did Not
               Always Administer Its Section 8 Housing
2012-CH-1012   Choice Voucher Program in Accordance         09/27/2012   01/07/2013   01/01/2023
               With 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   07/25/2016
               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   04/30/2016
               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
2013-FO-0003   Report on HUD’s Fiscal Years 2012 and 2011   11/15/2012   05/15/2013   Note 2
               Financial Statements

               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 1
               Program, Albany, NY

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

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

               Bay Vista Methodist Heights Violated Its
2013-LA-1003   Agreement With HUD When Administering        03/14/2013   05/15/2013   Note 1
               Its 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 1
               Requirements, Arecibo, PR




                                                                                                  71
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                              DECISION     FINAL
                        REPORT TITLE                                    ISSUE DATE
 NUMBER                                                                              DATE         ACTION

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

                        The Housing Authority of the City of El
                        Paso Did Not Follow Recovery Act
 2013-FW-1004                                                           04/12/2013   08/27/2013   Note 1
                        Obligation Requirements or Procurement
                        Policies, El Paso, TX

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

                        Nassau County Did Not Administer Its
                        HOME Investment Partnerships 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
 2013-FW-1006                                                           06/19/2013   02/11/2014   08/13/2016
                        Housing Authority Mismanaged the
                        Authority, Houston, TX

                        HUD Did Not Enforce the Reporting
                        Requirements of Section 3 of the Housing
 2013-KC-0002                                                           06/26/2013   10/24/2013   Note 1
                        and Urban Development Act of 1968 for
                        Public Housing Authorities

                        The Stark Metropolitan Housing Authority
                        Did Not Follow HUD’s Requirements and Its
 2013-CH-1003                                                           07/15/2013   11/12/2013   10/31/2016
                        Own Policies Regarding the Administration
                        of Its Program, Canton, OH

                        HUD Officials Did Not Always Monitor
 2013-NY-0003           Grantee Compliance With the CDBG                07/19/2013   11/26/2013   Note 1
                        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 1
                        Requirements, San Juan, PR

                        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




72
                                                                                               TABLES




REPORT                                                                   DECISION     FINAL
               REPORT TITLE                                 ISSUE DATE
NUMBER                                                                   DATE         ACTION

               The City of Hawthorne Inappropriately
2013-LA-1009   Used Nearly $1.6 Million in HOME Funds for   09/13/2013   01/06/2014   Note 1
               Section 8 Tenants, Hawthorne, CA

               The State of Michigan Lacked Adequate
               Controls Over Its NSP Under the American
2013-CH-1006                                                09/15/2013   01/13/2014   04/15/2016
               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   06/30/2016
               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 1
               Accordance With HUD Rules and
               Requirements, Hawthorne, CA

               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   Note 1
               Reported Funds in Accordance With
               Program Requirements, New Orleans, LA

               The Malakoff Housing Authority Did Not
               Have Sufficient Controls Over Its Public
2013-FW-1805                                                09/26/2013   12/19/2013   04/30/2016
               Housing Programs, Including Its Recovery
               Act Funds, Malakoff, TX

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

               The Flint Housing Commission Did Not
               Always Administer Its Grant in Accordance
2013-CH-1009                                                09/27/2013   01/14/2014   07/25/2016
               With Recovery Act, HUD’s, and Its Own
               Requirements, Flint, MI

               The City of West Palm Beach Did Not
2013-AT-1008   Always Properly Administer Its HOME          09/30/2013   01/17/2014   Note 1
               Program, West Palm Beach, FL

               The City of Toledo Did Not Always
               Administer Its CDBG Program in
2013-CH-1010                                                09/30/2013   01/15/2014   Note 1
               Accordance With HUD’s and Its Own
               Requirements, Toledo, OH




                                                                                                 73
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                             DECISION     FINAL
                        REPORT TITLE                                   ISSUE DATE
 NUMBER                                                                             DATE         ACTION

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

                        The Hamtramck Housing Commission Did
                        Not Administer Its Grant in Accordance
 2013-CH-1012                                                          09/30/2013   01/21/2014   07/25/2016
                        With Recovery Act, HUD’s, and Its Own
                        Requirements, Hamtramck, MI

