oversight

SAR 76 - Semiannual Report to Congress for the period Ending September 30, 2016

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-12-28.

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

OFFICE OF INSPECTOR GENERAL


SEMIANNUAL REPORT TO CONGRESS
 FOR THE PERIOD ENDING SEPTEMBER 30, 2016




                                            U.S. DEPARTMENT
                                            OF HOUSING
                                            AND URBAN
                                            DEVELOPMENT
OUR MISSION
 To provide independent,
 objective, and impactful
oversight of the Department
  to help ensure efficient
  and effective programs
      and operations.
OUR VALUES
  Accountability
    Courage
     Respect
   Stewardship
      Trust
    OUR VISION
 To be the Office of Inspector General
of choice for driving accountability and
       trust in Federal programs.
DIVERSITY AND EQUAL OPPORTUNITY
   The promotion of high standards and equal employment opportunity

 for employees and job applicants at all levels. The Department of Housing and

Urban Development (HUD OIG), reaffirms its commitment to nondiscrimination

 in the workplace and the recruitment of qualified employees without prejudice

 regarding their gender, race, religion, color, national origin, sexual orientation,

   disability, or other classification protected by law. HUD OIG is committed

 and proactive in the prevention of discrimination and ensuring freedom from

   retaliation for participating in the equal employment opportunity process

           in accordance with departmental policies and procedures.
PROFILE OF PERFORMANCE
 For the period April 1, 2016, to September 30, 2016
 AUDIT RESULTS1                                                                                         THIS REPORTING PERIOD                                    FISCAL YEAR 2016

 Recommendations that funds be put to better use                                                                  $5,152,580,134                                     $6,777,751,436

 Recommended questioned costs                                                                                      $196,249,089                                       $514,122,502

 Collections from audits                                                                                             $10,122,659                                       $17,314,737

 Administrative sanctions                                                                                                    0                                                  0

 Civil actions                                                                                                               13                                                13

 Subpoenas                                                                                                                    7                                                16

 Personnel action                                                                                                            0                                                  0


 INVESTIGATION RESULTS1                                                                                 THIS REPORTING PERIOD                                    FISCAL YEAR 2016

 Total restitutions and judgments                                                                                   $127,910,568                                      $266,246,221

 Total recoveries and receivables to HUD programs                                                                   $105,598,621                                      $140,515,816

 Arrests                                                                                                                    102                                               230

 Indictments and informations                                                                                               147                                               289

 Convictions, pleas, and pretrial diversions                                                                                157                                               302

 Civil actions                                                                                                               18                                                70

 Total administration sanctions                                                                                            109                                                247

      Suspensions                                                                                                            51                                                97

      Debarments                                                                                                             47                                               106

      Limited denial of participation                                                                                        0                                                  0

      Removal from program participation                                                                                     4                                                  9

      Evictions                                                                                                              4                                                 11

      Other2                                                                                                                  3                                                24

 Systemic implication reports                                                                                                0                                                  1

 Search warrants                                                                                                            40                                                 64

 Subpoenas                                                                                                                 436                                                940


 JOINT CIVIL FRAUD RESULTS1                                                                             THIS REPORTING PERIOD                                    FISCAL YEAR 2016
 Recoveries and receivables to HUD programs or
                                                                                                                   $907,282,798                                       $909,174,798
 HUD program participants
 Recoveries and receivables for other entities3                                                                    $677,679,800                                       $677,730,800
 Recommendations that funds be put to better use                                                                        $55,405                                           $55,405
 Civil actions                                                                                                               16                                                18
 Administrative sanctions                                                                                                    0                                                  0

1 T
   he 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 Results or Investigation Results. These results include civil settlements of $1.2 billion from Wells Fargo, $113 million from Freedom Mortgage
  Corporation, $70 million from Franklin American Mortgage Company, $64 million from M&T Bank, $52.4 million from Regions Bank, $83 million from Branch Banking and Trust Company, and $1 million
  from RANlife, Inc. Results are further detailed in chapter 7.
2 Includes reprimands, suspensions, demotions, or terminations of the employees of Federal, State, or local governments or of Federal contractors and grantees, as the result of OIG activities.
3 This amount represents funds that relate to HUD programs but were paid to other entities rather than to HUD, such as funds paid to the U.S. Treasury for general government purposes.
DURING THIS REPORTING PERIOD, WE

HAD NEARLY $5.2 BILLION IN FUNDS TO BE

PUT TO BETTER USE, QUESTIONED COSTS

OF MORE THAN $1.1 BILLION, AND MORE

THAN $884 MILLION IN COLLECTIONS,

RESULTING FROM 109 AUDITS, AND OBTAINED

MORE THAN $127 MILLION IN RESTITUTIONS

AND JUDGMENT DUE TO OUR INVESTIGATIVE

EFFORTS. OF THIS AMOUNT, MORE THAN

$105 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 with great pleasure that I submit the   allocated for disaster relief at eight agencies had been spent. In
                        U.S. Department of Housing and Urban          addition, seven of the eight agencies had asked for and received
                        Development (HUD), Office of Inspector        extensions, which increased the time those affected by the
                        General’s (OIG) Semiannual Report to          disaster had to wait for disaster relief funds.
                        Congress for the second half of fiscal           In a joint civil fraud effort, Wells Fargo Bank, a Federal
                        year 2016. This report describes the
                                                                      Housing Administration (FHA) direct endorsement lender,
                        remarkable accomplishments of the
                                                                      entered into a settlement agreement for $1.2 billion for
                        talented public servants of HUD OIG. By
                                                                      certifying to HUD from May 2001 through December 2008
promoting better stewardship and accountability, HUD OIG
                                                                      that certain loans were eligible for FHA mortgage insurance
staff continues to have a lasting impact on the Department and
our communities for the benefit of the American people. This          when they were not. In addition, from October 2005 through
last year, the OIG’s phenomenal contribution realized a savings       December 2010, Wells Fargo failed to report to HUD that the
of nearly $8.5 billion which represents a return on investment of     majority of FHA loans that its internal quality control assurance
67 to 1 for every dollar spent on our work.                           reviews had identified as having material deficiencies.
     Our mission at HUD OIG is to provide independent,                   In another case, four former employees of the Morgan City
objective, and impactful oversight of the Department to help          (Louisiana) Housing Authority were sentenced in U.S. District
ensure efficient and effective programs and operations. This          Court for their part in defrauding the Authority of more than
is done through the Offices of Audit, of Evaluation and of            $500,000 by writing themselves unauthorized bonuses. Their
Investigation which are supported by the Offices of Legal             sentences ranged from five years’ probation to three years
Counsel and of Management and Technology.
                                                                      imprisonment and fines and restitution that ranged from
     In the past year, HUD OIG has conducted a number of
                                                                      $100,040 to $165,405.
significant audits, evaluations, and investigations including
                                                                         Further, the OIG conducted a number of impactful
findings that the Government National Mortgage Association’s
                                                                      evaluations during this reporting period including a robust
financial statements did not meet generally accepted
accounting principles and that the Department misused the             review of the Department’s cybersecurity posture, a look into
Intergovernmental Personnel Act to hire senior staff members.         HUD’s processes for distributing grants for disaster recovery,
In addition, and widely reported in the news, was HUD OIG’s           and a review to assess the performance of HUD’s programs to
discovery that tens of thousands of overincome individuals            preserve and revitalize affordable housing.
and families were living in public housing while a substantial           Another area of significant development has been the
number of qualified applicants remained on waiting lists              maturing of our internal Integrity and Compliance Program
nationwide. This resulted in bi-partisan legislation in just under    (ICP), which we launched a year ago. The ICP continues to
nine months, an exceptional achievement.                              demonstrate our commitment to the public to maintain our
     In addition, two audits during this reporting period were        high level of integrity and dedication to making values-based
especially noteworthy. In one, the State disaster recovery
                                                                      ethics the standard for our conduct.
grantee procurement processes audit, HUD OIG discovered
                                                                         In closing, I would like to express my continued gratitude to
that grantees struggled with their certification of accurate
                                                                      Congress and the Department for their sustained commitment
supporting documentation because of a lack of adequate
                                                                      to improving HUD’s programs and operations. I also want to
controls over the process. This situation resulted in more
than $4.9 billion in disaster relief funds not being disbursed or     reiterate my sincere appreciation of the people of HUD OIG for
put to better use. In another, we led a review of the Disaster        their dedication to the critically important work they undertake
Relief Appropriations Act, 2013, as part of a Council of the          every day. Through their collective effort, HUD OIG has
Inspectors General on Integrity and Efficiency cross-cutting          surpassed its goals and fulfilled its mission and responsibilities
initiative, and discovered that only a third of the $46.5 billion     to our Nation.




                                                                      David A. Montoya | Inspector General
TRENDING




                           PROGRAM

INTEGRITY AND COMPLIANCE PROGRAM: THE FIRST STEPS
As we conclude the first year of the Integrity and Compliance Program (ICP), we are pleased to report the
success of our first steps in demonstrating the U.S. Department of Housing and Urban Development, Office
of Inspector General’s commitment to the public to maintain a high standard of integrity by making values
based conduct the standard for all of our employees.

Thus far we have
•	 Completed an extensive survey, with an astounding 74 percent response rate, to form the baseline
   for our program;
•	   Briefed the results of the survey to the entire organization and posted the survey results on the
     ICP landing page;
•	   Completed reports focused on various groups (and briefed these reports to the leadership of every group)
     to better understand the needs of each other as we move forward with ICP efforts;
•	   Provided training on Respect in the Workplace to all senior and midlevel leaders in the organization; and
•	   Revised, published, and defined core values for the organization. These are: accountability, courage,
     respect, stewardship, and trust.
    We have also determined that our Senior Executive Service (SES) corps should take a strong lead in
focusing on integrity. To meet this challenge, they took part in developing an action plan to bring integrity
to the forefront in their areas. Communication was identified as an area that could be improved, and we are
focused on improving communication. All Assistant Inspectors General are contacting their staffs to open
dialogue on the survey results and the new core values.
   We are focused on a “speak up – listen up” culture. As we move forward with the ICP, this theme will
become more prevalent and pronounced. We want a culture in which all levels of our organization feel
comfortable speaking with and listening to each other.
     The steps we will take to further develop ICP are:
•	   Develop and launch training throughout the organization wide on the integrity and compliance issues
     identified in the survey;
•	   Publish and distribute a guide for reporting so everyone in the organization knows where to go if an issue
     is identified; and
•	   Publish a summary of disciplinary action taken within the organization so all employees know that our
     standards are enforced.
    We will perform our work with the highest level of integrity. It is fundamental to maintaining the public
trust and fulfilling our mission. Integrity is also essential to the way we conduct ourselves as employees and
how we treat each other as individuals. The Integrity and Compliance Program is a catalyst for this.
TABLE OF CONTENTS
Chapter 1 – Single-Family Programs.............................................................................................................. 14
Audit...........................................................................................................................................................................................14
Investigation.............................................................................................................................................................................16



Chapter 2 – Public and Indian Housing Programs.........................................................................................17
Audit........................................................................................................................................................................................... 17
Investigation.............................................................................................................................................................................23



Chapter 3 – Multifamily Housing Programs.................................................................................................. 24
Audit...........................................................................................................................................................................................24
Investigation............................................................................................................................................................................ 26
Evaluation................................................................................................................................................................................ 26



Chapter 4 – Community Planning and Development Programs................................................................. 28
Audit.......................................................................................................................................................................................... 28
Investigation............................................................................................................................................................................. 31



Chapter 5 – Disaster Recovery Programs...................................................................................................... 32
Audit...........................................................................................................................................................................................32
Investigation.............................................................................................................................................................................35
Evaluation................................................................................................................................................................................ 36


Chapter 6 – Other Significant Audits and Investigations............................................................................ 37
Audit...........................................................................................................................................................................................37
Evaluation................................................................................................................................................................................ 39


Chapter 7 – Joint Civil Fraud Initiatives........................................................................................................ 41

Chapter 8 – Legislation, Regulations, and Other Directives....................................................................... 45

Chapter 9 – Audit Resolution.......................................................................................................................... 49

Chapter 10 – Whistleblower Ombudsman Program..................................................................................... 68

Appendix 1 – Peer Review Reporting............................................................................................................. 70

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

Appendix 3 – Tables.......................................................................................................................................... 82

OIG Telephone Directory............................................................................................................................... 104

Acronyms and Abbreviations List.................................................................................................................. 108

Reporting Requirements.................................................................................................................................111
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               11 audits              $23,162,575                    $85,852,210


REVIEW OF GINNIE MAE’S PROCESS OF RESOLVING UNINSURED POOLED LOANS
The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
the Government National Mortgage Association’s (Ginnie Mae) process for identifying and removing
uninsured single-family FHA loans from mortgage-backed securities (MBS) pools to determine whether
loans remained in Ginnie Mae MBS pools for 1 year or longer without the required mortgage insurance.
     Ginnie Mae allowed at least 345 uninsured single-family loans valued at nearly $50 million to remain in
its MBS pools for more than 1 year after the lenders issued the related securities.
     OIG recommended that Ginnie Mae establish (1) a maximum time during which loans may remain
pooled without insurance and (2) a process for requiring the removal of pooled loans that remain uninsured
at that time to put $49.3 million to better use. (Audit Report:  2016-KC-0002)



REVIEW OF PARTIAL CLAIMS COLLECTION AFTER FHA-INSURED MORTGAGES TERMINATE
HUD OIG audited HUD to determine whether it collected partial claims upon termination of the related FHA-
insured mortgages.  OIG initiated this audit because of its concern that FHA partial claims could go uncollected.
    HUD did not collect an estimated 1,361 partial claims that became due in fiscal year 2015.  As a result,
partial claims totaling nearly $21.5 million were not returned to the FHA insurance fund.
    OIG recommended that HUD (1) require its loan-servicing contractor to complete the necessary
debt collection efforts for the uncollected partial claims that became due during fiscal year 2015, (2) add
a performance requirement measuring partial claims collection to its contractor’s performance work
statement to put these funds to better use, and (3) strengthen procedures to better identify and resolve all due
and payable partial claims. (Audit Report:  2016-KC-0001)



REVIEW OF HUD’S OVERSIGHT OF FHA-INSURED PROPERTIES TO ENSURE SAFE WATER
HUD OIG audited HUD’s oversight of FHA-insured loans in Flint, MI, to determine whether HUD ensured
that properties in Flint that were approved for FHA mortgage insurance had a continuing and sufficient
supply of safe and potable water.
    HUD did not ensure that lenders verified that properties in Flint that were approved for FHA mortgage




14
                                                                                     CHAPTER 1 SINGLE-FAMILY PROGRAMS




insurance had a continuing and sufficient supply of safe and potable water.  Specifically, 11 of the 17
files reviewed did not contain evidence of water testing to show that the water was safe, and later testing
performed by the State of Michigan showed that at least 4 of the 11 properties had lead and copper levels
above the Environmental Protection Agency’s action levels.  The issues identified represent an ongoing safety
concern.  Further, HUD and homeowners face an increased risk of loss if property values decrease due to the
water safety issues, and homeowners may not have sufficient resources to attain and maintain safe water. 
     OIG recommended that HUD direct the applicable lenders to provide evidence showing that the
properties had a safe and potable water source at the time the loans closed and were endorsed. If the
lenders cannot provide this evidence, HUD should direct them to perform water testing and any necessary
remediation to ensure that the properties have a safe and potable water source or indemnify HUD against
any future loss, thereby putting up to $10.8 million to better use.  OIG also recommended that HUD take
appropriate administrative action against the parties involved for any cases in which they did not take
appropriate steps to ensure that properties in Flint had a safe and potable water source. OIG further
recommended that HUD improve its controls to ensure that it does not insure additional loans in Flint for
properties that do not have a safe and potable water source. (Audit Report:  2016-PH-0003)



REVIEW OF HUD’S REAL ESTATE-OWNED MANAGEMENT AND MARKETING III PROGRAM
HUD OIG audited P.K. Management Group, Inc. (PKMG), in Doral, FL, a contracted field service manager in
HUD’s real estate-owned Management and Marketing III program, to determine whether PKMG provided
property preservation and protection services in accordance with its contract with HUD and its own
requirements.
    PKMG did not always provide property preservation and protection services in accordance with its
contract and its own requirements.  Specifically, it did not ensure that (1) 82 HUD-owned vacant properties
were in ready-to-show condition and (2) 23 custodial properties were free of health and safety hazards and
the exteriors were clean, safe, sanitary, and secured.  In addition, PKMG billed HUD for properties for which it
had not provided property preservation and protection services.  As a result, it inappropriately received more
than $19,000 in property management fees for properties that were not adequately maintained and more than
$2,300 in property management fees for properties that it had not serviced. 
    OIG recommended that HUD require PKMG to (1) certify that the applicable property and preservation
deficiencies have been corrected for the 105 properties cited, (2) reimburse HUD for the property
management fees for the 105 properties that were not adequately maintained, (3) implement adequate
procedures and controls to ensure that all properties comply with its contract and its own requirements to
prevent more than $2.5 million in program funds from being spent over the next year for monthly ongoing
property management fees for properties that do not comply with HUD’s and its own requirements, and (4)
reimburse HUD for the property management fees received for services it had not performed. (Audit Report: 
2016-CH-1008)



REVIEW OF FHA HOME AFFORDABLE MODIFICATION PROGRAM
HUD OIG audited the Georgia Housing and Finance Authority in Atlanta, GA, regarding its implementation
of FHA’s Home Affordable Modification Program (FHA-HAMP) to determine whether the Authority properly
implemented its FHA-HAMP in accordance with HUD’s requirements.
    The Authority did not adequately implement its FHA-HAMP in accordance with HUD’s requirements. 
Specifically, it did not (1) comply with the market rate condition required for FHA-HAMP stand-alone partial
claims, (2) ensure that the borrowers successfully completed their trial payment plans, (3) support that it