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

                        The City of Flint Lacked Adequate Controls
 2014-CH-1001           Over Its HOME Investment Partnerships          11/15/2013   03/13/2014   10/14/2016
                        Program, Flint, MI

                        The Municipality of Arecibo Did Not
 2014-AT-1001           Properly Administer Its HOME Program,          12/03/2013   01/24/2014   Note 1
                        Arecibo, PR

                        Government National Mortgage
 2014-FO-0001           Association Fiscal Years 2013 and 2012         12/06/2013   05/02/2014   Note 1
                        Financial Statements Audit

                        Federal Housing Administration Fiscal Years
 2014-FO-0002                                                          12/13/2013   04/14/2014   Note 1
                        2013 and 2012 Financial Statements Audit

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

                        The City of Norfolk Generally Failed To
 2014-PH-1001                                                          12/17/2013   04/16/2014   Note 2
                        Justify Its CDBG Activities, Norfolk, VA

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

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




74
                                                                                                TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

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

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

               HUD Did Not Provide Effective Oversight of
2014-NY-0001                                                 02/19/2014   06/10/2014   Note 1
               Section 202 Multifamily Project Refinances

               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
2014-FO-0004   the Improper Payments Elimination and         04/15/2014   01/07/2015   Note 3
               Recovery Act of 2010

               The Hamtramck Housing Commission Did
               Not Always Administer Its Grant in
2014-CH-1003                                                 04/30/2014   08/08/2014   10/31/2016
               Accordance With Recovery Act, HUD’s, or Its
               Own Requirements, Hamtramck, MI

               Fiscal Year 2013 Review of Information
2014-DP-0005   Systems Controls in Support of the            04/30/2014   02/09/2015   Note 2
               Financial Statements Audit

               Improvements Are Needed Over
               Environmental Reviews of Public Housing
2014-FW-0002                                                 05/12/2014   03/17/2015   10/01/2016
               and 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   Note 2
               Adequately Account for and Administer the
               Mirabeau Apartments Project, Huntsville, AL

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




                                                                                                  75
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                           DECISION     FINAL
                        REPORT TITLE                                 ISSUE DATE
 NUMBER                                                                           DATE         ACTION

                        HUD Could Not Support the
                        Reasonableness of the Operating and
 2014-LA-0004           Capital Fund Programs’ Fees and Did Not      06/30/2014   10/20/2014   12/31/2017
                        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
 2014-NY-1006                                                        07/02/2014   08/06/2014   Note 2
                        Weaknesses 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   Note 2
                        Indian Housing Block Grant Requirements,
                        White River, AZ

                        The Cumberland Plateau Regional Housing
                        Authority Did Not Procure Services in
 2014-PH-1007                                                        07/15/2014   09/05/2014   10/01/2017
                        Accordance With HUD Requirements,
                        Lebanon, VA

                        Palladia, Inc., Did Not Administer Its
                        Supportive Housing Program in
 2014-NY-1008                                                        07/25/2014   11/21/2014   Note 2
                        Accordance With HUD Requirements, New
                        York, NY

                        The Municipality of Carolina Did Not
 2014-AT-1007           Properly Administer Its HOME Program,        08/08/2014   12/05/2014   Note 2
                        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   01/31/2017
                        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   12/31/2016
                        Regarding the Administration of Its
                        Program, Goshen, IN




76
                                                                                                TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

               The South Landry Housing Authority Did
               Not Always Comply With Federal
2014-FW-1806   Procurement and Financial Requirements,       08/19/2014   12/09/2014   12/31/2016
               Including a Procurement Using Recovery
               Act Funds, Grand Coteau, LA

               The City of Richmond Did Not Administer
2014-LA-1005   Its NSP in Accordance With Requirements,      08/22/2014   12/19/2014   06/30/2016
               Richmond, CA

               The State of New Jersey Did Not Fully
               Comply With Federal Procurement and
2014-PH-1008   Cost Principle Requirements in                08/29/2014   09/02/2015   Note 2
               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   12/31/2016
               Demolition or Disposition Were Not Always
               Accurately Calculated

               Miami-Dade County Did Not Always
2014-AT-1010   Properly Administer Its HOME Program,         09/11/2014   12/11/2014   Note 2
               Miami, FL

               HUD Did Not Always Enforce the
               Requirements of the Regulatory
2014-KC-0003   Agreements and HUD Handbooks                  09/17/2014   11/25/2014   Note 2
               Pertaining to Owner Advances and
               Distributions

               The City of Jersey City’s HOME Investment
               Partnerships Program Administration Had
2014-NY-1009                                                 09/18/2014   01/13/2015   Note 2
               Financial and Administrative Controls
               Weaknesses, City of Jersey City, NJ

2014-DP-0006   Program Accounting System                     09/23/2014   12/01/2014   Note 2

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

               Lenders Generated $428 Million in Gains
2014-KC-0004                                                 09/24/2014   01/22/2015   Note 2
               From Modifying Defaulted FHA Loans




                                                                                                  77
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        Cornerstone Home Lending Did Not
                        Adequately Underwrite 16 Loans, Violated
                        the Real Estate Settlement Procedures Act,
 2014-FW-1006                                                         09/26/2014   03/30/2015   Note 2
                        and Did Not Implement an Adequate
                        Quality Control Plan During Our Review
                        Period, Houston, TX

                        The City of Los Angeles Did Not Always
                        Ensure That CDBG-Funded Projects Met
 2014-LA-1007                                                         09/29/2014   01/27/2015   03/31/2017
                        National Program Objectives, Los Angeles,
                        CA

                        The Housing Authority of the City of
 2014-AT-1016           Spartanburg Used HUD Program Funds for        09/30/2014   01/28/2015   05/31/2016
                        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   Note 2
                        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

                        The Owner and Former Management
                        Agents Lacked Adequate Controls Over the
 2014-CH-1012                                                         09/30/2014   01/28/2015   06/30/2016
                        Operation of Lake Village of Fairlane
                        Apartments, Dearborn, MI

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

                        HUD Policies Did Not Always Ensure That
 2014-PH-0001           HECM Borrowers Complied With Residency        09/30/2014   01/28/2015   Note 2
                        Requirements

                        The Management of the Housing Authority
                        of the City of Taylor Did Not Exercise
 2015-FW-1801                                                         10/02/2014   01/30/2015   08/03/2016
                        Adequate 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   Note 2
                        Enterprise Data Warehouse




78
                                                                                                   TABLES




REPORT                                                                       DECISION     FINAL
               REPORT TITLE                                     ISSUE DATE
NUMBER                                                                       DATE         ACTION

               The Rotan Housing Authority Did Not
               Administer Its Public Housing and Recovery
2015-FW-1802   Act Programs in Accordance With                  10/31/2014   02/20/2015   01/31/2017
               Regulations and Other Requirements,
               Rotan, TX

               Audit of the Federal Housing
2015-FO-0001   Administration’s Financial Statements for        11/14/2014   04/14/2015   Note 2
               Fiscal Years 2014 and 2013

               The City of New York Did Not Always
               Disburse CDBG Disaster Recovery
2015-NY-1001   Assistance Funds to Its Subrecipient in          11/24/2014   03/23/2015   Note 2
               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   10/01/2016
               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   05/02/2016
               Procurement and Administration of Its
               Multifamily Servicing Contract

               The Office of the Commissioner for
               Municipal Affairs Needs To Make
2015-AT-1001                                                    12/05/2014   04/03/2015   04/02/2016
               Improvements in 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   04/14/2016
               Accounting System

               Intergovernmental Personnel Act
               Appointment Created an Inherent Conflict
2015-FW-0801                                                    01/20/2015   05/20/2015   04/30/2016
               of Interest in the Office of Public and Indian
               Housing

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




                                                                                                     79
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        The County of Beaver Did Not Always
                        Administer Its HOME Program in
 2015-PH-1001                                                         01/30/2015   08/31/2015   08/31/2016
                        Accordance With Applicable HUD and
                        Federal Requirements, Beaver Falls, PA