                                                                                                                  15
SEMIANNUAL REPORT TO CONGRESS




properly evaluated and independently verified the borrowers’ financial information, and (4) support that it
properly calculated the partial claim and loan modification amounts.  As a result, HUD paid more than $1.1
million for 138 loans that were not eligible or supported for proper implementation of FHA-HAMP, including 3
active modified loans with unpaid principal balances of more than $241,000.
    OIG recommended that HUD require the Authority to (1) reimburse HUD more than $160,000 for claims
and incentive fees paid for 10 loans that were not FHA-HAMP eligible, (2) indemnify HUD for 2 active
modified loans with a total unpaid balance of more than $102,000 that were not FHA-HAMP eligible, (3)
support or reimburse HUD nearly $942,000 for claims and incentive fees paid on 124 loans that may not have
been eligible for FHA-HAMP, (4) support or reimburse HUD nearly $75,000 for partial claims and incentive
fees paid for 3 loans that were not supported as eligible for FHA-HAMP, (5) support or indemnify HUD for 1
active modified loan with an unpaid balance of nearly $139,000 that was not supported as eligible for FHA-
HAMP, and (6) improve its written policies and procedures to ensure implementation of FHA-HAMP in
accordance with HUD’s requirements. (Audit Report:  2016-AT-1011)



REVIEW OF HUD’S REQUIREMENTS IN LOAN ORIGINATION
HUD OIG audited Evergreen Moneysource Mortgage Company, doing business as Evergreen Home Loans, to
determine whether Evergreen’s Las Vegas, NV, branch complied with HUD requirements in the origination of
FHA-insured loans.
     Evergreen did not always originate FHA-insured loans in accordance with HUD regulations. Specifically,
it did not identify unacceptable restrictive covenants on 14 FHA loans that received downpayment assistance. 
Three additional loans reviewed included significant underwriting deficiencies, which would have affected
the insurability of the loans.  These deficiencies resulted in potential losses to the FHA insurance fund of
more than $1.1 million. 
     OIG recommended that HUD require Evergreen to (1) work with HUD to nullify the restrictions on
conveyance that violate HUD policy or indemnify HUD against future losses of more than $867,000 for the 14
loans; (2) indemnify HUD for 3 actively insured loans, which could cause potential losses of nearly $305,000
if they are foreclosed upon and resold; (3) develop procedures to ensure that it reviews all closing documents,
including closing documents for second mortgages associated with downpayment assistance, before
closing the loan; and (4) ensure that it has adequately trained its employees regarding HUD underwriting
requirements, including unallowable restrictions on conveyance.  OIG also recommended that HUD pursue
civil and administrative remedies if legally sufficient. (Audit Report:  2016-LA-1011)


INVESTIGATION
PROGRAM RESULTS

          Administrative-civil actions                    45

     Convictions-pleas-pretrial diversions                52

              Financial recoveries                   $54,708,413




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
3,800 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              32 audits                 $44,246,810                    $79,147,781

SECTION 8 HOUSING CHOICE VOUCHER PROGRAM
HUD’s Office of Inspector General (OIG) audited the Housing Choice Voucher program of the Orange County
Housing Authority in Santa Ana, CA, regarding its housing quality standards to determine whether the
Authority conducted its inspections in accordance with HUD rules and requirements.
    The Authority’s inspections did not adequately enforce HUD’s housing quality standards.  Of the
80 housing units inspected, 42 were in material noncompliance with HUD standards.  For those units,
the Authority’s inspectors failed to report 229 deficiencies that existed when they conducted their last
inspections.  As a result, some tenants lived in housing that was not up to HUD standards, and the Authority
disbursed nearly $218,000 in housing assistance payments for those 42 units. 
    OIG recommended that HUD require the Authority to (1) reimburse its program nearly $218,000 from
non-Federal funds for the 42 units that materially failed to meet HUD standards; (2) certify that the identified
deficiencies have been corrected; (3) ensure that its inspectors are provided up-to-date and consistent
training on conducting inspections, which will prevent more than $48.6 million in program funds from
being spent on housing that does not meet HUD standards over the next year; and (4) develop and implement
quality controls, which ensure that housing complies with HUD standards. (Audit Report:  2016-LA-1003)



HUD OIG audited the Housing Authority of the City of Durham, NC’s Housing Choice Voucher program’s
housing quality standards to determine whether the Authority ensured that program units met HUD’s and its
own housing quality standards.
    The Authority did not always ensure that program units met HUD’s and its own housing quality
standards.  Of 75 program units inspected, 69 failed to comply with HUD’s minimum housing quality
standards and the Authority’s own requirements, and 40 of those were in material noncompliance with the
standards.  For the 40 units in material noncompliance, the Authority’s inspectors failed to observe or report
352 violations that existed when they conducted their latest inspections.  As a result, some tenants lived
in inadequately maintained units, and the Authority disbursed more than $100,000 in housing assistance
payments and received more than $8,000 in administrative fees for the 40 units in material noncompliance. 


                                                                                                                       17
SEMIANNUAL REPORT TO CONGRESS




     OIG recommended that HUD require the Authority to (1) reimburse its program from non-Federal
funds for the 40 units that materially failed to meet HUD’s and its own housing quality standards, (2) ensure
that all violations cited for the units failing to meet housing quality standards have been corrected, and
(3) implement adequate procedures and controls to ensure that all units meet HUD’s and its own housing
quality standards to prevent more than $7.5 million in program funds from being spent on units that do not
comply with HUD’s requirements over the next year. (Audit Report: 2016-AT-1005)



HUD OIG audited the Housing Choice Voucher program of the Housing Opportunities Commission of Mont-
gomery County in Kensington, MD, to determine whether the Commission ensured that its program units
met HUD’s housing quality standards.
     The Commission did not always conduct adequate inspections to ensure that its program units met
housing quality standards.  Of 75 program units inspected, 56 did not meet HUD’s housing quality standards. 
Further, 15 of the 56 were in material noncompliance with HUD standards.  The Commission disbursed
nearly $45,000 in housing assistance payments and received more than $300 in administrative fees for these
15 units.  Over the next year, if the Commission does not implement adequate procedures to ensure that its
program units meet housing quality standards, HUD could pay more than $7.5 million in housing assistance
for units that materially fail to meet those standards.
     OIG recommended that HUD require the Commission to (1) reimburse its program from non-Federal funds
for the 15 units that materially failed to meet HUD’s housing quality standards and (2) implement procedures
and controls to ensure that program units meet housing quality standards. (Audit Report:  2016-PH-1008)



HUD OIG audited the Housing Choice Voucher program of the Westmoreland County Housing Authority
in Greensburg, PA, to determine whether the Authority ensured that its program units met HUD’s housing
quality standards and whether it abated housing assistance payments as required.
    The Authority did not always conduct adequate inspections to ensure that its program units met housing
quality standards, and it did not always accurately calculate housing assistance payment abatements.  Of
78 program units inspected, 65 did not meet HUD’s housing quality standards.  Further, 38 of the 65 were in
material noncompliance with HUD standards.  The Authority disbursed nearly $60,000 in housing assistance
payments and received nearly $3,000 in administrative fees for these 38 units.  Over the next year, if the
Authority does not implement adequate procedures to ensure that its program units meet housing quality
standards, HUD could pay more than $4 million in housing assistance for units that materially fail to meet
those standards. In addition, the Authority did not always accurately calculate housing assistance payment
abatements.  It incorrectly calculated the abatement amount for 7 of 18 units reviewed.  As a result, it did not
abate payments totaling nearly $2,000 for units that did not meet housing quality standards, and it made
excessive abatements totaling $71. 
    OIG recommended that HUD require the Authority to (1) reimburse its program more than $62,000 for
the 38 units that materially failed to meet HUD’s housing quality standards, (2) implement procedures and
controls to ensure that program units meet housing quality standards, and (3) reimburse its program for
housing assistance payments that should have been abated. (Audit Report:  2016-PH-1002)



HUD OIG audited the Housing Choice Voucher program of the Sanford Housing Authority in Sanford, NC, to de-
termine whether the Authority administered its program in accordance with HUD’s and its own requirements.
    The Authority did not administer its program in accordance with HUD regulations and its own requirements. 
Specifically, it did not ensure that the physical conditions of its units complied with housing quality standards




18
                                                                             CHAPTER 2 PUBLIC AND INDIAN HOUSING PROGRAMS




or maintain required eligibility documentation.  Also, it made housing assistance payments on an expired
project-based contract.  As a result, the Authority disbursed and earned more than $250,000 in improper housing
assistance payments and administrative fees and more than $3,000 in housing assistance payments and
administrative fees for files with missing documentation.  Unless the Authority improves the administration of its
program, over the next year, HUD will pay more than $3.3 million in improper housing assistance.
     OIG recommended that HUD require the Authority to (1) reimburse its program from non-Federal funds
for the improper payments and fees, (2) support or reimburse its program from non-Federal funds for the
unsupported payments and fees, (3) ensure that all unit violations cited have been corrected and certify that
the units meet standards, and (4) develop and implement program controls to address the deficiencies cited. 
OIG also recommended that HUD take appropriate administrative action against the Authority’s former
executive director. (Audit Report:  2016-AT-1013)



HUD OIG audited the Housing Authority of the City of Muncie, IN’s Housing Choice Voucher program to deter-
mine whether the Authority administered its program in accordance with HUD’s and its own requirements.
    The Authority did not always administer its program in accordance with HUD’s and its own
requirements.  It did not (1) obtain and maintain required eligibility documentation and (2) correctly
calculate and pay housing assistance and utility allowances.  As a result of these weaknesses, HUD and
the Authority lacked assurance that more than $587,000 in program funds was used appropriately. If the
Authority does not correct its certification process, we estimate that it could overpay nearly $251,000 in
housing assistance over the next year.
    In addition, the Authority did not appropriately use HUD’s Enterprise Income Verification system to
identify program households with unreported or underreported income to recapture overpaid housing
assistance and utility allowances.  As a result, nearly $76,000 in program funds was not available for other
program use.
    The Authority also did not appropriately manage its Family Self-Sufficiency program.  As a result, HUD
and the Authority lacked assurance that (1) program participants benefited from the program or had made
progress toward self-sufficiency and (2) more than $100,000 in program funds was used appropriately.
    OIG recommended that HUD require the Authority to (1) support or reimburse its program from non-
Federal funds for the unsupported housing assistance payments and Family Self-Sufficiency program escrow
fund activities, (2) reimburse its program from non-Federal funds for the ineligible housing assistance
payments, (3) reimburse its program households for the overpayment of housing assistance, (4) transfer more
than $55,000 to its Housing Choice Voucher program, and (5) implement adequate controls to address the
findings cited. (Audit Report:  2016-CH-1006)



PUBLIC HOUSING PROGRAM
HUD OIG audited the calculation process for Public Housing Operating Fund subsidies awarded to PHAs
to determine whether HUD verified Operating Fund calculations to ensure that PHAs received the correct
amounts and recaptured any excess subsidies provided.
    HUD did not always adequately verify the calculation of Operating Fund subsidies to ensure that PHAs
received the correct amount; however, it recaptured the funds once it determined that excess subsidies were
provided to PHAs.  Specifically, (1) unsupported utility expense levels were used in funding calculations, (2)
units that exceeded the limit were ineligibly funded, (3) verification procedures for PHAs’ funding requests
were not always adequately followed, and (4) HUD’s verification procedures were limited.  As a result,
more than $12 million in operating funds disbursed to PHAs was not adequately supported, and more than
$116,000 was ineligible. 



                                                                                                                      19
SEMIANNUAL REPORT TO CONGRESS




    OIG recommended that HUD (1) determine whether any of the overpayment of $3.6 million was ineligible
and recover the ineligible payments; (2) recapture from PHAs the funds ineligibly disbursed for the units
that exceeded the limit; (3) obtain documentation of the utility expense level amounts, verify the accuracy of
the computation of $9 million in Operating Fund subsidies, and recapture ineligible amounts; (4) enhance
controls to ensure that verification procedures for Operating Fund calculations are followed by field office
staff; (5) continue implementing the reconciliation software application to provide greater assurance that
Operating Fund subsidies are accurately calculated based on correct data; and (6) strengthen controls over
record keeping. (Audit Report:  2016-NY-0001)



HUD OIG audited the Housing Authority of the City of Bridgeport, CT, to determine whether Federal funds
were used for eligible and adequately supported costs, procurements were executed in compliance with HUD
regulations, and the Authority had established adequate controls to safeguard equipment.
     Authority officials had not always spent funds for eligible and adequately supported costs, procurement
actions did not always comply with HUD regulations, and controls over inventory were not adequate. 
Specifically, Authority officials (1) spent more than $542,000 for ineligible costs and more than $6.2 million
for inadequately supported costs; (2) failed to properly maintain and reconcile accounting records, resulting
in the unsupported allocation of $1.75 million; (3) charged more than $216,000 and more than $272,000
for legal and public relations services, respectively, that were not procured in compliance with Federal
regulations; and (4) did not ensure that nearly $62,000 in inventory was put to its intended use.  As a result,
HUD lacked assurance that funds were always spent for eligible and properly supported costs, procurements
were made at a reasonable cost, and inventory was accurately accounted for.
     OIG recommended that HUD require Authority officials to (1) repay funds that were spent for ineligible
costs; (2) provide documentation to support that the inadequately supported disbursements were for eligible
costs; (3) reconcile Authority accounting records to ensure that funds were properly allocated; (4) show
that funds spent for legal and public relations services complied with Federal procurement regulations; (5)
properly account for inventory; and (6) strengthen controls over disbursement of funds, maintenance of
accounting and inventory records, and procurement. (Audit Report:  2016-BO-1002)


HUD OIG audited the public housing program of the Jefferson Metropolitan Housing Authority in Steuben-
ville, OH, to determine whether the Authority complied with (1) Federal and its own procurement require-
ments and (2) HUD’s requirements for administering its energy performance contract. 
    The Authority did not always comply with (1) Federal and its own procurement requirements and (2)
HUD’s requirements for administering its energy performance contract.  Specifically, it failed to (1) maintain
adequate documentation to support its procurements and (2) ensure that there were no real or apparent
conflicts of interest in its contracting process.  Additionally, it failed to achieve the expected savings on its
energy improvements.  As a result, HUD and the Authority lacked assurance that more than $964,000 in
public housing operating funds was used appropriately.  Further, the Authority is at risk of defaulting on its
nearly $6 million energy conservation loan, thus potentially encumbering public housing properties.
    OIG recommended that HUD require the Authority to (1) support or reimburse its program from non-
Federal funds for its unsupported procurement and contracting activities, (2) work with HUD to develop a
plan to ensure that energy savings are realized to prevent a potential default on its loan used to purchase
energy conservation equipment attached to the Authority’s public housing properties, and (3) develop and
implement adequate procedures and controls to address the findings cited. (Audit Report:  2016-CH-1005)




20
                                                                               CHAPTER 2 PUBLIC AND INDIAN HOUSING PROGRAMS




HUD OIG audited the fees that the Richmond, VA, Redevelopment and Housing Authority charged to its HUD
housing programs for central office cost center services to determine whether the Authority charged fees to
its HUD housing programs for central office cost center services that were eligible, reasonable, and supported
in accordance with applicable HUD requirements.
     The Authority did not always charge fees to its HUD housing programs for central office cost center services
that were eligible and reasonable in accordance with HUD requirements. Specifically, it charged (1) nearly $508,000
for an information technology fee that was duplicative and (2) $5 million based on an hourly maintenance fee rate
that was unreasonable for the services provided.  It also made ineligible transfers of HUD funds to its central office
cost center.  As a result, the Authority improperly used HUD funds for ineligible expenses and could not show that
the fees paid with HUD funds were reasonable for the services provided.
     OIG recommended that HUD require the Authority to (1) reimburse its public housing projects from non-
Federal funds for the ineligible duplicative information technology fee, (2) provide documentation to show
that the hourly maintenance fees were reasonable for the services provided or reimburse its public housing
projects from non-Federal funds for any amount that it cannot support, and (3) continue its efforts and
develop and implement procedures and controls to improve its operations. (Audit Report:  2016-PH-1005)



HUD OIG audited the Richmond Housing Authority in Richmond, CA, to validate complaint allegations re-
garding whether the Authority spent HUD funds and used its assets in accordance with HUD requirements.
     The complaint allegations had merit.  The Authority mismanaged its financial operations and did
not spend HUD funds and use its assets in accordance with HUD requirements. As a result, it misspent
$2.2 million in HUD funds, had nearly $945,000 in unsupported costs, and incurred other questionable
transactions that unnecessarily limited its resources and effectiveness with its public housing program.
     OIG recommended that HUD determine legal sufficiency and if legally sufficient, pursue remedies under
the Program Fraud Civil Remedies Act and take the appropriate administrative actions against Authority
officials for submitting misleading documentation to HUD.  OIG also recommended that HUD require
the Authority to (1) repay more than $2 million for the ineligible use of HUD funds, more than $53,000 for
duplicate charges, and $60,000 for a City of Richmond-initiated management audit; (2) support nearly $81,000
of the executive director’s salary spent on Authority activities and $180,000 spent on office rent; (3) determine
the proper use of the Authority’s former maintenance building property; and (4) develop and implement
financial policies and procedures for the current operating environment.  OIG further recommended that
HUD work on corrective actions to improve the Authority’s control and accountability regarding its finances
and operations, including but not limited to HUD receivership and separating the Authority’s finances from
those of the City.  (Audit Report:  2016-LA-1006)



HUD OIG audited the Housing Authority of the City of Annapolis, MD’s procurement activities to determine
whether the Authority procured services and products using operating and capital funds in accordance with
applicable requirements.
    The Authority did not always follow applicable requirements when it procured services and products. 
Specifically, it (1) did not document cost estimates before making purchases or selecting a developer, (2) did
not make purchases competitively, (3) acquired services and products without having contracts in place, (4)
paid vendors for services after their contracts had expired, (5) did not select a developer competitively, and (6)
did not properly extend a contract.  As a result, HUD had no assurance that the prices the Authority paid for
services and products using $3 million in Federal funds were fair and reasonable.




                                                                                                                        21
SEMIANNUAL REPORT TO CONGRESS




     OIG recommended that HUD require the Authority to (1) provide documentation to show that prices paid
for services and products were fair and reasonable or reimburse the applicable program from non-Federal
funds for any amount that it cannot support, (2) develop and implement controls to ensure that it complies
with all applicable procurement requirements, and (3) provide training to all employees involved in the
procurement process. (Audit Report:  2016-PH-1007)



HUD OIG audited the Mobile, AL, Housing Board’s financial operations to determine whether the Housing
Board complied with HUD’s financial management requirements for its low-income public housing and Pub-
lic Housing Capital Fund programs.
     The Housing Board did not comply with HUD regulations for its financial operations. Specifically, it
did not inform HUD of the instrumentality status of its nonprofit, which prevented HUD from identifying
an apparent conflict of interest that led to the potential payment of more than $1.2 million to a related
party.  Additionally, it did not comply with its Capital Fund agreement by failing to use its capital funds to
rehabilitate 1,194 of its low-income public housing units and allowing 824 units to remain vacant from 1 to 16
years, including 2 developments that were 100 and 73 percent vacant. 
     OIG recommended that HUD require the Housing Board to (1) provide support showing that a conflict of
interest did not exist or reimburse HUD from non-Federal funds; (2) update its books, records, and policies
and procedures to identify Mobile Development Enterprises as an instrumentality, according to applicable
HUD regulations, to prevent a future actual or apparent conflict of interest; and (3) work with HUD to ensure
that it meets the conditions of its Rental Assistance Demonstration program approval to ensure that its units
are renovated and available to eligible families.  OIG recommended that HUD take appropriate enforcement
action against the Housing Board’s management staff for failing to disclose the instrumentality relationship
between the Housing Board and Mobile Development Enterprises if a conflict of interest exists. (Audit
Report:  2016-AT-1010)



REVIEW OF PAYMENTS FOR OUTSIDE LEGAL SERVICES
HUD OIG audited HUD’s oversight of legal costs at housing agencies participating in the Moving to Work
Demonstration program to determine whether HUD’s oversight was adequate to ensure that the costs were
reasonable and necessary.
     HUD’s oversight of legal costs at Moving to Work housing agencies was not adequate to ensure that
costs were reasonable and necessary.  OIG audited three Moving to Work housing agencies and found that
they did not always make payments for outside legal services in compliance with applicable requirements. 
OIG projected that more than $9.2 million of the $16.5 million that the three agencies paid for outside legal
services during the period October 2007 to September 2012 could be unsupported.  Although total legal costs
at Moving to Work agencies declined from 2010 to 2015, the agencies continued to incur relatively higher costs
for legal services compared to non-Moving to Work agencies.
     OIG recommended that HUD require Moving to Work housing agencies to include a breakdown of their
anticipated and actual costs for legal services in their annual plans and reports. (Audit Report:  2016-PH-0004)



HUD OIG reviewed the payments for outside legal services of the District of Columbia Housing Authority in
Washington, DC, to determine whether the Authority made payments for outside legal services in compli-
ance with applicable requirements.




22
                                                                          CHAPTER 2 PUBLIC AND INDIAN HOUSING PROGRAMS




     The Authority did not always make payments for outside legal services in compliance with applicable
requirements.  It did not always maintain documentation to support payments for legal services.  It also paid
for services (1) performed by unapproved personnel, (2) performed beyond the terms of the contract, and (3)
that were block billed.  As a result, the Authority made nearly $1 million in unsupported payments for outside
legal services.
     OIG recommended that HUD require the Authority to (1) provide documentation to support nearly $1
million in unsupported payments identified by the review or reimburse its program from non-Federal funds
for costs that it cannot support and (2) develop and implement controls to ensure that invoices for legal
services are adequately verified and its payments for outside legal services are made in accordance with the
terms of the related contracts and other applicable requirements. (Audit Memorandum:  2016-PH-1801)


INVESTIGATION
        Administrative-civil actions                       54

   Convictions-pleas-pretrial diversions                   73

            Financial recoveries                      $45,477,969


HOUSING AUTHORITY EXECUTIVES SENTENCED FOR THEFT AND FRAUD
Four former employees of the Morgan City Housing Authority were sentenced in U.S. District Court for their
part in defrauding the Authority. Beginning in 2007 and continuing through 2013, the employees conspired
with each other by issuing and receiving more than $500,000 in bonus payments from the Authority, all of
which they were not entitled to receive.  The executive director was sentenced to 36 months imprisonment
and ordered to pay $111,657 in restitution. The accounting technician was sentenced to 18 months
imprisonment and ordered to pay $137,660 in restitution. The Section 8 housing manager was sentenced
to 12 months imprisonment and ordered to pay $100,040 in restitution. The public housing manager
was sentenced to 5 years probation and ordered to pay $165,405 in restitution. HUD OIG conducted this
investigation. (Morgan City, LA)


HOUSING AUTHORITY DEPUTY DIRECTOR SENTENCED TO 4 YEARS IN PRISON
The former deputy director of South Pittsburg Housing Authority was sentenced to 4 years imprisonment for
theft and 8 years probation for theft of property. The deputy director fraudulently used the Authority credit
card, issued fraudulent payroll checks to herself, and issued checks for travel expenses not authorized and
travel that did not occur. A total of $117,436 was stolen from the Public Housing Authority fund and $10,544
from the Elderly Housing fund. HUD OIG and the Tennessee State Comptroller conducted this investigation. 
(Jasper, TN)




                                                                                                                  23
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 3 – MULTIFAMILY HOUSING PROGRAMS

In addition to multifamily housing developments and Office of Healthcare Programs properties with U.S. De-
partment 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 disabled. 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               12 audits             $6,651,886                    $25,128,561


REVIEW OF MULTIFAMILY ACCELERATED PROCESSING PROGRAM
HUD’s Office of Inspector General (OIG) audited the HUD multifamily accelerated processing (MAP)
program to determine whether (1) HUD adequately reviewed and approved loans underwritten by MAP-
approved lenders for Federal Housing Administration (FHA) insurance and (2) the 2016 MAP Guide was
adequately revised to improve the review and approval process for MAP loans.
    HUD did not adequately review and approve nine loans reviewed, which were underwritten by MAP-
approved lenders for FHA insurance using the 2002 MAP Guide.  Specifically, HUD did not require lenders
to adequately address a number of underwriting components in accordance with MAP underwriting
requirements and lacked adequate monitoring of its approvals of MAP loans.  As a result, it inappropriately
approved the nine loans, submitted by six MAP lenders, which exposed the FHA insurance fund to
unnecessary risk.  In addition, the 2016 MAP Guide was not sufficiently revised and could be further
improved and modified to correct inconsistencies with certain underwriting components and the overall
review and approval process. 
    OIG recommended that HUD (1) ensure that loans approved by HUD are reviewed for compliance with
MAP underwriting requirements, (2) issue alternate guidance to update and clarify inconsistencies in the
2016 MAP Guide, and (3) formalize a training program to ensure that new staff members are familiar with the
Single Underwriter model. (Audit Report: 2016-AT-0001)



REVIEW OF MULTIFAMILY RESIDENT HOME-OWNERSHIP PROGRAM
HUD OIG audited HUD’s resident home-ownership program grant for the West Park Place Condominium
project in Chicago IL, to determine whether the West Park Place Condominium Association and management
agent operated the project in accordance with HUD’s requirements and HUD’s grant agreement with the
West Park Place Resident Association for Preservation.
    The Preservation Association did not transfer ownership of the project’s units to the Condominium
Association as required and still owned eight of the units as of July 2016.  The Condominium Association and
management agent did not determine the fair market value of units to support (1) that owners did not pay
more than the fair market value for their units, (2) that HUD’s secured interest in the units was appropriately




24
                                                                                       CHAPTER 3 MULTIFAMILY PROGRAMS




valued, and (3) the amount of net proceeds that should have been paid to the City’s HOME Investment Trust
Fund from later unit sales.  Further, the Condominium Association and management agent could not provide
sufficient documentation to support that (1) the payments to HUD for initial unit sales were accurate, (2) the
Condominium Association used its share of the proceeds from initial unit sales in accordance with the grant
agreement, and (3) housing was affordable for all members.  As a result, the Condominium Association is at
risk of having to reimburse HUD nearly $13.9 million in program funds.
    OIG recommended that HUD (1) require the Condominium Association to resolve the issues and
implement adequate procedures and controls to address the weaknesses cited and (2) make a preliminary
determination as to whether the Condominium Association is in default of the grant agreement. (Audit
Report:  2016-CH-1009)


HUD OIG audited the Dolores Frances Affordable Housing project in Los Angeles, CA, to determine whether
Dolores Frances was administered in accordance with its regulatory agreement and HUD requirements. 
     Dolores Frances was not administered in accordance with its regulatory agreement and HUD
requirements.  The project made ineligible payments of more than $531,000 for expenses that were not
reasonable and necessary for the operation of the project.  In addition, Dolores Frances inappropriately
secured more than $10.9 million in unsupported loans that encumbered the properties of the project without
HUD approval.  These actions increased the project’s risk of mortgage default.
     OIG recommended that HUD require the owners of Dolores Frances to (1) stop disbursing project funds for
ineligible social services fees and reimburse the project $300,000; (2) reimburse the project for nearly $75,000
in consulting fees and more than $18,000 in fees charged by the management agent that were ineligible; (3)
reimburse the project for more than $114,000 in ineligible legal fees; (4) provide documentation to support
HUD approval for a loan between Dolores Frances and Pico Union Housing Corporation for more than $6.3
million and how the funds were used or remove the loan and associated encumbrance from the project;
(5) provide documentation to support that a loan between Dolores Frances and Alliant for more than $4.5
million was approved by HUD or remove the loan and any associated encumbrance from the project; and (6)
implement controls to ensure that management and ownership follow the project’s policies and procedures, the
regulatory agreement, and HUD program requirements.  OIG also recommended that HUD pursue civil and
administrative remedies, as appropriate, against the owners of Dolores Frances. (Audit Report:  2016-LA-1008)


HUD OIG audited Folts, Inc., in Herkimer, NY, regarding its management of the Folts Adult Home and Folts Home
projects to determine whether the projects were administered in accordance with their regulatory agreements.
    Project owners failed to administer the projects in compliance with the projects’ regulatory agreements. 
Specifically, they failed to make required mortgage payments, incurred costs that were not eligible for the
projects’ operations, and inadequately supported costs.  As a result, two mortgages with outstanding principal
balances of nearly $11.9 million have been assigned to HUD, with HUD expected to pay claims on both
mortgages; more than $1.8 million was charged for ineligible costs; and more than $2 million in expenditures
lacked documentation showing that the expenditures were necessary for the projects’ operations.
    OIG recommended that HUD instruct project officials to (1) develop an adequate liquidation plan for the
two assigned mortgages, (2) reimburse the projects from nonproject funds for the ineligible expenses, and (3)
provide documentation to justify the unsupported costs. (Audit Report:  2016-NY-1010)


HUD OIG audited Saltillo Assisted Living (project), an assisted living facility located in Saltillo, MS, to de-
termine whether the members and operator of the project complied with the executed regulatory agreement
and HUD’s requirements.




                                                                                                                 25
SEMIANNUAL REPORT TO CONGRESS




    The member, managing member, and operator did not comply with the executed regulatory agreement
and HUD’s requirements.  Specifically, in managing and operating the project, the members or operator did
not (1) follow the regulatory agreement by taking and using more than $246,000 in distributions and ineligible
and unreasonable project expenses, (2) ensure that project expenses totaling more than $865,000 were properly
supported, (3) submit audited financial statements as required, (4) maintain the project in good repair and
condition, (5) obtain HUD’s approval for leasing the project, and (6) maintain books and records in reasonable
condition for proper audit.  As a result, the project lacked financial viability, HUD incurred a net loss of more
than $1.5 million, and HUD lacked assurance that program requirements were met.
    OIG recommended that HUD require the members to reimburse HUD’s FHA insurance fund for the
ineligible and unreasonable costs and provide support for or reimburse the unsupported costs.  OIG also
recommended that HUD pursue (1) double damages against the responsible parties for the ineligible
distributions and unreasonable and unsupported disbursements that violated the project’s regulatory
agreement and (2) civil money penalties, administrative action, and monetary sanctions against the
responsible parties as applicable. (Audit Report:  2016-AT-1009)


INVESTIGATION
          Administrative-civil actions                        13

     Convictions-pleas-pretrial diversions                    19

              Financial recoveries                       $49,011,733


DEVELOPMENT COMPANY SETTLES OVER MISREPRESENTATION TO FHA
A multifamily development company, together with a finance company, entered into a settlement agreement
in U.S. District Court for $500,000 to resolve allegations that it made misrepresentations when applying for
FHA insurance on multifamily housing financing for a housing project located in Novi, MI. The development
company stated that it had not compromised any debt and that the finance company, the holder of the debt
to be refinanced, did not have an identity of interest with the developer when there was a relationship.  The
developer had applied for financing in excess of $18 million before HUD officials identified the alleged false
statements and stopped the issuance of the debt insurance.  HUD OIG, HUD’s Office of General Counsel, and
the U.S. Department of Justice conducted this investigation. (Detroit, MI)


EVALUATION
PERFORMANCE OF PROGRAMS TO PRESERVE AND REVITALIZE AFFORDABLE HOUSING
In response to an Office of Multifamily Housing Programs (Multifamily) request, HUD OIG assessed the
performance of programs to preserve and revitalize affordable housing. HUD OIG performed the assessment
to assist Multifamily’s efforts to monitor and evaluate program operations, which had transitioned from
preserving affordable housing to revitalizing properties and integrating community resources to meet
specific tenant needs. HUD’s agreement with the Corporation for National and Community Service
continues to support affordable housing preservation activities in addition to the new efforts on community
revitalization and tenant services.




26
                                                                                     CHAPTER 3 MULTIFAMILY PROGRAMS




     Multifamily’s existing performance measures and reporting formats did not provide useful program
evaluation information and did not meet Multifamily’s needs. There were opportunities to improve
communication and collaboration among HUD headquarters, regional, and local offices; provide feedback
to grantees and host sites; and leverage other organizations’ leading practices. Multifamily, CNCS, and EJW
needed to improve coordination and specify activities and program operations planned to achieve program
objectives. Also, they needed a site-specific model to provide guidance on how to achieve specific goals,
complete activities, establish measures to revitalize properties, and integrate essential community resources
for tenants.
     HUD OIG recommended that Multifamily (1) build systematic program assessment into each program
and incorporate ongoing evaluation throughout the program to enable effective program management and
formal assessments at regular intervals to monitor and report progress against goals and objectives; (2)
obtain input from HUD field offices, provide feedback on programs’ progress, and identify leading practices
to share with other sites and potentially other parts of HUD; (3) collaborate with CNCS and EJW to specify
and align plans, activities, and reporting requirements to achieve objectives, including modifying the current
CNCS agreement as needed; and (4) implement a site-specific model that identifies measurement criteria and
reporting requirements and enables officials to monitor and evaluate progress.
     Multifamily agreed with all of the recommendations and had begun implementing them before project
completion. (Evaluation Report: 2016-OE-0003)




                                                                                                                27
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                   21 audits4                        $117,868,065                           $4,962,192,584

The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited
the Community Development Block Grant (CDBG), Neighborhood Stabilization Program (NSP), Emergency
Shelter Grant, and HOME Investment Partnerships Program.


COMMUNITY DEVELOPMENT BLOCK GRANT
HUD OIG audited the City and County of Honolulu, HI’s CDBG program to determine whether the City
administered its CDBG program in accordance with HUD requirements.
    The City did not comply with HUD requirements related to cost eligibility and procurement and its
own award requirements.  Specifically, it allowed the unnecessary acquisition and did not support the cost
reasonableness of the Hibiscus Hill Apartments, allowed the unnecessary acquisition of the Kaneohe Elderly
Apartments, allowed a subrecipient to award a contract to one of the property owner’s affiliates, restricted
competitive procurement, did not follow its award requirements, and did not review program income
adequately.  As a result, it incurred grant costs of $15.9 million that were unsupported.
    OIG recommended that HUD require the City to (1) support that the Hibiscus Hill acquisition was
necessary and reasonable or repay its CDBG program line of credit $10 million from non-Federal funds; (2)
support that the Kaneohe Elderly Apartments acquisition was necessary or repay its CDBG program line of
credit $2.9 million from non-Federal funds; (3) support that the costs for a contract awarded to one of the
property owner’s affiliates was reasonable and the integrity of the procurement was not compromised by
the relationship or repay its CDBG program line of credit $1.45 million from non-Federal funds; (4) support
that the noncompetitively procured fire apparatus costs were reasonable and that potential bidders were
not harmed by the City’s arbitrary action or repay its CDBG line of credit $1.6 million from non-Federal
funds; (5) review all current CDBG-funded projects for unreported program income and report any to HUD;
and (6) implement adequate controls over its program, including consolidating the grant program into one
department, and develop citywide written policies and procedures. (Audit Report:  2016-LA-1009)


4 The total CPD audits, questioned costs, and funds put to better use amounts include any disaster recovery type audits conducted in the community planning
  and development area (10 audits). The writeups for these audits may be shown separately in chapter 5 of this semiannual report.