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

                        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            02/24/2015   07/02/2015   07/02/2016
                        Financial Statements Audit

                        Audit of the Government National
 2015-FO-0003           Mortgage Association’s Financial              02/27/2015   06/25/2015   Note 3
                        Statements for Fiscal 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   06/30/2016
                        Regulations, Providence, RI

                        Breakthrough Living Program Did Not
 2015-KC-1001           Administer Its Program in Accordance With     03/05/2015   05/05/2015   05/16/2016
                        HUD Rules and Regulations, Topeka, KS

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

  

 SIGNIFICANT AUDIT REPORTS ISSUED WITHIN THE PAST 12 MONTHS THAT WERE DESCRIBED IN PREVIOUS
 SEMIANNUAL REPORTS FOR WHICH FINAL ACTION HAD NOT BEEN COMPLETED AS OF 03/31/2016

                        Veterans First, Santa Ana, CA, Did Not
 2015-LA-1002           Administer and Spend Its HUD Funding in       04/16/2015   08/14/2015   07/31/2016
                        Accordance With HUD Requirements

                        HUD’s Claim Payment System Did Not
 2015-LA-0001           Always Identify Ineligible FHA-HAMP Partial   04/20/2015   08/19/2015   06/30/2016
                        Claims




80
                                                                                                 TABLES




REPORT                                                                     DECISION     FINAL
               REPORT TITLE                                   ISSUE DATE
NUMBER                                                                     DATE         ACTION

               The Housing Authority of the City of Comer
2015-AT-1002   Did Not Comply With Conflict-of-Interest       04/24/2015   05/19/2015   05/31/2016
               and Procurement Requirements

               The City of Paterson, NJ’s HOME
               Investment Partnerships Program Controls
2015-NY-1005                                                  04/30/2015   06/03/2015   04/29/2016
               Did Not Ensure Compliance With
               Regulations

               Compliance With the Improper Payments
2015-FO-0005                                                  05/15/2015   10/02/2015   08/31/2018
               Elimination and Recovery Act

               First Niagara Bank, Lockport, NY, Did Not
               Always Properly Implement HUD’s Loss
2015-NY-1006                                                  05/22/2015   11/19/2015   05/22/2016
               Mitigation Requirements in Servicing
               FHA-Approved Mortgages

               The Housing Authority of the County of
               San Bernardino, San Bernardino, CA, Used
2015-LA-1004                                                  05/29/2015   09/16/2015   09/09/2016
               Shelter Plus Care Program Funds for
               Ineligible and Unsupported Participants

               The State of New Jersey Did Not Comply
               With Federal Procurement and Cost
2015-PH-1003                                                  06/04/2015   10/02/2015   Note 3
               Principle Requirements in Implementing Its
               Disaster Management System

               The Housing Authority of Bexar County, TX,
               Did Not Operate Its HUD Public Housing
2015-FW-1806                                                  06/11/2015   08/28/2015   07/01/2016
               Programs in Accordance With Regulations
               and Other Requirements

               Potential Antideficiency Act Violation
2015-FO-0801                                                  06/16/2015   12/11/2105   06/16/2016
               HOME Investment Partnerships Program

               HUD Did Not Adequately Implement or
               Provide Adequate Oversight To Ensure
2015-FW-0001                                                  06/16/2015   10/07/2015   10/14/2016
               Compliance With Environmental
               Requirements

               The City of New Orleans, LA, Did Not
2015-FW-1002   Always Comply With Requirements When           06/26/2015   09/29/2015   06/01/2016
               Administering Its 2013 Disaster Relief Grant

               Prudential Huntoon Paige Associates, LTD,
               Did Not Underwrite and Process a $19.9
2015-AT-1003                                                  06/30/2015   09/18/2015   08/10/2016
               Million Loan in Accordance With HUD
               Requirements




                                                                                                   81
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                             DECISION     FINAL
                        REPORT TITLE                                   ISSUE DATE
 NUMBER                                                                             DATE         ACTION