28
                                                                 CHAPTER 4 COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS




HUD OIG audited HUD’s CDBG program’s property acquisition and disposition activities to determine
whether HUD had adequate oversight of these activities. 
     HUD did not always provide adequate oversight of property acquisition and disposition activities.
Specifically, of 14 activities reviewed, 7 field offices did not provide adequate oversight of 8 property
acquisition and disposition activities totaling more than $26.2 million. For the eight activities for which
adequate oversight was not provided, two activities with draws totaling $6.1 million had outstanding
program-related findings that HUD had not enforced, and six totaling $20.1 million had not been monitored.
Additionally, four of the eight activities totaling nearly $11.9 million had not met a national objective.  As a
result, five activities had unsupported draws totaling nearly $12.2 million, and one of those activities also had
ineligible costs totaling more than $4,000.  HUD had no assurance that funds spent for these acquisition and
disposition activities complied with applicable HUD and Federal requirements. 
     OIG recommended that HUD (1) enforce its monitoring findings and require the City of New Orleans, LA,
and Miami-Dade County, FL, to provide documentation to support costs totaling $6.1 million or reimburse
their programs from non-Federal funds for any costs that they cannot support, (2) develop and implement
controls to ensure that it promptly takes action to enforce grantee compliance with monitoring findings
or pursue one of the established remedies for noncompliance, (3) require the Cities of Saint Paul, MN, and
Washington, DC, to provide documentation to support $6.1 million in unsupported payments or reimburse
their programs from non-Federal funds for any costs that they cannot support, and (4) direct its field offices to
include property acquisition and disposition activities as an area of special emphasis when assessing grantee
risk and establishing their monitoring plans and grantee monitoring strategies. (Audit Report:  2016-PH-0001)


HUD OIG audited the City of Camden, NJ’s administration of its CDBG program to determine whether the
City ensured that its program activities met national objectives and complied with applicable HUD procure-
ment and environmental review requirements.
     The City did not ensure that its activities always complied with national objective, procurement, and
environmental review requirements.  Of 10 activities reviewed, 7 did not comply with requirements.  One
activity did not meet a national objective, and the related costs were incurred and paid after the subrecipient
agreement had expired.  For this and six other activities, the City did not (1) prepare independent cost
estimates before making purchases, prepare cost analyses before modifying the contracts, or show evidence
of competition or (2) conduct environmental reviews or properly document that projects were exempt
from environmental review requirements.  As a result, the City made ineligible disbursements totaling
nearly $318,000, and it could not show that disbursements totaling $2.8 million complied with applicable
requirements. 
     OIG recommended that HUD require the City to (1) repay its program for the disbursements made after
the subrecipient agreement expired, (2) provide documentation for the six activities that did not comply with
procurement requirements to show that costs paid for products and services were fair and reasonable or
repay its program from non-Federal funds any amount that it cannot support, and (3) provide documentation
for seven activities to show that either it conducted an environmental review or the activity was exempt from
an environmental review or repay its program from non-Federal funds any amount that it cannot support.
(Audit Report:  2016-PH-1003)




                                                                                                                   29
SEMIANNUAL REPORT TO CONGRESS




NEIGHBORHOOD STABILIZATION PROGRAM
HUD OIG audited the State of Connecticut’s NSP to determine whether State officials administered the
State’s NSP in accordance with HUD regulations. 
     State officials did not always administer the State’s NSP in accordance with program regulations. 
Specifically, they did not always ensure that (1) costs were eligible, reasonable, and supported; (2) national
objectives were met; (3) proper affordability restrictions were in place; (4) properties were acquired at a
discount; and (5) program income was properly administered.  As a result, the State incurred nearly $671,000
in ineligible costs, more than $29,000 in unreasonable costs, more than $2 million in unsupported costs,
and more than $212,000 in program income that was not accounted for and returned to the State by the
subrecipient, which could be reallocated to other eligible NSP activities.
     OIG recommended that HUD require State officials to (1) repay the ineligible costs, (2) justify or repay
the unreasonable costs, (3) provide adequate documentation to support the eligibility of or repay the
unsupported costs, (4) provide support showing that all program income has been returned to the State and
remitted and reallocated to eligible NSP activities, (5) amend the affordability restrictions in place for five
properties, and (6) strengthen controls over subrecipient monitoring to provide greater assurance that NSP
funds will be properly administered. (Audit Report:  2016-BO-1003)



EMERGENCY SHELTER GRANTS
HUD OIG audited the Municipality of Bayamon, PR’s Emergency Shelter Grants and Emergency Solutions
Grants programs to determine whether complaints alleging that the Municipality improperly used program
funds to transport people from Puerto Rico to mainland U.S. cities to receive rehabilitation treatment had
merit and whether the Municipality’s programs were administered in compliance with HUD requirements.
     Although the Municipality assisted in the transportation of persons from Puerto Rico to mainland U.S.
cities to receive rehabilitation treatment, HUD funds were not used to pay for the transportation costs of the
participants.  However, the Municipality improperly used program funds to pay for travel costs of employees
who went to mainland U.S. cities to follow up on clients.  The Municipality’s financial management system
did not properly identify the source and application of more than $1.14 million in program funds and allowed
the use of more than $189,000 for ineligible expenditures.  In addition, it did not support the eligibility of more
than $38,000 in program charges and reported inaccurate information in HUD’s information system.  As a
result, HUD lacked assurance that funds were adequately accounted for, safeguarded, and used for requested
and eligible purposes and in accordance with HUD requirements.
     OIG recommended that HUD require the Municipality to (1) complete the implementation of the new
accounting system in accordance with HUD requirements, (2) submit all supporting documentation showing
the eligibility and propriety of nearly $983,000 in program funds, and (3) reimburse its program more than
$189,000 from non-Federal funds for the ineligible expenditures. (Audit Report:  2016-AT-1012)



HOME INVESTMENT PARTNERSHIPS PROGRAM
HUD OIG audited the Wyoming Community Development Authority of Casper, WY, to determine whether the
Authority properly procured goods and services with its HOME Investment Partnerships Program and NSP
funds and whether it used its HOME and NSP funds for eligible travel purposes.
   The Authority did not always properly procure goods and services with its HOME and NSP funds
and used HOME and NSP funds for unreasonable travel costs.  It did not always (1) ensure open and fair
competition when it used a contractor as a sole source for its drug testing and drug remediation when




30
                                                                  CHAPTER 4 COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS




renovating homes, (2) ensure a fair bidding process, and (3) properly complete inspections.  Additionally,
employees incurred unreasonable costs while traveling.
     OIG recommended that HUD require the Authority to (1) provide support showing that the Authority
received the best value for amounts it spent on drug testing and remediation and all instances when the
Authority incorrectly awarded a contract based on an improperly submitted bid; (2) provide support
justifying the reasonableness and necessity of all travel to conferences and trainings over the 31-month
period reviewed, costs exceeding local per diem rates while on travel, and any weekend travel that occurred;
(3) develop and implement detailed policies and procedures for the procurement process regarding
inspections, competitive bidding, and sealed bids; (4) develop and implement an official drug testing and
drug remediation policy; and (5) develop and implement a travel policy that specifically reflects Federal travel
regulations and requires more oversight of the approval of travel authorizations and travel vouchers. (Audit
Report:  2016-DE-1005)


HUD OIG audited the City of Miami Beach, FL’s HOME program to determine whether the City ensured that
the drawdown of HOME funds was supported and allowable.
    The City did not always comply with HOME requirements.  Specifically, it did not ensure that drawdowns
were properly supported and allowable.  As a result, it charged more than $742,000 in questioned costs to
the HOME program.  In addition, more than $300,000 in remaining funds for one activity will not meet the
intended benefit of the HOME program.
    OIG recommended that the City (1) reimburse HUD for nearly $380,000 in ineligible costs from non-
Federal funds, (2) provide supporting documentation or reimburse its program for nearly $363,000 in
unsupported expenditures from non-Federal funds, and (3) recapture the more than $300,000 remaining
balance allocated to one activity. (Audit Report:  2016-AT-1006)


INVESTIGATION
        Administrative-civil actions                         12

   Convictions-pleas-pretrial diversions                     19

            Financial recoveries                         $126,226




                                                                                                                    31
SEMIANNUAL REPORT TO CONGRESS




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 $47.4 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. Of the
$44.4 billion in active disaster grants, the funds have been allocated nationwide, with nearly $38.4 billion obli-
gated and $33.6 billion disbursed as of September 30, 2016.


                                                                                                                                    Percentage of
                  Disaster                       Funds allocated            Funds obligated            Funds disbursed
                                                                                                                                     funds used

            Hurricane Sandy                         $15.5 billion               $7.6 billion               $6.1 billion                     40

          Hurricanes Katrina,
                                                     19.5 billion               19.6 billion               18.9 billion                     97
            Rita & Wilma


  Hurricanes Ike, Gustav & Dolly                      6.1 billion                6.0 billion                4.9 billion                     81


                    9-11                              3.5 billion                3.3 billion                3.1 billion                     89

                   Other                              0.8 billion                0.6 billion               0.54 billion                     69


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


AUDIT
STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

             Key program results                             Questioned costs                     Funds put to better use

      Audit                   10 audits5                        $80,382,793                             $4,961,679,810

HUD OIG audited HUD’s controls over its certifications of State disaster recovery grantee procurement
processes to determine whether these HUD certifications were accurate and supported.
    HUD did not always provide accurate and supported certifications of State disaster grantee procurement
processes.  Specifically, it (1) allowed conflicting information on its certification checklists, (2) did not
ensure that required supporting documentation was included with the certification checklists, and (3) did
not adequately evaluate the supporting documentation submitted by the grantees.  As a result, HUD did not
have assurance that State grantees had sufficient procurement processes in place, and the HUD Secretary’s
certifications did not meet the intent of the Disaster Relief Appropriations Act of 2013.

5 D
   isaster-related audits consist of community planning and development and other significant audits and other. The questioned costs and funds put to
  better use amounts relate only to disaster-related costs.




32
                                                                                CHAPTER 5 DISASTER RECOVERY PROGRAMS




    OIG recommended that HUD perform a detailed review of the procurement procedures for each of
the State grantees that received funds under the Act.  If the State did not show that its procedures met
requirements, HUD should (1) require the grantee to update its procedures and provide an updated
certification; (2) review the updated grantee certification to confirm that the State meets requirements and
has a sufficient procurement process in place, thereby putting up to $4.9 billion not yet disbursed or awarded
to better use; and (3) review procurement files for contracts that were paid with funds provided under the Act
and if the procurement did not comply with Federal procurement requirements, require the grantees to repay
HUD from non-Federal funds any amounts that they cannot support or were not fair and reasonable. 
    OIG also recommended that HUD continue to improve the guidance it provides to grantees to ensure that
future grantee certifications are accurate and supported, continue to improve its controls to ensure that its
staff adequately reviews future grantee certifications to ensure that they are accurate and supported before
certifying that grantees have a sufficient procurement process, and increase monitoring of State grantees
that certified that they had a procurement process equivalent to Federal procurement standards. (Audit
Report:  2016-PH-0005)


HUD OIG audited the State of Oklahoma to determine whether the State obligated and spent its grant in
accordance with requirements. 
    The State did not obligate and spend its Community Development Block Grant Disaster Recovery (CDBG-
DR) funds in accordance with requirements.  It failed to support how it determined activity eligibility,
existence, disaster event qualification, reasonableness of cost estimates, prioritization, and fund allocation
as required.  It did not determine compliance with procurement and environmental requirements.  Further,
it made payments based on incomplete, insufficient, or no supporting documentation.  The State’s failure to
comply with requirements resulted in unsupported obligations and expenditures of more than $11.7 million
and $4.3 million, respectively.
    OIG recommended that HUD require the State to (1) develop and implement policies and procedures
to document and perform detailed review and testing to establish eligibility, existence, disaster event
qualifications, reasonableness of cost estimates, prioritization, and fund allocation, both retroactively and
prospectively, which would put $81.9 million to better use; (2) support or properly obligate the unsupported
obligations; and (3) support or repay the unsupported expenditures. (Audit Report:  2016-FW-1010)


HUD OIG audited the State of New Jersey’s CDBG-DR-funded Superstorm Sandy Housing Incentive Program
contract to determine whether the State disbursed disaster funds to its contractor in accordance with HUD,
Federal, and other applicable requirements for costs that were eligible, supported, reasonable, and necessary.
     The State did not disburse disaster funds to its contractor in accordance with HUD, Federal, and other
applicable requirements.  Specifically, it did not ensure that (1) disbursements met a national objective,
(2) expenses were incurred after the contract was executed, (3) other direct costs were fully supported and
the prices paid were fair and reasonable, (4) labor costs were fully supported, (5) travel costs were fully
supported, and (6) disbursements were for costs that were reasonable and necessary.  Further, the State did
not show that it properly managed equipment purchased with disaster funds.  As a result, HUD did not have
assurance that the $43.1 million disbursed under the contract was for costs that were eligible, supported,
reasonable, and necessary.
     OIG recommended that HUD require the State to provide documentation to show that the funds
disbursed under the contract were for costs that met a national objective and were supported, reasonable,
and necessary or direct the State to repay HUD from non-Federal funds.  Further, HUD should require the
State to repay HUD from non-Federal funds for nearly $129,000 in charges incurred before the contract




                                                                                                                33
SEMIANNUAL REPORT TO CONGRESS




effective date.  HUD should also require the State to implement controls to ensure that it adequately
administers current and future contracts related to disaster funds, adequately monitors contract
performance, and takes appropriate action when contractors fail to meet performance goals stated in the
contract. (Audit Report:  2016-PH-1009)


HUD OIG audited the New York State CDBG-DR assistance-funded New York State Tourism and Marketing
program to determine whether State officials established and maintained financial and administrative con-
trols to ensure efficient and effective program administration. 
     State officials did not always establish and maintain financial and administrative controls to ensure
efficient and effective program administration.  Specifically, cost estimates were not always obtained for
procurements so there was a lack of assurance that nearly $22 million in CDBG-DR funds allocated and
disbursed for the Tourism and Marketing program were for reasonable and necessary costs. In addition,
State officials did not ensure that subrecipient budgets were complete so that they could effectively monitor
program progress and hold subrecipients accountable.
     OIG recommended that HUD direct State officials to (1) provide documentation showing that CDBG-
DR funds disbursed for contracts complied with applicable procurement requirements and repay any
amounts determined to be unsupported from non-Federal funds and (2) include complete budgets in written
agreements with subrecipients to ensure that CDBG-DR funds are used for their intended purposes. (Audit
Report:  2016-NY-1009)


HUD OIG audited the State of Louisiana’s disaster assistance programs administered by the State’s subrecip-
ient, St. John the Baptist Parish, to determine whether the Parish met the requirements of its agreement with
the State and followed HUD requirements related to its program participant, procurement, and expenditure
activities when administering its disaster assistance programs.
     The Parish did not always meet the requirements of its agreement and follow HUD requirements when
administering its disaster assistance programs, as it (1) did not always ensure that its contractor had adequate
documentation to support the eligibility of program participants, (2) violated procurement requirements
when it did not perform an independent cost estimate for one contract, and (3) did not maintain detailed
information regarding time worked on disaster projects to support salary expenditures.  As a result, the State
could not provide reasonable assurance to HUD that the Parish would properly administer and spend CDBG-
DR funds in accordance with requirements, putting nearly $5.3 million obligated for the disaster assistance
programs at risk of mismanagement, and paid more than $1.5 million in questioned costs.
     OIG recommended that HUD require the State to develop and implement written procedures and
actions that would correct and prevent the deficiencies cited to better ensure that the Parish spends its
CDBG-DR funds in accordance with HUD requirements.  OIG also recommended that HUD require the State
to (1) ensure that the Parish supports program participant eligibility, review the remaining 293 program
participant files for eligibility, and support or repay the questioned costs; (2) provide assistance to the
Parish on procurement requirements; and (3) review the Parish’s procurement and expenditure policies for
adequacy. (Audit Report:  2016-FW-1006)


HUD OIG audited the City of Joplin, MO’s CDBG-DR program to determine whether the City complied with
the requirements of Section 3 of the Housing and Urban Development Act of 1968 for its CDBG-DR program.
    The City did not always comply with the requirements of Section 3 of the Housing and Urban
Development Act of 1968 for its CDBG-DR program. It did not always direct employment and other economic




34
                                                                                 CHAPTER 5 DISASTER RECOVERY PROGRAMS




opportunities generated from CDBG-DR funding to low- and very low-income persons and the businesses
that employed them. In addition, it did not always incorporate the Section 3 clause into its contracts. As a
result, the City may have denied low- and very low-income residents and the businesses that employed them
more than $2.2 million in economic benefits.
    OIG recommended that HUD require the City to develop a checklist or other processes to verify that all
contractors implement their Section 3 plans to ensure that the City spends disaster funds in compliance
with the requirements so that its CDBG-DR funds will be put to better use.  OIG also recommended that
HUD provide Section 3 technical assistance to the City and monitor the City’s compliance with Section 3
requirements. (Audit Report:  2016-KC-1006)


As part of a Council of the Inspectors General on Integrity and Efficiency (CIGIE) cross-cutting initiative in-
volving eight OIGs, HUD OIG reviewed the Disaster Relief Appropriations Act of 2013 and eight agencies that
received $46.5 billion for expenses related to the consequences of Hurricane Sandy and other disasters.  The
objectives were to compile and report on the eight Federal agencies’ total funding, expenditures, and moni-
toring; identify common concerns; and make suggestions to improve oversight, enhance collaboration, and
report best practices.
     The eight agencies had made progress in budgeting, obligating, and spending their allocated funds. 
However, their progress varied as they had spent only $15 billion of the $46.5 billion allocated.  The
eight OIGs and agencies monitored their disaster relief funds and activities, but the extent and type of
monitoring varied.  The review also identified observations and common concerns regarding contracting
issues, the significant risk of duplicate assistance, and differences in the administration of OIG oversight
funding.  Further, the review made suggestions for and noted best practices concerning the need to increase
coordination, data matching, and the use of analytical tools.
     HUD OIG recommended that CIGIE and the OIGs work with Congress and the agencies to ensure that the
remaining funds are budgeted, obligated, and spent in a timely manner.  HUD OIG also recommended that
CIGIE work with the agencies and Congress to ensure that the agencies, grantees, and contractors comply
with Federal contracting requirements. In addition, HUD OIG recommended that the various OIGs continue
to collaborate to identify and address areas of potential duplication.  Further, HUD OIG recommended that
CIGIE and the OIGs work with Congress to (1) amend the Inspector General Act of 1978 to exempt the OIGs
from data-matching requirements, (2) ensure each OIG receives oversight funding separate from its agency
for future disaster relief allocations, and (3) ensure that the OIGs’ oversight funding does not expire before
the agencies and their grantees spend all of their funds. (Audit Report:  2016-FW-1007)


INVESTIGATION
        Administrative-civil actions                          3

   Convictions-pleas-pretrial diversions                      8

            Financial recoveries                          $688,507




                                                                                                                 35
SEMIANNUAL REPORT TO CONGRESS




EVALUATION
HUD’S USE OF FORMULA AND COMPETITION MODELS FOR DISTRIBUTING DISASTER
RECOVERY FUNDING
HUD OIG researched the Office of Community Planning and Development’s (CPD) methods to allocate
CDBG-DR funds appropriated under the Disaster Relief Appropriations Act of 2013 (PL 113-2). The objectives
were to review the methodology for (1) the seven formula-based allocations and (2) the two competition-
based allocations of CDBG-DR funds.
    HUD OIG conducted this research to assess the feasibility of evaluating whether HUD’s transition
from formula-based allocations to competition-based allocations improved its ability to address unmet
need. During its research, HUD OIG reviewed Federal Register notices, notices of funding availability, and
program documents. HUD OIG also interviewed managers and employees who designed and implemented
the allocation methodologies. After meeting its research objectives, HUD OIG did not identify indications
of systemic weaknesses in methodologies CPD used for formula-based or competition-based allocations. As
a result, HUD OIG did not conduct an evaluation and communicated its research results through a closure
memorandum. (Evaluation Research Memorandum: 2016-OE-0009S)




36
                                                                                                   CHAPTER 6 OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS




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                    7 Audits6                             $528,147                                  $259,008

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

AUDIT OF HUD’S FY 2015 TRAVEL AND PURCHASE CARD PROGRAMS
HUD OIG audited HUD’s compliance with the fiscal year 2015 travel and purchase card programs based on
its required fiscal year 2014 risk assessment, which determined HUD’s agencywide charge card program to be
at medium risk for fraud. Offices of inspector general are required to (1) conduct periodic assessments of the
agency charge card programs, (2) perform analyses or audits as necessary, and (3) report to the head of the
executive agency the results of such analyses or audits. The audit objective was to determine whether HUD
had sufficient and effective controls to (1) prevent and identify improper and potentially unallowable uses of
cards and (2) recognize patterns of violation.  While HUD stated that it had implemented controls to identify
cardholder travel card program violations, it did not successfully identify patterns of abuse. Additionally,
although HUD monitors purchase card use through periodic reviews, the purchase card program’s internal
controls needed improvement.
     OIG recommended that HUD review the identified 3,671 transactions totaling more than $528,000 to
determine whether these transactions were for official Government travel, identify additional transactions
made outside official travel, and ensure that appropriate action is taken. Additionally, OIG recommended
that HUD (1) clarify roles and responsibilities regarding the duties that must be separated and the overlap
that might be allowable in smaller field offices, (2) establish a periodic review of the official cardholders, (3)
enforce retention of supporting documentation and make it available to auditors, and (4) review supporting
documents to identify overlapping functions and responsibilities. (Audit Report:  2016-FO-0006)



AUDIT OF HUD’S FISCAL YEAR 2015 COMPLIANCE WITH THE IMPROPER PAYMENTS
ELIMINATION AND RECOVERY ACT OF 2010
This report presents the results of HUD OIG’s audit of HUD’s fiscal year 2015 compliance with the Improper
Payments Elimination and Recovery Act of 2010 (IPERA).
    For the third consecutive fiscal year, HUD did not comply with IPERA.  Of the six requirements, in
fiscal year 2015, HUD complied with four (compliance determinations a, c, d, and f) but did not comply
with the remaining two (compliance determinations b and e).  Specific areas of noncompliance for fiscal
year 2015 were related to HUD’s failure to (1) conduct an annual risk assessment in accordance with Office
6 The total “other” audits, questioned costs, and funds put to better use amounts include any disaster recovery type audits conducted in the
   “other” area (1 audit). The writeup for this audit may be shown separately in chapter 5 of this semiannual report.




                                                                                                                                                    37
SEMIANNUAL REPORT TO CONGRESS




of Management and Budget (OMB) guidance and (2) meet its annual improper payment reduction target. 
Additionally, OIG noted some issues concerning (1) the completeness and accuracy of HUD’s improper
payment data reporting, including payment recapture audit plans, and (2) the reasonableness of HUD’s
improper payment estimate for its rental housing assistance programs. 
    OIG made 13 recommendations to improve HUD’s compliance with IPERA and address weaknesses
identified in HUD’s payment recapture audit plans, rental housing assistance program improper payment
estimation process, and reporting of improper payment information in the agency financial report. (Audit
Report:  2016-FO-0005)



REVIEW OF GENERAL AND APPLICATION CONTROLS OVER FHA AND
SINGLE-FAMILY SYSTEMS
HUD OIG reviewed the general and application controls over the Federal Housing Administration’s (FHA)
Single Family Insurance System (SFIS) and Single Family Insurance Claims Subsystem (Claims) as part of
the internal control assessments required for the fiscal year 2015 financial statement audit under the Chief
Financial Officer’s Act of 1990. The objective was to assess the general and application controls over SFIS
and Claims for compliance with HUD information technology (IT) policies and Federal information system
security and financial management requirements.
    OIG has determined that the contents of this audit report would not be appropriate for public
disclosure and has, therefore, limited its distribution to those officials on the report distribution list. (Audit
Report:  2016-DP-0003)



AUDIT OF THE FUNCTIONALITY OF HUD’S NEW CORE INTERFACE SOLUTION
HUD OIG audited the functionality of HUD’s New Core Interface Solution (NCIS) for phase 1, release 3, as part
of the internal control assessments required for the fiscal year 2016 financial statement audit under the Chief
Financial Officer’s Act of 1990.  The objective was to determine whether adequate internal controls were in place
for the phase 1, release 3, functionality of NCIS and the impact of the release implementation on the project. 
     OIG found that following the implementation of phase 1, release 3, of the New Core Project on October
1, 2015, HUD had unresolved data conversion errors and inaccurate funds management reports and lacked
a fully functional data reconciliation process.  In addition, NCIS’s performance was not monitored, tracked,
or measured, and controls over processing errors in Oracle Federal Financials were routinely bypassed.  As
a result, in June 2016, unresolved data conversion errors were estimated at an absolute value of more than
$9 billion, HUD’s funds management reports contained inaccurate data, the newly completed status of
funds reconciliation report indicated that there was an absolute value of $4.5 billion in differences between
the HUD Centralized Accounting and Processing System and Oracle Financials, and it was difficult to tell
whether NCIS met user needs and business process requirements.
     OIG recommended that HUD correct the data conversion errors, verify the reconciliation reports
and resolve differences, and improve the custom Oracle Discoverer reports and error handling. (Audit
Report:  2016-DP-0004)



AUDIT OF HUD’S OVERSIGHT OF GINNIE MAE’S MEDIA MARKETING SERVICES
HUD OIG audited HUD’s oversight of the Government National Mortgage Association’s (Ginnie Mae) contract
for financial industry and media marketing services with the public relations and communications firm,
Burson-Marsteller, to determine whether HUD ensured that costs for Ginnie Mae’s contract with Burson-
Marsteller were reasonable, necessary, and supported.



38
                                                                     CHAPTER 6 OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS




     HUD did not ensure that all costs associated with Ginnie Mae’s contract with Burson-Marsteller were
supported, reasonable, and necessary.  Specifically, HUD did not ensure that (1) Ginnie Mae maintained
adequate supporting documentation for invoices paid and (2) costs for promoting members of Ginnie Mae’s
senior staff were reasonable and necessary.  As a result, HUD did not have assurance that $1.8 million paid
under Ginnie Mae’s contract with Burson-Marsteller was supported and up to $1.1 million paid was for
services that were reasonable and necessary.  Unless HUD requires Ginnie Mae to improve its procurement
and contract administration processes and increases its monitoring of Ginnie Mae, Ginnie Mae could
incur additional costs under the Burson-Marsteller contract and future contracts that are not supported,
reasonable, and necessary.
     OIG recommended that HUD (1) assess Ginnie Mae’s processes and capabilities and provide technical
assistance to ensure that its staff is adequately trained on procurement and contract administration matters;
(2) require Ginnie Mae to improve its procurement and contract administration processes to ensure that
it follows all applicable requirements, thereby putting more than $259,000 to better use; and (3) increase
monitoring to ensure that Ginnie Mae’s costs related to its contract with Burson-Marsteller and any future
contracts are supported, reasonable, and necessary. (Audit Report:  2016-PH-0002)


EVALUATION
HEALTHCARE PROGRAMS
RECORDS MANAGEMENT IN THE OFFICE OF HOSPITAL FACILITIES (OHF) NEEDS IMPROVEMENT
The Office of Hospital Facilities (OHF) provides mortgage insurance for acute care hospitals. The insurance
it provides reduces risk to lenders and lowers borrowing costs for hospitals. As of May 2016, the unpaid
principal balance for its 105 insured mortgages was approximately $7 billion. OHF collects and generates
many records to support its mission. These records include application materials, internal reports, and
correspondence. Robust records management practices can help OHF protect the financial, legal, and other
rights of the Government and the public. HUD OIG evaluated OHF’s records management practices to
determine whether it maintained a records retention system that complied with applicable policies and its
staff received required records management training.
     OIG observed that records collected or generated by OHF could be misplaced or improperly destroyed
because it did not actively apply a records disposition schedule, it lacked internal policies, and its employees
received insufficient training. Additionally, OHF did not treat emails as records as required by the National
Archives and Records Administration and HUD policies. OHF could not provide some documents OIG
requested as part of its evaluation. OHF risks not being able to retrieve all records needed for legal or
administrative procedures if it does not address these issues. Finally, HUD’s records management training
content was vague and did not cover Federal records requirements. After taking the training, an employee
would not have learned how to properly identify, maintain, and archive Federal records.
     OIG recommended that the Director of OHF (1) develop internal written procedures for records
management and (2) ensure that personnel preparing records for archiving are trained to perform this
function and are aware of all relevant records disposition schedules and policies. OIG also recommended
that the chief learning officer, in consultation with the Office of Digital Enterprise, offer records management
training that incorporates Federal and departmental records management policies and employee records
management responsibilities.
     The applicable HUD components agreed with all of the recommendations and will provide OIG with
proposed management decisions and target dates for implementing corrective action within 90 days.
(Evaluation Report: 2016-OE-0001)




                                                                                                                      39
SEMIANNUAL REPORT TO CONGRESS




CYBERSECURITY ACT OF 2015 REVIEW OF AGENCY SECURITY MEASURES
HUD OIG conducted an evaluation of HUD’s security measures associated with systems that provide access
to personally identifiable information (PII). The Cybersecurity Act of 2015 requires the Inspector General
to assess and report on HUD’s cybersecurity policies, procedures, practices, and capabilities for systems
that provide access to covered systems as defined in Section 406 of the Cybersecurity Act of 2015. These
controls and practices focus on system access control, monitoring and detection of sensitive data exfiltration
and other threats, and oversight of the information security practices of third-party providers associated
with systems containing PII. HUD OIG completed an evaluation report in August 2016, highlighting several
areas that need improvement within the HUD IT environment to protect sensitive and PII data. (Evaluation
Report: 2016-OE-0008)


FEDERAL AUDIT EXECUTIVE COUNCIL (FAEC) IT SUBCOMMITTEE INCIDENT RESPONSE
MATURITY MODEL FOR FISMA
HUD OIG collaborated in a Federal Audit Executive Council (FAEC) IT Subcommittee project that developed
a maturity model for assessing Federal agency incident response and reporting programs. This maturity
model was added to the fiscal year 2016 Inspector General (IG) Federal Information Security Modernization
Act (FISMA) metrics, which allows OMB to measure Federal agency cybersecurity more consistently. HUD
OIG was one of a few volunteer IG offices to develop this model, which will be used by OMB to capture FISMA
reporting metrics. HUD OIG will continue to participate in this group to develop and establish additional
maturity models for the IG FISMA metrics.


MANAGEMENT ASSISTANCE REVIEWS
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 reported on
•	   The Region 1, Boston, MA, audit activities (Evaluation Report: 2016-OE-MAR4a) and
•	   The Region 1-2, New York City, NY, audit (Region 2) and investigation (Region 1-2) activities. (Evaluation
     Report: 2016-OE-MAR4b)




40
                                                                                    CHAPTER 7 JOINT CIVIL FRAUD INITIATIVES




CHAPTER 7 – JOINT CIVIL FRAUD INITIATIVES

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


STRATEGIC INITIATIVE 1: CONTRIBUTE TO THE REDUCTION OF FRAUD IN
SINGLE-FAMILY INSURANCE PROGRAMS
PROGRAM RESULTS
       Recoveries and receivables to HUD programs                        $907,282,798
              or HUD program participants

       Recoveries and receivables for other entities                     $677,679,800

    Recommendations that funds be put to better use                         $55,405

                        Civil actions                                          16

SINGLE FAMILY
HUD OIG assisted the U.S. Department of Justice and the U.S. Attorney’s Office, Washington, DC, Southern
District of New York and Northern District of California, in conducting an investigation of Wells Fargo Bank,
N.A.’s origination and underwriting of mortgage loans insured by the Federal Housing Adminidtration (FHA).
Wells Fargo is headquartered in San Francisco, CA.
    Based in part on OIG’s review, the United States alleged that for certain loans, Wells Fargo failed to
comply with HUD rules and regulations in originating and underwriting the loans for FHA insurance. 
Specifically, during January 1, 2002, through December 31, 2010, Wells Fargo allegedly failed to self-report to
HUD certain FHA loans that Wells Fargo’s quality assurance personnel had determined contained a material
finding. Secondly, during May 1, 2001, through October 31, 2005, and later, Wells Fargo allegedly submitted
loans for FHA mortgage insurance that did not meet HUD’s underwriting requirements and were not eligible
for FHA insurance under HUD’s direct endorsement program.