                        The City Used Grant Funds for
                        Unsupported Salary and Project Costs and
 2015-DE-1002                                                          06/30/2015   10/28/2015   05/31/2016
                        Did Not Properly Complete Environmental
                        Reviews of Its Projects

                        The City Of Colorado Springs Did Not
 2015-DE-1003           Always Administer Its HOME Program in          06/30/2015   10/28/2015   05/31/2016
                        Accordance With Applicable Requirements

                        HUD Did Not Provide Adequate Oversight
 2015-LA-0002           of the Section 184 Indian Home Loan            07/06/2015   10/28/2015   11/02/2016
                        Guarantee Program

                        The City of High Point Did Not Properly
                        Administer Its Lead-Based Pain Hazard
 2015-AT-1005                                                          07/09/2015   11/06/2015   11/07/2016
                        Control Grants in Compliance With Federal
                        Requirements

                        NOVA Financial & Investment Corporation’s
                        FHA-Insured Loans With Downpayment
 2015-LA-1005                                                          07/09/2015   09/11/2015   Note 3
                        Assistance Gifts Did Not Always Meet HUD
                        Requirements

                        Overincome Families Resided in Public
 2015-PH-0002                                                          07/21/2015   01/15/2016   04/01/2016
                        Housing Units

                        The State of Florida, Tallahassee, FL, Did
                        Not Properly Support the Eligibility of Some
 2015-AT-1006                                                          07/27/2015   11/24/2015   05/23/2016
                        Funds Used for the CDBG Disaster
                        Recovery Program

                        HUD Did Not Adequately Oversee
 2015-PH-0003           Enhanced Vouchers Administered by New          07/29/2015   10/29/2015   10/28/2016
                        York Agencies

                        HUD Did Not Always Provide Adequate
                        Oversight of Its Section 203(k)
 2015-CH-0001                                                          07/31/2015   11/27/2015   11/24/2016
                        Rehabilitation Loan Mortgage Insurance
                        Program

                        Berkadia Approved a Mortgage for the Temtor
 2015-KC-1005                                                          08/04/2015   12/02/2015   11/16/2016
                        Project That Was Not Economically Sound

                        The Office of Community Planning and
                        Development’s Reviews of Matching
 2015-KC-0002           Contributions Were Ineffective and Its         08/11/2015   12/09/2015   10/31/2016
                        Application of Match Reductions Was Not
                        Always Correct




82
                                                                                             TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

               Prudential Huntoon Paige Associates, LTD,
               Did Not Underwrite and Process a $22
2015-AT-1007                                                 08/14/2015   09/11/2015   12/02/2016
               Million Loan in Accordance With HUD
               Requirements

               HUD’s Office of Multifamily Asset
               Management and Portfolio Oversight Did
2015-AT-0002                                                 08/21/2015   12/16/2015   09/30/2016
               Not Comply With Its Requirements For
               Monitoring Management Agents’ Costs

               HUD Policies Did Not Always Ensure That
2015-PH-0004   HECM Borrowers Complied With Residency        08/21/2015   12/18/2015   12/18/2016
               Requirements

               Broward County, Fort Lauderdale, FL, Did
               Not Properly Administer One of Its Projects
2015-AT-1008                                                 08/23/2015   10/30/2015   06/21/2016
               and Did Not Comply With Some Match
               Requirements

               HUD’s Office of Public Housing
               Investments Could Improve Its Oversight of
2015-CH-0802   the Chicago Housing Authority’s Exception     08/26/2015   10/29/2015   10/15/2016
               Payment Standards Under Its Moving to
               Work Housing Choice Voucher Program

               HUD Did Not Complete an Adequate
2015-AT-0003   Front-End Risk Assessment for the Rental      09/03/2015   12/21/2015   06/30/2016
               Assistance Demonstration

               St. Francis Hospital, Inc., Did Not Comply
               With the Executed Regulatory Agreement
2015-AT-1009                                                 09/03/2015   10/17/2015   11/14/2016
               and Federal Regulations for the HUD
               Section 242 Program