                                                                                                                       41
SEMIANNUAL REPORT TO CONGRESS




    On April 8, 2016, Wells Fargo entered into a settlement agreement with the United States.  Wells
Fargo admitted, acknowledged, and accepted responsibility for, among other things, submitting to HUD
certifications stating that certain loans were eligible for FHA mortgage insurance when they were not and
not reporting to HUD the majority of the FHA loans that its internal quality assurance reviews had identified
as having material findings. Wells Fargo agreed to pay to the Government $1.2 billion, of which FHA was to
receive $642 million. (Memorandum:  2016-KC-1803; Office of Audit Region 7-8-10, Office of Investigation
Region 2, and Joint Civil Fraud Division)


HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, District of
New Jersey, in the civil investigation of Freedom Mortgage Corporation.  Freedom has its principal place of
business in Mount Laurel, NJ, and became an FHA-approved direct endorsement lender in 1993.  As a direct
endorsement lender, Freedom was authorized by HUD to originate and underwrite mortgage loans on HUD’s
behalf, including determining a borrower’s creditworthiness and whether the proposed loan met all applica-
ble requirements.
     On April 15, 2016, Freedom entered into a settlement agreement with the Federal Government to pay
$113 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation.  As part
of the settlement, Freedom agreed that it engaged in certain conduct in connection with its origination,
underwriting, quality control, self-reporting of loans with unacceptable risk, certification of compliance with
program requirements, and endorsement of certain single-family residential mortgage loans insured by FHA. 
The settlement was neither an admission of liability by Freedom nor a concession by the United States that
its claims were not well founded. Of the total settlement of $113 million, HUD FHA will receive $76 million.
(Memorandum:  2016-CF-1806; Joint Civil Fraud Division and various Office of Investigation regions)


HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, District
of Colorado, in the civil investigation of Franklin American Mortgage Company.  Franklin American has its
principal place of business in Franklin, TN.  Franklin American became an FHA-approved direct endorse-
ment lender in 1995.  As a direct endorsement lender, Franklin American was authorized by HUD to originate
and underwrite mortgage loans on HUD’s behalf, including determining a borrower’s creditworthiness and
whether the proposed loan met all applicable requirements.  When a borrower defaults on an FHA-insured
loan underwritten and endorsed by a direct endorsement lender, such as Franklin American, the lender (or its
representative) has the option of submitting a claim to HUD to compensate the lender for any loss sustained
as a result of the default.  Therefore, once a mortgage loan is endorsed for FHA insurance, HUD insures the
risk of the borrower’s defaulting on that mortgage, which is realized if an insurance claim is submitted.
     On December 2, 2015, Franklin American entered into a settlement agreement with the Federal
Government to pay $70 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy
litigation.  As part of the settlement, Franklin American agreed that it engaged in certain conduct in
connection with its origination, underwriting, and quality control of certain single-family residential
mortgage loans insured by FHA.  The settlement was neither an admission of liability by Franklin American
nor a concession by the United States that its claims were not well founded. (Memorandum:  2016-CF-1801;
Joint Civil Fraud Division and various Office of Investigation regions)


HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, Western
District of New York, in the civil investigation of Manufacturers and Traders Trust Company, also known as
M&T Bank.  M&T Bank has its principal place of business in Buffalo, NY.  On March 19, 2013, a former em-




42
                                                                                 CHAPTER 7 JOINT CIVIL FRAUD INITIATIVES




ployee of M&T Bank filed a civil complaint, alleging improprieties in M&T Bank’s loan origination and under-
writing practices in violation of the False Claims Act.  Based on further investigation, the Government alleged
that M&T Bank submitted false certifications to HUD concerning compliance with program rules and certain
endorsed loans between January 2006 and December 31, 2011, in violation of these rules.
     On May 9, 2016, M&T Bank entered into a settlement agreement with the Government to pay $64 million
to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation. As part of the settlement,
M&T Bank agreed that it engaged in certain conduct in connection with its origination, underwriting,
property appraisal, and quality control of certain single-family residential mortgage loans insured by FHA. 
The settlement was neither an admission of liability by M&T Bank nor a concession by the United States that
its claims were not well founded. Of the total settlement of $64 million, HUD FHA will receive $43.35 million.
(Memorandum:  2016-CF-1804; Joint Civil Fraud Division and Office of Investigation Region 5)


HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office for the
Middle District of Florida in a civil investigation of Regions Bank.  Regions Bank has its principal place of
business in Birmingham, AL, and became an FHA-approved direct endorsement lender in 1985.  As a direct
endorsement lender, Regions Bank was authorized by HUD to originate and underwrite mortgage loans on
HUD’s behalf, including determining a borrower’s creditworthiness and whether the proposed loan met all
applicable requirements.
    On September 13, 2016, Regions Bank entered into a settlement agreement with the Federal Government
to pay $52.4 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation. As part
of the settlement, Regions Bank agreed that it engaged in certain conduct in connection with its origination,
underwriting, and quality control of certain single-family residential mortgage loans insured by FHA.  The
settlement was neither an admission of liability by Regions Bank nor a concession by the United States that its
claims were not well founded. Of the total settlement of $52.4 million, HUD FHA was to receive $37.7 million,
and the remaining portion will be paid to other Federal entities. (Memorandum:  2016-CF-1811; Joint Civil
Fraud Division and Office of Investigation Regions 4 and 6)


HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office of the
Northern District of Georgia in the civil investigation of Branch Banking and Trust Company (BB&T).  BB&T’s
principal place of business is in Winston-Salem, NC.
    Based in part on OIG’s review, the Federal Government alleged that BB&T violated the False Claims Act
when it originated and underwrote certain FHA mortgage loans that did not meet applicable requirements. 
The Federal Government also alleged that BB&T did not maintain a quality control program that complied
with requirements.
    On September 29, 2016, BB&T entered into a settlement agreement with the Federal Government to pay
$83 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation.  As part of the
settlement, BB&T agreed that it engaged in certain conduct in connection with its origination, underwriting,
and quality control of single-family residential mortgage loans insured by FHA. The settlement was neither an
admission of liability by BB&T nor a concession by the United States that its claims were not well founded. Of
the total $83 million settlement, HUD FHA was to receive $35.7 million, and the remaining portion will be paid
to other Federal entities. (Memorandum: 2016-AT-1802; Office of Audit Region 4 and Joint Civil Fraud Division)




                                                                                                                    43
SEMIANNUAL REPORT TO CONGRESS




HUD OIG investigated alleged violations of FHA regulations by RANlife, Inc., of Salt Lake City, UT.  OIG
reviewed single-family FHA loans processed by RANlife to determine whether it complied with HUD’s rules
and regulations in originating, underwriting, and endorsing the loans for FHA insurance.
    Based in part on OIG’s review, the United States contended that for certain loans, RANlife failed to
comply with HUD rules and regulations in originating, underwriting, and endorsing the loans for FHA
insurance. On November, 23, 2015, RANlife entered into a settlement agreement with the United States.  To
avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation and in consideration of the
mutual promises and obligations of the settlement agreement, RANlife agreed to pay FHA more than $1
million.  The settlement agreement was neither an admission of liability by RANlife nor a concession by the
United States that its claims were not well founded. (Memorandum:  2016-DE-1802; Office of Audit Region
7-8-10, Office of Investigation Region 7-8-10, and Joint Civil Fraud Division)




44
                                                                    CHAPTER 8 LEGISLATION, REGULATION, AND OTHER DIRECTIVES




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 Of-
fice of Inspector General’s (OIG) responsibilities under the Inspector General Act. During this 6-month reporting
period, OIG has committed more than 615 hours to reviewing 141 issuances. The draft directives consisted of 85
notices, 6 mortgagee letters, and 50 other directives. OIG provided comments on 38 (or 27 percent) of the issuanc-
es and lifted 5 nonconcurrences. Of the 50 other directives, OIG reviewed 16 final, proposed, and interim rules.
Of these, OIG provided comments on 3, nonconcurred and resolved 1, and had no position on 12. A summary of
selected reviews for this 6-month period follows.


NOTICES, POLICY ISSUANCES, AND FINAL RULES
OFFICE OF 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 June 30 and
September 30, 2016, FHA published updates to the content in existing sections of the Handbook.
    During this reporting period, OIG reviewed content updates made to existing sections of the Handbook.
For example, FHA added new guidance for individual residential water purification systems in section II
(Origination Through Post-Endorsement/Closing), clarified when lenders are required to preserve and
protect the property, and provided updated documentation requirements in section III (Servicing and Loss
Mitigation). OIG did not have substantive comments. During the previous reporting period, OIG reviewed
the Title I section and provided a number of comments. One substantial comment related to the section’s
lacking a definition on premium pricing and inconsistent uses of premium pricing.
    Housing Counseling Certification Final Rule – OIG reviewed a reclearance issuance of the final rule on
new certification requirements for housing counselors. One of the changes made to the final rule included
that the U.S. Department of Housing and Urban Development (HUD) would not issue a separate agency
“certificate of competence” as originally proposed. Instead, for a housing counseling agency to be HUD
approved or maintain status as a housing counseling agency under HUD’s Housing Counseling Program,
each individual providing housing counseling for the agency must be a HUD-certified housing counselor.
OIG expressed concerns that a shift in certification requirements from the housing counseling agency
down to the individual housing counselors creates a transference of accountability away from the housing
counseling agencies that employ the counselors and are accountable for their employees’ actions. Further,
OIG expressed concerns on possible conflicts of interest and wanted restrictions placed on the eligibility
of entities (specifically housing finance agencies) that provide housing counseling services and also
participate in buyer-funded financial assistance. Lastly, OIG expressed concerns on the lack of an important
integrity and reporting module regarding the counselors’ certification and training requirements. In light
of these concerns, the Department quickly clarified to OIG that housing counseling agencies are still held
accountable for compliance with applicable HUD requirements by their participating agreement and their
own certifications. The individual counseling certifications are in addition to existing certifications from



                                                                                                                       45
SEMIANNUAL REPORT TO CONGRESS




the housing counseling agencies. Further, HUD recognizes that housing finance agencies are often engaged
in multiple lines of activities and that they are supposed to have firewalls between their counseling and
origination activities. HUD recognized that conflicts could possibly occur and agreed to pursue necessary
action against housing finance agencies in violation of requirements. Lastly, the Department was receptive
to OIG’s comment and suggestion on adding an integrity and reporting module but indicated that would
be better handled with the Home Equity Conversion Mortgage (HECM) program office in its update of the
HECM handbook and protocols.


OFFICE OF PUBLIC AND INDIAN HOUSING
Demonstration to test a proposed new method of assessing the physical conditions of voucher-assisted
housing – On May 4, 2016, HUD published a proposed rule, which solicited comments on a demonstration
designed to test a new method of assessing the physical condition of housing assisted by HUD vouchers.
The Joint Explanatory Statement that accompanied the Consolidated Appropriations Act of 2016 directed
HUD to implement a single inspection process protocol for public housing and Housing Choice Voucher
program units. The uniform physical condition standard (UPCS) is used to evaluate public housing units,
while housing quality standards are used for Housing Choice Voucher program units. HUD is developing a
new inspection and oversight approach called UPCS-V, which will use the UPCS protocol for Housing Choice
Voucher program units. The new approach incorporates housing health and safety constructs, concepts from
UPCS, and housing quality standards. Under this demonstration, HUD will test the UPCS-V model for up to
3 years with up to 250 public housing agencies. The demonstration will provide HUD with insight into the
UPCS-V model, including its ability to expand HUD’s oversight and risk management capabilities through
a reliable, repeatable inspection process that better identifies health and safety risks to families, before
implementing the program nationwide. At the conclusion of the demonstration, HUD will assess its success
and determine whether to implement UPCS-V on a permanent basis throughout the country.
     Native American Housing Assistance and Self-Determination Act: revisions to the Indian Housing Block
Grant program formula – On May 31, 2016, HUD issued a proposed rule soliciting comments. The proposed
rule would revise the Indian Housing Block Grant program allocation formula authorized by Section 302 of
the Native American Housing Assistance and Self-Determination Act of 1996 as amended (NAHASDA). OIG
nonconcurred on this proposed rule because it redefined the eligible funding period for a demolished unit in
a manner inconsistent with an express statutory limitation. Specifically, HUD’s intention with the proposed
rule was to provide a far longer period between demolition and rebuild than is permitted by the statute. HUD
redrafted the proposed rule by requesting public comments on how to address this issue by regulation, while
also remaining within the scope of section 302(b)(1)(C) of NAHASDA. As a result, OIG lifted its nonconcurrence.


OFFICE OF MULTIFAMILY HOUSING PROGRAMS
Improving previous participation reviews – On May 17, 2016, HUD published its supplemental notice of
proposed rulemaking, which opens the public comment period to address uncertainties related to its August
10, 2015, proposed rule at 80 FR (Federal Register)-47874. In this notice, HUD provides a draft supplemental
guide describing the previous participation review process. While the revised regulations provide flexibility
in the review process, there was uncertainty on the implementation of the final rule. The guide will be posted
to HUD’s Web site with the final regulations. It is intended to clarify and simplify HUD’s process for reviewing
the previous participation of participants that have decision-making authority over their projects as one
component of HUD’s responsibility to assess financial and operational risk to the projects in these programs.
The approach offered by the proposed rule was to not only bring greater certainty and clarity to the process
but also greater flexibility, avoiding a one-size-fits-all approach.




46
                                                                    CHAPTER 8 LEGISLATION, REGULATION, AND OTHER DIRECTIVES




     Expanding the Family Self-Sufficiency program – On August 26, 2016, HUD issued Housing Notice,
H-2016-08, which expands the Family Self-Sufficiency (FSS) program to privately owned multifamily housing
properties that receive project-based Section 8 rental subsidies through a housing assistance payments contract
with HUD. The FSS program provides incentives and support to help families living in multifamily assisted
housing to increase their earned income and reduce their dependence on public housing programs. Owners of
privately owned HUD-assisted multifamily housing can voluntarily establish and operate an FSS program at
their housing sites. Families living in these properties can voluntarily participate in the FSS program.
     Amending lead-based paint regulations – On September 1, 2016, HUD published a proposed rule, FR-
5816-P-01, which amends its lead-based paint regulations on reducing blood lead levels in children under age
6 who reside in federally owned or assisted pre-1978 housing. The proposed rule formally adopts the revised
definition of “elevated blood lead levels” in children under the age of 6 in accordance with guidance of the
Centers for Disease Control and Prevention and establishes more comprehensive testing and evaluation
procedures for the housing where such children reside.
     Complying with the National Environmental Policy Act – On September 26, 2016, HUD published FR-
5979-N-01, which announces that it has posted on its Web site its memorandum of understanding regarding
its compliance with the National Environmental Policy Act (NEPA) and related laws and authorities. The
purpose of the memorandum is to outline the respective roles and responsibilities of HUD program offices to
ensure HUD compliance with NEPA and related laws and authorities and HUD’s implementing regulations
at 24 CFR (Code of Federal Regulations) Parts 50, 51, 55, and 58. The memorandum defines the roles and
responsibilities of the parties involved in HUD’s environmental review process, establishes a governance
structure to address environmental compliance issues, and clarifies procedural mechanisms to ensure and
evaluate compliance. It establishes an internal governance structure to address environmental compliance
issues with regional, national, and executive committees. Issues can be raised at each level and elevated as
necessary to create a more efficient review process. Mechanisms to maintain and monitor environmental
compliance are included in the memorandum. HUD will develop a management program to evaluate
program office compliance with environmental review requirements. These procedures will be used to
identify and solve internal issues of compliance.


OFFICE OF COMMUNITY PLANNING AND DEVELOPMENT
Equal Access in Accordance With an Individual’s Gender Identity in CPD Programs – On September 21, 2016, HUD
published a final rule to ensure equal access for individuals in accordance with their gender identity in programs
and shelter funded under programs administered by HUD’s Office of Community Planning and Development
(CPD). The rule also amended HUD’s definition of gender identity to more clearly reflect the difference between
actual and perceived gender identity and eliminated the prohibition on inquiries related to sexual orientation or
gender identity so that service providers can ensure compliance. The rule becomes effective October 21, 2016.
    Further, HUD had participated in a Physical Inspection Alignment Working Group, which has decided
to eliminate redundant physical inspections required when a property is financed with multiple Federal
housing programs. There are eight pilot grantees (State of Illinois, Commonwealth of Kentucky, State of
Louisiana, State of Maryland, State of Minnesota, State of Missouri, State of New Mexico, and State of North
Carolina) and 38 pilot properties in the 2015 Physical Inspection Alignment Pilot Program. These pilot
properties associated with this waiver are projects funded by the HOME Investment Partnerships Program
and one or more of the Combined Funding Programs, which include the U.S. Department of the Treasury’s
low-income housing tax credits, U.S. Department of Agriculture’s Section 515 Rural Rental Housing
Program, FHA Multifamily Insurance Program, Section 811 (Housing for the Disabled) program, Section 202
(Housing for the Elderly) program, Section 8 Project-Based Rental Housing program, and Rental Assistance
Demonstration program. The elimination of multiple unnecessary inspections could lower the cost of
oversight while maintaining housing quality.


                                                                                                                       47
SEMIANNUAL REPORT TO CONGRESS




CONSUMER ADVISORIES AND ALERTS
As a way to assist in fraud prevention, 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. These
advisories are intended to ensure that industry professionals 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 programs. During this semiannual period, OIG issued three integrity bulletins related to
community planning and development, which are summarized below.
    7 Keys to Handling Conflicts of Interest – Conflicts of interest can arise when officials or staff benefit
directly or indirectly from awarding or contracting grant funds. Conflicts of interest, if not avoidable, must
be identified, disclosed, and managed in compliance with rules and regulations. OIG issued an integrity
bulletin discussing the common types of conflicts of interest, offers of best practices for avoiding and
managing them, and the potential consequences of not handling them appropriately.
    Subrecipient Oversight and Monitoring – OIG issued this industry bulletin to highlight the importance of
effective oversight and monitoring by grantees receiving community planning and development funds. The
bulletin offers key tips for improving oversight of subrecipients regarding their performance and compliance
with laws and regulations.
    Procurement and Contracting – Grantees and subrecipients are required to follow Federal, State, and local
laws when procuring goods and services. Weak procurement policies and oversight can entice some employees
to manipulate contracts to their personal benefit or create costly, wasteful, or unenforceable contracts. Strong
polices and oversight will enhance program integrity. OIG’s integrity bulletin was issued to provide five ground
rules, including (1) maintain separation of duties, (2) provide competencies and training, (3) insist on good
record keeping, (4) maximize competition, and (5) uphold ethics and bar conflicts of interest.




48
                                                                                               CHAPTER 9 AUDIT RESOLUTION




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 do not have a management decision, have
significantly revised management decisions, or have significant management decisions with which OIG disagrees.
It also includes a status report on HUD’s implementation of the Federal Financial Management Improvement Act of
1996 (FFMIA). In addition to this chapter on audit resolution, see appendix 3, table B, “Significant Audit Reports for
Which Final Action Had Not Been Completed Within 12 Months After the Date of the Inspector General’s Report.”


AUDIT REPORTS ISSUED BEFORE START OF PERIOD WITH NO
MANAGEMENT DECISION AS OF SEPTEMBER 31, 2016
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 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 in
which OIG cannot determine whether PIH is making progress in addressing the recommendation.
    This issue was referred to the Assistant Secretary on June 19, 2014, and September 30, 2014, but as of
March 31, 2015, a new proposal had not been made. Therefore, this issue was referred to the Deputy Secretary
on March 31, 2015. OIG met to brief the Deputy Secretary’s staff on the subject on April 20, 2015.  On August
24, 2016, PIH indicated that in coordination with the Office of the Chief Information Officer, plans were being
developed to address the recommendation.  However, OIG has not been able to confirm what those plans are,
and a new proposal had not been made as of September 30, 2016. (Audit Report: 2014-FO-0003)




                                                                                                                     49
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). OIG 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 caused by 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 for this 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 as the result of 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 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. OIG briefed 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 an 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 improper
payments made to deceased tenants, 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.  OIG has not heard back from OCFO on this matter.
     OCFO submitted a management decision for the other recommendation on March 31, 2016. However,
OIG disagrees with this management decision because it believes that the 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)




50
                                                                                           CHAPTER 9 AUDIT RESOLUTION




THE NIAGARA FALLS HOUSING AUTHORITY DID NOT ALWAYS ADMINISTER ITS HOPE VI
GRANT PROGRAM AND ACTIVITIES IN ACCORDANCE WITH HUD REQUIREMENTS,
ISSUE DATE: JULY 10, 2014
HUD OIG audited the Niagara Falls Housing Authority’s HOPE VI grant program based on an OIG risk
analysis and the amount of funding the Authority received. The objectives of the audit were to determine
whether the Authority administered its HOPE VI grant program and activities in accordance with HUD and
HOPE VI grant program requirements.
     The Authority did not always administer its HOPE VI grant program and activities in accordance with
requirements. Specifically, contrary to Federal regulations and the HOPE VI grant agreement, Authority
officials drew more HOPE VI funds from HUD’s Line of Credit Control System than were needed to cover
project expenditures. OIG recommended that HUD instruct Authority officials to (1) reimburse the U.S.
Treasury for approximately $1.5 million in HOPE VI funds drawn in excess of their 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 HUD’s Office of General Counsel
(OGC) regarding the proposed management decisions. On March 26, 2015, OIG referred the disagreement
to the Acting Assistant Secretary for Public and Indian Housing because a legal determination had not been
provided.
     On April 28, 2015, the Associate General Counsel, Office of Assisted Housing and Community
Development, provided an opinion on the proposed management decisions and the related OIG concerns.
This opinion concluded that approximately $1.5 million in questioned costs was program income under the
definition of excess income and did not have to be repaid to the U.S. Treasury.
     The Counsel to the Inspector General reviewed the OGC opinion and agreed that the OIG
recommendations should be retained, the questioned costs were not program income, and the interest
earned on these funds was also not program income. Also, exhibit H of the annual contributions contract
amendment would have required program income to have been spent before HOPE VI funds were drawn
down. Because unspent HOPE VI grant funds are no longer available for expenditure, funds returned to HUD
must be returned to the U.S. Treasury.
     On August 13, 2015, OIG referred its disagreement on the management decisions to the Deputy Secretary
for a decision as the departmental audit resolution official. As of September 30, 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 Federal Housing Administration (FHA) loan indemnification
recovery process to determine whether HUD had adequate controls 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



                                                                                                                  51
SEMIANNUAL REPORT TO CONGRESS




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 (1) was not able to determine loss amounts for loans that were part of the ACD program,
(2) was not aware of the CWCOT program, and (3) considered the final default date for billing only. As a
result, HUD did not attempt to recover a loss of more than $37 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 Offices of Housing, Single Family Housing, and Finance and
Budget on January 30, 2015. Although the meeting ended in disagreement, OGC and the OIG 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 explicitly stated in signed indemnification agreements, OIG
believes that the indemnification agreement should be enforced for any loan that “goes into default” during
the indemnification agreement term, regardless of whether the loan emerged from a default status after the
agreement expired. In response to HUD’s legal opinions, OIG received its own legal opinion from the OIG
Office of Legal Counsel, 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 but has not received an answer. (Audit
Report: 2014-LA-0005)



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




52
                                                                                             CHAPTER 9 AUDIT RESOLUTION




related to the auditability of several material assets and reserve for loss liability account balances.  The audit
report had 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.  Initially, OIG did not
reach consensus with Ginnie Mae on the necessary corrective actions for 9 of the 20 audit recommendations
and referred the matter to the Deputy Secretary for a decision on September 21, 2015.  In August 2016, OIG
reached an agreement on three of nine management decisions that it previously rejected. As a result, there
are now six audit recommendations without a management decision. OIG’s audit recommendations request
that HUD’s Chief Financial Officer provide oversight of Ginnie Mae’s financial management operations
because HUD’s plan of action for providing oversight of Ginnie Mae lacked specificity. As of September 30,
2016, the Deputy Secretary had not provided a decision. (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. OIG conducted the
audit based on the large 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
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 it 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. As a result, its certification to HUD was inaccurate. The State began taking corrective actions
and providing documentation during the audit 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 nearly $39
million contract price for the initial 2-year period was fair and reasonable, (2) show that the more than $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 more than $9 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




                                                                                                                   53
SEMIANNUAL REPORT TO CONGRESS




with OIG regarding the applicability of the procurement regulations at 24 CFR 85.36(b) through (i) to State
CDBG-DR grantees. HUD also disagrees 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. 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 notice 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 asserted 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 an answer.
(Audit Report: 2015-PH-1003)



GTL INVESTMENTS, INC., DOING BUSINESS AS JOHN ADAMS MORTGAGE COMPANY,
SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH HUD’S FHA LOAN
REQUIREMENTS, ISSUE DATE: SEPTEMBER 30, 2015
HUD OIG, in coordination with the U.S. Attorney’s Office for the Eastern District of Michigan, reviewed
GTL Investments, Inc., doing business as John Adams Mortgage Company, regarding its originations,
underwriting, quality control, and endorsement of FHA loans.
     The U.S. Government contended that it had civil claims against GTL Investments because of the
origination, underwriting, quality control, and endorsement of 29 FHA-insured loans made from
January 2008 through April 2012 that went to claim. Further, GTL Investments’ material deficiencies in
the underwriting of these 29 loans resulted in losses to the FHA insurance fund. The Government also
contended that it had actual and potential administrative claims against GTL Investments for two additional
FHA-insured loans that remained in GTL Investments’ loan portfolio.
     On December 23, 2014, GTL Investments entered into a settlement agreement to pay more than $4
million to the FHA insurance fund. GTL Investments also agreed to refrain from making any claim for
FHA insurance benefits or indemnify FHA for losses incurred, if any, on the two loans that remained in its
loan portfolio.7 The settlement agreement was neither an admission of liability by GTL Investments nor a
concession by the Government that its allegations were not well founded.
     OIG recommended that HUD’s Office of Program Enforcement record (1) the more than $4 million
settlement to recognize funds due and returned as an ineligible cost and (2) more than $27,000 as an
ineligible cost for the loss incurred on the sale of the property associated with FHA case number 261-9436172.
It also recommended that HUD’s Office of Program Enforcement coordinate with the Office of Single Family

7 Since the settlement agreement, FHA case numbers 261-9436172 and 261-9389877 went into claim, and HUD incurred a loss on the sale of each of the
  associated properties.




54
                                                                                                                                CHAPTER 9 AUDIT RESOLUTION




Housing to ensure that FHA case number 261-9389877 is identified in the appropriate HUD system as being
subject to indemnification if claims are paid and losses are incurred as a result of the settlement agreement.
The loss to the FHA insurance fund is estimated to be nearly $37,000.8
     HUD’s Office of Program Enforcement’s proposed management decisions disagree with OIG’s
recommendations because the Office contends that (1) the collection of civil recoveries and tracking of
related activities is beyond its authority or responsibility, (2) it has no authority to require another HUD office
to record indemnification obligations, and (3) it is not within the scope of its duties.
     This issue was referred to HUD’s Deputy General Counsel for Program Enforcement and Fair Housing
on February 5, 2016. After discussions with OGC regarding the recommendations, recommendation 1A
was closed because the settlement agreement was the needed action for closure. However, responsibility
for recommendations 1B and 1C was transferred to the Office of Single Family Housing because the loans
required indemnification agreements. As of September 30, 2016, Single Family Housing had not provided
management decisions for these two recommendations. (Memorandum: 2015-CH-1801)

REVIEW OF DOWNPAYMENT ASSISTANCE FUNDS
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
In fiscal year 2015, HUD OIG completed three audits of two lenders, NOVA Financial and Investment
Corporation and loanDepot LLC, which disclosed that FHA-insured loans with downpayment assistance
funds did not always meet HUD requirements. While the Deputy Secretary provided a decision on the NOVA
audit, that decision did not include loanDepot. OIG strongly disagreed with the Deputy Secretary’s decision
on NOVA. There are more details on the disagreement in the “Significant Management Decision With Which
OIG Disagrees” section of this semiannual report. (Audit Report: 2015-LA-1005) Further, HUD and OIG
continue to disagree on the overarching issue of borrower-financed downpayment assistance.
     HUD OIG audited loanDepot based on the results of a previous audit of NOVA and a referral from HUD’s
Quality Assurance Division detailing a separate lender that originated FHA-insured loans that had ineligible
downpayment assistance gifts. The HUD OIG analysis identified loanDepot as a lender with high FHA
origination volume in the geographic region that participated in similar downpayment assistance gift and
secondary financing programs.
     OIG 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 nearly $5 million for 53 loans with ineligible assistance and $29.9 million
for a projected 339 loans that likely had ineligible assistance. Projecting forward 1 year, this is equivalent to
more than $25 million in potential losses for loans that could have 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 because of higher monthly mortgage payments imposed
on them by a premium interest rate.
     OIG conducted a second audit of loanDepot’s FHA-insured loans with Golden State Finance Authority



8 This amount is based on the loss severity rate of 50 percent of the unpaid principal balance of nearly $74,000 as of September 3, 2015.




                                                                                                                                                      55
SEMIANNUAL REPORT TO CONGRESS




downpayment assistance gifts, which again disclosed that loanDepot did not always comply with HUD
requirements. This noncompliance put the FHA insurance fund at unnecessary risk, including potential
losses of nearly $6 million for 62 loans with ineligible gifts and more than $16 million for 178 loans that likely
contained ineligible gifts. Projecting forward 1 year, this is equivalent to nearly $16 million in potential
losses for loans that would have ineligible gifts and 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. As OIG
determined in the first audit, the ineligible loans put borrowers at a disadvantage because of higher monthly
mortgage payments, including the burden of funding the downpayment assistance program through
premium interest rates.
    The audits 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. 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.
    Among other things, OIG recommended that HUD require 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.
    The Office of Single Family Housing’s position is that the downpayment assistance provided by
housing finance agencies through premium pricing is consistent with established law and guidance.
OIG disagrees. Single Family Housing believes that the downpayment assistance funding mechanisms
used are not 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. Single
Family Housing also reaffirmed 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. This process includes the generation of funds through capital market vehicles that 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 on NOVA, 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 HUD OGC legal opinion. 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. Further, the use of funds derived
from the sale of a mortgage with a higher than market interest rate does not constitute premium pricing.
In addition, HUD OGC cited that 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. HUD OGC concluded that it found no basis to challenge the legality of
the downpayment assistance programs.




56
                                                                                         CHAPTER 9 AUDIT RESOLUTION




     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 reports 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.
     The lenders were obligated to conduct due diligence to ensure that planned downpayment assistance
gifts met the requirements described in HUD Handbook 4155.1. OIG determined that the FHA loans with
downpayment assistance did not meet 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 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) funded 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 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 continued to disagree with HUD’s stance on the issue and
referred the NOVA audit recommendations to the Deputy Secretary on December 15, 2015.
     While the Deputy Secretary’s decision on NOVA was still pending, OIG also referred the loanDepot
audit recommendations to the Principal Deputy Assistant Secretary on March 17, 2016, and discussed the
recommendations with HUD on March 29, 2016. During that meeting, it was mutually agreed upon to refer
the loanDepot disagreement to the Deputy Secretary so that it can be included with the decision on the
NOVA disagreement referral. On May 25, 2016, the Deputy Secretary provided her decision on the NOVA
recommendations; however, it excluded loanDepot. Although there have been many discussions on the
issues between HUD and OIG, the Deputy Secretary’s decision on loanDepot is still pending. (Audit Reports:
2015-LA-1009 and 2015-LA-1010)



GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS 2015 AND 2014
(RESTATED) FINANCIAL STATEMENTS AUDIT, ISSUE DATE: NOVEMBER 13, 2015
HUD OIG audited Ginnie Mae’s fiscal year 2015 stand-alone financial statements.  OIG conducted this audit in
accordance with the Chief Financial Officers Act of 1990 as amended.  This report had new and repeat audit
findings. Of 14 audit recommendations, OIG did not reach consensus on the necessary corrective actions for
3 audit recommendations. 
    Ginnie Mae did not provide a response to OIG to explain its refusal to implement one audit
recommendation related to the compliance with Debt Collection Improvement Act.
    For the remaining two information technology (IT)-related audit recommendations, Ginnie Mae’s master
subservicer (MSS) disagreed with one audit recommendation. The MSS believes that it has the proper
segregation of duties for cash processes, payment processing, and reconciliation of all financial activities.
However, OIG disagrees and maintains its original position that segregation of duties means that no single
person should have control of two or more conflicting functions within a transaction or operation. Further,



                                                                                                                57
SEMIANNUAL REPORT TO CONGRESS




while a security camera system, criminal background checks, etc., are helpful, they do not take the place of
good internal controls, which include the segregation of duties.
    Regarding the second IT audit recommendation, Ginnie Mae’s MSS agreed to regularly review the
market discount fraction change report and confirm this review in its monthly self-evaluation. However,
this response and management’s plan of action did not fully address OIG’s recommendation. The methods
identified were neither sufficient nor adequate to address (1) OIG’s finding “that management had an
ineffective monitoring tool in place” and (2) OIG’s recommendation that management automate the approval
process to include restricting the capability to make unauthorized changes unless evidence of approval is
present or increase the scope of the “Admin Adjustment Report” to include all exceptions and adjustments.
The issue was not that a review process was not in place but that the review was not meaningful or effective
because the tool or report used to review financial adjustment changes was limited. The manual approval
process also enabled staff to avoid obtaining approval before making adjustments because there were (1) no
checks and balances and (2) no restrictions in the financial system to prevent unauthorized adjustments. 
Management’s plan of action did not address OIG’s concern.
    OIG referred this matter to the President of Ginnie Mae for a decision on April 21, 2016, and as of
September 30, 2016, a decision is still pending. (Audit Report: 2016-FO-0001)



ADDITIONAL DETAILS TO SUPPLEMENT OUR FISCAL YEARS 2015 AND 2014 (RESTATED)
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FINANCIAL STATEMENT
AUDIT, ISSUE DATE: NOVEMBER 18, 2015
HUD OIG audited HUD’s consolidated financial statements and reported on deficiencies in the areas of
(1) accounting for assets and liabilities for PIH programs in accordance with GAAP and FFMIA, (2) HUD’s
financial management governance structure and internal controls over financial reporting, (3) HUD’s
administrative control of funds system, and (4) compliance with the HOME Investment Partnership Act
(HOME statute).  HUD disagreed with several recommendations made in each of these areas, and OIG
referred them to the Principal Deputy Assistant Secretary for Community Planning and Development,
the Principal Deputy Assistant Secretary for Public and Indian Housing, and the Deputy Chief Financial
Officer on April 21, 2016.  However, OIG received a response on only one recommendation and disagreement
remained on the actions necessary to correct the deficiencies identified in the report.  OIG referred the
remaining recommendations to the Deputy Secretary on September 20, 2016. 

Accounting for assets and liabilities for PIH programs in accordance with GAAP and FFMIA:  OIG reported
that HUD had not reported on its financial statements cash advances made to Indian Housing Block Grant
recipients who are authorized to invest funds drawn from their line of credit.  This requirement is in accordance
with GAAP.  HUD disagrees because it believes that the use of funds for investment purposes is considered
an immediate use for an authorized program purpose.  In addition, most of HUD’s argument is based on
conclusions from the Tenth Circuit Court of Appeals and the U.S. Government Accountability Office (GAO)
Redbook and does not consider GAAP at all.  None of the references cited by HUD fall into the GAAP hierarchy
outlined in OMB Circular A-136, Financial Reporting Requirements.  In addition, Indian Housing Block Grant
recipients report their investments as “cash on hand” on OMB SF-425, on which the instructions state for cash
on hand that “a recipient must compute the amount of Federal Cash on Hand due to undisbursed advance
payments using the same basis that it uses in requesting the advances.”  OIG has repeatedly requested that
OCFO provide its justification for not classifying these payments as advances on its financial statements based
on accounting principles, but as of September 30, 2016, OIG has not received OCFO’s position.




58
                                                                                                                         CHAPTER 9 AUDIT RESOLUTION




HUD’s financial management governance structure and internal controls over financial reporting:  OIG reported
on deficiencies found in the financial governance and financial reporting areas.  OIG could not accept the
proposed management decisions because OCFO (1) requested final action target dates that were too far out in
the future, (2) claimed the deficiencies had been addressed by the new processes implemented by New Core
when it had not, or (3) did not provide sufficient detail to support that the recommendations would be fully
addressed.  OIG communicated these issues to HUD on March 7, 2016, but has not received any new proposals.

HUD’s administrative control of funds system:  OIG reported that data changes were being made in HUD’s
Central Accounting and Program System (HUDCAPS) by OCFO systems without adequate documentation
to support the justification, authorization, and approval of the change.  HUD stated that the transition to
the Oracle financial management service has resulted in Oracle Federal Financials now being the system
of record instead of HUDCAPS. Therefore, this finding should be closed.  While the transition occurred,
changes to data in HUDCAPS can still be made, which has an impact on the data in Oracle Federal
Financials.  OIG has not received any new proposals on this matter.