               New Core Project: Release 1 of Phase 1
2015-DP-0007                                                 09/03/2015   10/22/2015   09/30/2016
               New Core Interface Solution

               The Duson Housing Authority, Duson, LA,
               Failed To Administer Its Public Housing
2015-FW-1808                                                 09/10/2015   11/05/2015   11/03/2016
               Program in Accordance With HUD
               Requirements

               New York State Did Not Always Administer
               Its Rising Home Enhanced Buyout Program
2015-NY-1010                                                 09/17/2015   03/01/2016   02/16/2017
               in Accordance With Federal and State
               Regulations




                                                                                                83
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        Program Control Weaknesses Lessened
                        Assurance That New York Rising Housing
 2015-NY-1011                                                         09/17/2015   03/18/2016   Note 3
                        Recovery Program Funds Were Always
                        Disbursed for Eligible Costs

                        HUD Did Not Have Effective Controls or
 2015-LA-0003           Clear Guidance in Place for the FHA-HAMP      09/18/2015   03/23/2016   09/30/2016
                        Partial Claim Loss Mitigation Option

                        The Jefferson Metropolitan Housing
                        Authority, Steubenville, OH, Did Not
 2015-CH-1007                                                         09/24/2015   01/13/2016   12/31/2016
                        Adequately Enforce HUD’s Housing Quality
                        Standards and Its Own Requirements

                        Veterans First Did Not Administer or Spend
 2015-LA-1802           Its Supportive Housing Program Grants in      09/24/2015   10/29/2015   10/25/2016
                        Accordance With HUD Requirements

                        The Housing Authority of the City of South
                        Bend, IN, Did Not Always Comply with HUD
 2015-CH-1008           Requirements and Its Own Policies             09/25/2015   01/22/2016   12/31/2016
                        Regarding the Administration of Its Section
                        8 Housing Choice Voucher Program

                        The State of Maryland Could Not Show
 2015-PH-1005           That Replacement Homes Complied With          09/25/2015   01/19/2016   01/19/2017
                        the Green Building Standard

                        The State of Illinois’ Administrator Lacked
                        Adequate Controls Over the State’s
 2015-CH-1009           Community Development Block Grant             09/30/2015   01/28/2016   01/27/2017
                        Disaster Recovery Program-Funded
                        Projects

                        The Cooperative and Management Agent
                        Lacked Adequate Controls Over the
 2015-CH-1010                                                         09/30/2015   01/28/2016   01/28/2017
                        Operation of Carmen-Marine Apartments,
                        Chicago, IL

                        LoanCare Did Not Always File Claims for
                        Foreclosed-Upon Properties Held on
 2015-KC-1012                                                         09/30/2015   01/04/2016   12/21/2016
                        Behalf of Ginnie Mae and Convey Them to
                        FHA in a Timely Manner

                        loanDepot’s FHA-Insured Loans With
 2015-LA-1009           Downpayment Assistance Funds Did Not          09/30/2015   01/12/2016   Note 3
                        Always Meet HUD Requirements




84
                                                                                                                       TABLES




 REPORT                                                                                    DECISION           FINAL
                       REPORT TITLE                                      ISSUE DATE
 NUMBER                                                                                    DATE               ACTION

                       loanDepot’s FHA-Insured Loans With
                       Golden State Finance Authority
 2015-LA-1010                                                            09/30/2015        01/12/2016         Note 3
                       Downpayment Assistance Gifts Did Not
                       Always Meet HUD Requirements

                       The City of Richmond, CA, Did Not
                       Adequately Support Its Use of HUD-Funded
 2015-LA-1803                                                            09/30/2015        01/08/2016         06/30/2016
                       Expenses for Its Filbert Phase 1 and Filbert
                       Phase 2 Activities

                       The Richmond Redevelopment and
                       Housing Authority, Richmond, VA, Did Not
 2015-PH-1008                                                            09/30/2015        10/29/2015         01/27/2017
                       Comply With HUD Requirements When
                       Procuring Services



Audits excluded:
78 audits under repayment plans
31 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




                                                                                                                         85
SEMIANNUAL REPORT TO CONGRESS




TABLE C

Inspector General-issued reports with questioned and unsupported costs at 3/31/2016
(thousands)

                                                                                     NUMBER OF
                                                                                                               QUESTIONED                    UNSUPPORTED
  AUDIT REPORTS                                                                      AUDIT
                                                                                                               COSTS                         COSTS
                                                                                     REPORTS

           For which no management decision had
  A1       been made by the commencement of the                                                      6313               $568,338                  $297,887
           reporting period

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

           For which additional costs were added to
  A3                                                                                                     -                    1,605                    172
           reports in beginning inventory

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

  B1       Which were issued during the reporting period                                               19                 318,070                  316,274

  B2       Which were reopened during the reporting period                                              0                           0                    0

   SUBTOTALS (A + B)                                                                                  87                  915,346                  619,503

           For which a management decision was made
  C                                                                                                 5414                  438,287                  368,836
           during the reporting period

           (1) Dollar value of disallowed costs:                                                     2215                 324,966                  307,003
                Due HUD                                                                               39                    89,401                  38,199
                Due program participants

           2) Dollar value of costs not disallowed                                                    616                   23,920                  23,634

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

           For which no management decision had been                                                  28                  449,726                  245,497
  E
           made by the end of the reporting period                                               <52>   17
                                                                                                                    <368,385>       17
                                                                                                                                                <189,237>17

13 Due to a system malfunction, an audit that was closed out was not detected in reporting at the conclusion of the reporting cycle.
    Therefore, the beginning count and balance are being reduced to account for the amount of that report.
14 Twenty-one audit reports also contain recommendations with funds to be put to better use.
15 Seven audit reports also contain recommendations with funds due program participants.
16 Six audit reports also contain 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.




86
                                                                                                                                                     TABLES




TABLE D

Inspector General-issued reports with recommendations that funds be put to better use at
3/31/2016 (thousands)

                                                                                                              NUMBER OF
                                                                                                                                       DOLLAR
  AUDIT REPORTS                                                                                               AUDIT
                                                                                                                                       VALUE
                                                                                                              REPORTS

          For which no management decision had been made by the
  A1                                                                                                                           35             $2,437,637
          commencement of the reporting period

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

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

  A4      For which costs were added to noncost reports                                                                         0                      0

  B1      Which were issued during the reporting period                                                                        12              1,625,171

  B2      Which were reopened during the reporting period                                                                       0                      0

  SUBTOTALS (A + B)                                                                                                            49             4,064,662

          For which a management decision was made during the
  C                                                                                                                          2518               435,524
          reporting period

          (1) D
               ollar value of recommendations that were agreed
              to by management:                                                                                                  5               86,712
                Due HUD                                                                                                        21               348,812
                Due program participants

          2) Dollar value of recommendations that were not agreed to by
                                                                                                                                0                      0
              management

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

          For which no management decision had been made by the end                                                            22             3,627,284
  E
          of the reporting period                                                                                        <32>19              <701,978>19

18 Twenty-one audit reports also contain recommendations with questioned costs.
19 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




                                                                                                                                                       87
SEMIANNUAL REPORT TO CONGRESS




EXPLANATIONS OF TABLES C AND D

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




88
                                                OIG TELEPHONE DIRECTORY




OIG TELEPHONE DIRECTORY


OFFICE OF AUDIT
HEADQUARTERS OFFICE		Washington, DC			202-402-0364



OFFICE OF AUDIT
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



                                                                   89
SEMIANNUAL REPORT TO CONGRESS




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



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



REGION 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
HEADQUARTERS			Washington, DC			202-708-5998




OFFICE OF INVESTIGATION
REGION 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




90
                                          OIG TELEPHONE DIRECTORY




REGION 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



REGION 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




                                                              91
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				913-551-5566

					Salt Lake City, UT			801-524-6090

					St. Louis, MO				314-539-6559

					Seattle, WA				206-220-5380


REGION 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					Kansas City, KS				913-551-5566

Investigation				Kansas City, KS				913-551-5566




92
                                                                                                                              ACRONYMS LIST




ACRONYMS AND ABBREVIATIONS LIST

ACD..................................................................Accelerated Claims Disposition program

ADA..................................................................Antideficiency Act

AFR...................................................................agency financial report

ALO...................................................................audit liaison officer

AO....................................................................administrative officer

ARCATS............................................................Audit Resolution and Corrective Action 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

CIGIE................................................................Counsel of the Inspectors General on Integrity and Efficiency

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

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

DCCO...............................................................Departmental Claims Collection Officer

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

DEC...................................................................Departmental Enforcement Center

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

ERC...................................................................Ethics Research Center

FAEC.................................................................Federal Audit Executive Counsel

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

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

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

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

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

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

FISMA...............................................................Federal Information Security Modernization Act

GAAP................................................................generally accepted accounting principles

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

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

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

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




                                                                                                                                       93
SEMIANNUAL REPORT TO CONGRESS




ACRONYMS AND ABBREVIATIONS LIST                                                                                          (CONTINUED)



HIAMS.............................................................HUD Integrated Acquisition Management System
HOA..................................................................homeowner association

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

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

ICP....................................................................Integrity and Complinace Program

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

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

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

IRS-CI...............................................................Internal Revenue Service, Criminal Investigations

ISCM.................................................................information security continuous monitoring

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

MIP...................................................................mortgage insurance premium

NSP...................................................................Neighborhood Stabilization Program

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

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

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

OHF..................................................................Office of Hospital Facilities

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

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

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

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

PDAS.................................................................Principal Deputy Assistant Secretary

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

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

QAP..................................................................qualified allocation plan

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

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

UFMIP...............................................................upfront mortgage insurance premium

USAO................................................................U.S. Attorney’s Office

USPS.................................................................United States Postal Service

USSGL..............................................................United States Standard General Ledger

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




94
                                                                                                                                      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

  Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to the                                                  14 - 36
  administration of programs and operations of the Department.

  Section 5(a)(3)-identification of each significant recommendation described in previous                                                    Appendix 3,
  Semiannual Report on which corrective action has not been completed.                                                                       Table B, 67

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

  Section 5(a)(4)-summary of matters referred to prosecutive authorities and the                                                                 14 - 36
  prosecutions and convictions that have resulted.

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

  Section 5(a)(6)-listing of each audit report completed during the reporting period, and for                                                Appendix 2,
  each report, where applicable, the total dollar value of questioned and unsupported costs                                                      61
  and the dollar value of recommendations that funds be put to better use.

  Section 5(a)(7)-summary of each particularly significant report.                                                                               14 - 36

  Section 5(a)(8)-statistical tables showing the total number of audit reports and the total                                                 Appendix 3,
  dollar value of questioned and unsupported costs.20                                                                                        Table C, 86

  Section 5(a)(9)-statistical tables showing the total number of audit reports and the dollar                                                Appendix 3,
  value of recommendations that funds be put to better use by management.                                                                    Table D, 87

  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, 65

  Section 5(a)(11)-a description and explanation of the reasons for any significant revised                                                         53
  management decisions made during the reporting period.

  Section 5(a)(12)-information concerning any significant management decision with which                                                            55
  the Inspector General is in disagreement.

  Section 5(a)(13)-the information described under section 05(b) of the Federal Financial                                                           56
  Management Improvement Act of 1996.
20 Unsupported costs are a subset of questioned costs that the IG Act requires be identified separately from the cumulative questioned costs identified.



                                                                                                                                                           95
SEMIANNUAL REPORT TO CONGRESS




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, call the U.S. Department of Housing and Urban Development, Office of Inspector General.




96
                                                                 CHAPTER 1 XXXXXX




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

                      Washington, DC 20410




                              Internet

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

ALL INFORMATION IS CONFIDENTIAL, AND YOU MAY REMAIN ANONYMOUS.




                                                                             97
                   U.S. DEPARTMENT
                   OF HOUSING
                   AND URBAN
                   DEVELOPMENT



Report Number 75
www.hudoig.gov