Compliance with the HOME Investment Partnership Act:  In prior-year audit reports, OIG reported that
HUD was not in compliance with section 218(g) of the HOME statute because of the use of a cumulative
method for determining compliance with commitment deadlines.  OIG continued work in this area and
recommended that HUD implement a payment recapture audit for the HOME program to identify and
recapture payments made as a result of the continued use of the cumulative method and to ensure that the
impact of the cumulative method is included in the risk assessment process to evaluate the susceptibility to
significant improper payments.  HUD’s management decision indicated that it will determine compliance
with section 218(g) of the HOME statute even though GAO has already made a formal decision that HUD
is not in compliance.  In addition, HUD stated that it will implement a recapture plan after the results
of the Antideficiency Act investigation, although the criteria for an Antideficiency Act violation and an
improper payment differ.  As a result of this difference, OIG does not agree that one is contingent on the
outcome of the other.  Regarding inclusion in the risk assessment, HUD stated that the HOME program
would be included and the risk assessment process would be reevaluated as part of a prior-year audit
recommendation.  However, HUD did not specify whether the impact of the cumulative method to meet
commitment deadlines in the HOME program will be included. (Audit Report: 2016-FO-0003)



HUD DID NOT EFFECTIVELY NEGOTIATE, EXECUTE, OR MANAGE ITS AGREEMENTS
UNDER THE INTERGOVERNMENTAL PERSONNEL ACT, ISSUE DATE: MARCH 30, 2016
HUD OIG audited HUD’s implementation and oversight of the Intergovernmental Personnel Act (IPA or
Act) mobility program because of deficiencies found in prior reviews of two IPA assignments.9 The audit
objectives were 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 (1) it did not have
sufficient policies and procedures for negotiating, reviewing, and executing agreements; (2) its staff ignored
requirements and altered standard documents; and (3) it did not disclose information to decision makers.
OIG found that HUD abused the IPA mobility program by circumventing other hiring authorities, and OIG
had no assurance that the agreements were in its best interest, negotiated at a reasonable cost, or free from
9 Audit Memorandum 2014-FW-0801, Potential Antideficiency Act Violations Intergovernmental Personnel Act Agreements, dated May 30, 2014, and Audit
  Memorandum 2015-FW-0801, Intergovernmental Personnel Act Appointment Created an Inherent Conflict of Interest in the Office of Public and Indian
  Housing, dated January 20, 2015




                                                                                                                                                      59
SEMIANNUAL REPORT TO CONGRESS




conflicts of interest. In addition, HUD did not properly manage the assignees. This condition occurred
because HUD did not have a central means of tracking assignees or promptly outprocessing them when they
left the program. These shortcomings made HUD vulnerable to security threats.
     OIG addressed the report to the Deputy Secretary and 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, OIG recommended that OGC 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 its organizations support or repay
nearly $50,000 in unsupported payments to employers.
     On July 29, 2016, HUD proposed management decisions for the recommendations. While HUD addressed
many of the deficiencies in the report, OIG could not agree with a number of HUD’s management decisions
because the evidence for closure was insufficient or there were mistakes in the final action target dates. In
addition, OIG substantively disagreed with management decisions for five recommendations:
•	   Recommendation 1A - Establish a central point of review and authority for IPA agreements,
•	   Recommendation 1F - Resubmit its revised IPA policy for departmental clearance,
•	   Recommendation 2A - Establish points of responsibility for oversight and monitoring of personnel as-
     signed to HUD under the IPA,
•	   Recommendation 2C - Provide formal performance appraisals for IPA assignees, and
•	   Recommendation 2E - Establish controls to ensure IPA assignees receive required information technolo-
     gy security awareness training. 
    For each of the five recommendations, OIG disagreed with HUD’s proposed actions because they (1)
were insufficient to prevent further abuse and mismanagement of IPA assignments, (2) failed to provide
transparency to its procedures, and (3) did not ensure the security of its information systems. After
discussion with HUD, OIG rejected all of the management decisions on August 18, 2016, and asked HUD to
make revisions and provide additional information.  Although OIG attempted to work with HUD to revise
these management decisions, HUD had not submitted any of the requested revised management decisions
by fiscal yearend.  On September 30, 2016, OIG referred the recommendations to the Deputy Secretary. (Audit
Report: 2016-FW-0001)


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 has two reports in which there were significantly revised management decisions.

HUD SUBSIDIZED AN ESTIMATED 2,094 TO 3,046 HOUSEHOLDS THAT INCLUDED
LIFETIME REGISTERED SEX OFFENDERS, ISSUE DATE: AUGUST 14, 2009
HUD OIG audited HUD’s requirement prohibiting lifetime registered sex offenders from admission to
HUD-subsidized housing to determine the extent to which lifetime registered sex offenders occupied HUD-
subsidized housing. OIG determined that HUD subsidized an estimated 2,094 to 3,046 households, which
included lifetime registered sex offenders. This number included (1) individuals who were ineligible at
the time of admission because of their lifetime registration status, (2) individuals who were admitted and
convicted before the current law was enacted, and (3) individuals who were eligible at the time of admission
but later became lifetime registered sex offenders.




60
                                                                                            CHAPTER 9 AUDIT RESOLUTION




    Among other things, OIG recommended that HUD develop and implement controls to monitor housing
authority use of the required application questions and retention of appropriate background check documentation.
    In its original management decision, HUD agreed to develop relevant questions within a new module in its
Next Generation Management System. On May 4, 2016, HUD submitted a revised management decision, stating
that the module was not under consideration now, nor would it be in the foreseeable future.  As an alternative, it
agreed to update its monitoring checklists to include questions directly responsive to the recommendation.
    On May 13, 2016, OIG agreed with the revised significant management decision. (Audit Report: 2009-KC-0001)



CORNERSTONE HOME LENDING, HOUSTON, TX, ISSUE DATE: SEPTEMBER 26, 2014
HUD OIG audited Cornerstone Home Lending, formerly known as Cornerstone Mortgage Company. OIG
determined that Cornerstone did not comply with HUD requirements when underwriting 16 FHA-insured
loans. Specifically, underwriters (1) violated restrictions on resales occurring 90 days or less after acquisition,
(2) failed to review appraisal reports to ensure that properties’ values were reasonable, and (3) did not
adequately verify borrower assets or income.
     For recommendation 1A, OIG recommended that the Deputy Assistant Secretary for Single Family
Housing require Cornerstone to reimburse HUD for 13 loans for which HUD had sold the properties and
incurred losses of nearly $982,000. In its initial management decision, Housing determined that 12 of the
13 loans had material underwriting deficiencies and agreed to request that Cornerstone indemnify HUD for
the loans. For recommendation 1B, OIG recommended that the Deputy Assistant Secretary for Single Family
Housing require Cornerstone to indemnify HUD for three actively insured ineligible loans with unpaid
principal balances of nearly $230,000 and a projected loss of nearly $154,000. In its initial management
decision, Housing determined that two of the loans had material underwriting deficiencies and agreed
to request that Cornerstone indemnify HUD for the two loans. In an April 12, 2016, revised management
decision, HUD determined that the 14 cases were outside the applicable statutes of limitation and no further
action could be pursued. OIG agreed with the revised management decision on April 18, 2016.
     For recommendation 1G, OIG recommended that the Deputy Assistant Secretary for Single Family
Housing refer Cornerstone to HUD’s Mortgagee Review Board (MRB) for review and appropriate actions
for violating HUD underwriting requirements. In its initial management decision, Housing agreed that
there were clear violations of underwriting requirements but deferred making a referral to the MRB until
it had assessed Cornerstone’s compliance with HUD requirements. In a revised management decision,
HUD determined that because the applicable statutes of limitation had passed for the questioned loans and
no further actions could be taken, a referral to the MRB was not warranted. OIG agreed with the revised
management decision on April 18, 2016. (Audit Report: 2014-FW-1006)



SIGNIFICANT MANAGEMENT DECISIONS WITH WHICH OIG DISAGREES
During the reporting period, OIG had three reports in which the OIG disagreed with the significant
management decision.


THE STATE OF TEXAS DID NOT FOLLOW REQUIREMENTS FOR ITS INFRASTRUCTURE AND
REVITALIZATION CONTRACTS FUNDED WITH CDBG DISASTER RECOVERY PROGRAM
FUNDS, ISSUE DATE: MARCH 7, 2012
HUD OIG audited the State of Texas’ use of $1.3 billion of State CDBG-DR program funds provided for
recovery from Hurricane Ike. OIG determined that the State did not follow Federal and State requirements




                                                                                                                   61
SEMIANNUAL REPORT TO CONGRESS




and best practices for its infrastructure and revitalization professional services and project management
services contracts. It failed to do so because it disregarded various requirements. Specifically, the State (1)
improperly procured its professional services and project management services contracts, (2) improperly
increased the project management services company’s contract, (3) included ineligible contract provisions,
(4) failed to ensure that the contract payment type was consistent, (5) failed to prevent questionable charges,
(6) did not ensure that its budgets clearly assigned costs according to HUD CDBG cost categories, and (7) did
not ensure that its project management services contract contained specific and quantifiable performance
measures. As a result, the State paid more than $9 million in questioned costs.
     Among other things, OIG recommended that the Office of Community Planning and Development
(CPD) require the State of Texas to reimburse the CDBG-DR program from non-Federal funds nearly
$920,000, which the State improperly paid to the contractor for amounts billed using an ineligible “cost plus
a percentage of cost” payment method. OIG also recommended that CPD require the State to reimburse
or provide support for nearly $8 million in unsupported inflated labor costs and for more than $543,000 in
unnecessary and unreasonable inflated labor costs.
      CPD originally agreed with OIG’s recommendations in July 2012. However, in December 2013, CPD
submitted revised management decisions that disagreed with these recommendations, and it sought to
revise the ineligible and unsupported amounts owed to zero and close the recommendations. CPD stated
that it had consulted with OGC and determined that the contract was not a “cost plus a percentage of cost”
contract. CPD also stated that it had reviewed the State documentation and found no evidence that any of the
costs charged by the contractor were ineligible, unnecessary, or unreasonable.
     After discussions among HUD and OIG officials, including OIG’s Office of Legal Counsel, OGC, and
CPD, the matter was referred to the Deputy Secretary on March 31, 2015. On September 30, 2016, the Deputy
Secretary provided a final determination. The Deputy Secretary stated that in light of OGC’s opinion and
the “maximum feasible deference” legal concept, which the State is entitled to in interpreting the regulatory
prohibition at issue, the Deputy Secretary concluded that OIG did not establish that the State’s contract
violated the prohibition against “cost plus percentage of cost” contracts. The Deputy Secretary also
disagreed with OIG’s position that the State’s determination regarding the contract was plainly inconsistent
with the regulation and not entitled to deference. The Deputy Secretary further determined that the Federal
Acquisition Regulations (FAR) did not apply to the contract. The Deputy Secretary reached this conclusion
based on what HUD believes are the applicable regulatory requirements, the State’s stated method of
complying with these requirements at the time, and OGC’s legal opinion regarding the applicability of the
FAR and provisions in OMB Circular A-87.
     OIG continues to assert that the contract was a “cost plus a percentage of cost” contract because the
contractor’s entitlement was uncertain at the time of contracting. The OGC opinion relied on by the Deputy
Secretary, that inclusion of a total cost ceiling takes the contract outside the definition of “cost plus a
percentage of cost” contract, was based on a 1943 opinion of the Comptroller General of the United States,
which the Comptroller General has since abandoned. Comptroller General opinions reached since 1945
have followed the rule that such controls or dubious cost limitations are not sufficient to save such contracts
from violating the prohibition. Further, the contract was increased from approximately $68 million to $144
million, indicating that the contract was not a fixed-price contract that included all needed services. OIG
agrees that HUD’s State CDBG program rules gave the State “maximum feasible deference” and allowed
it to create its own definitions. However, HUD’s State CDBG rules required the State’s definitions to be
“explicit, reasonable and not plainly inconsistent with the Act.”10 Still, neither the State nor HUD defined a
“cost plus a percentage of cost” contract. In addition, the State admitted it had not established a definition.
According to 24 CFR 570.481(a), in situations in which no definition has been adopted, the State should follow
the FAR. In addition, the State courts have applied definitions consistent with the FAR to other contract




62
                                                                                           CHAPTER 9 AUDIT RESOLUTION




disputes. Therefore, OIG questions whether HUD’s decision is consistent with the existing regulations
because it granted the State deference when the State did not explicitly define “cost plus a percentage of cost”
contracting as required.
      OIG also asserts that the FAR does apply when determining whether the costs charged were reasonable
or that they were inflated and had unsupported costs. In examining the costs charged under the contract,
without reference to the FAR, the Deputy Secretary adopted CPD’s determination that there was no evidence
that any costs charged were ineligible, unnecessary, or unreasonable.
    The State’s contract stated that the contractor would be compensated in accordance with negotiated
hourly billing rates in an attachment that listed all of the tasks the contractor would perform. Although CPD
told the Deputy Secretary that invoices by task existed in January of 2016, CPD told OIG in May 2016 that the
State and its contractor did not have invoices by task as required by the contract. Further, according to the
State of Texas General Land Office Disaster Recovery (GLO-DR) Project Implementation manual, the GLO-DR
and, thus, the State had elected to follow applicable State and Federal statutes and regulations. These rules
included Federal cost guidelines found in OMB Circulars A-87 and A-102 and HUD regulations at 24 CFR
85.36.11 However, a State grantee is otherwise obligated to either follow its existing procurement policies or
adopt the Federal policies under 24 CFR 85.36. In either case, reasonable cost principles apply.
    OIG found that the records maintained were inadequate to determine whether costs incurred were
reasonable. In other words, the billing methods used did not comply with the contract provisions requiring
that invoices identify the services associated with each individual task, the date on which the services
were performed, the name and billing rate of the individual providing the services, and the amount billed.
Instead, OIG determined that the contractor billed only by category and hourly rates. In addition, the
contractor billed by an average or a predetermined salary cost rather than by actual wage costs. As a result,
OIG found that the State could not verify what tasks the contractor had completed or whether it had overpaid
the contractor for any task.
    OIG closed the recommendations with disagreement but maintains that the State’s contract was a “cost
plus a percentage of cost” contract and the FAR applied to the audit finding. (Audit Report: 2012-FW-1005)



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 FHA’s default and claim systems. OIG determined that
CAIVRS did not have 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 have 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 and 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.
    HUD disagreed with these recommendations, and the audit resolution was elevated to the Deputy
Secretary. On September 30, 2016, the Deputy Secretary provided her final decision that the Secretary of
HUD alone possesses the authority to declare a debt owed to the Department and consultation with the
Secretary of the Treasury is not required.

10 24 CFR 570.481(a)
11 See GLO-DR Project Implementation manual, chapters 3 and 4; pp 35, 64, and 66.




                                                                                                                 63
SEMIANNUAL REPORT TO CONGRESS




   OIG closed the recommendations with disagreement. OIG still believes that HUD has misapplied the
DCIA requirements for Federal debt and should seek a determination from the Secretary of the Treasury on
whether deficiencies on foreclosed on FHA-insured loans meet the definition of delinquent Federal debt for
purposes of including or excluding them from CAIVRS. (Audit Report: 2014-KC-0002)

NOVA FINANCIAL & INVESTMENT CORPORATION’S FHA-INSURED LOANS WITH
DOWNPAYMENT ASSISTANCE GIFTS DID NOT ALWAYS MEET HUD REQUIREMENTS,
ISSUE DATE: JULY 8, 2015
HUD OIG audited NOVA Financial & Investment Corporation based on a referral from HUD’s Quality
Assurance Division detailing a separate lender that originated FHA-insured loans that had ineligible
downpayment assistance gifts. OIG’s analysis identified NOVA as a lender with the highest origination
volume in the geographic region that participated in similar downpayment assistance gift programs.
     OIG 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 housing finance
agencies’ program guidelines, and assumed downpayment assistance eligibility based on the reputation of the
participating master loan servicer, U.S. Bank. The premium interest rate attached to the ineligible loans put
borrowers at a distinct disadvantage because of the higher monthly mortgage payments imposed on them.
     Among other things, OIG recommended that HUD require NOVA to (1) stop originating FHA loans with
ineligible gifts, (2) indemnify HUD for 709 FHA loans that were originated with ineligible downpayment
assistance gifts, (3) reimburse borrowers for more than $376,000 in misrepresented discount fees and more
than $7,000 in fees that were not customary or reasonable, (4) reduce the interest rate for borrowers who
received downpayment assistance, and (5) reimburse borrowers for overpaid interest as a result of the
premium interest rate.
     The Office of Single Family Housing disagrees with OIG’s conclusion that the downpayment assistance
used by NOVA that was provided by housing finance agencies through premium pricing is not consistent
with established law, guidance, and practice. In addition, Single Family Housing does not believe that the
downpayment assistance funding mechanisms used by NOVA constitute premium pricing, nor does it believe
that these funding mechanisms 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. It repeated
that there are no restrictions on how a government entity may fund its downpayment assistance programs.
Further, it believes that the downpayment assistance funding mechanisms employed by NOVA are
permissible, including the generation of funds through capital market vehicles that may result in a negotiated
interest rate, which is higher than a negotiated interest rate for mortgage loans without downpayment
assistance. However, OIG maintains its position that Single Family Housing is incorrect in its assertions.
     In response to OIG’s audit report, the Principal Deputy Assistant Secretary for Housing publicly
issued a letter to the lending industry, dated July 20, 2015. The letter reaffirmed FHA’s support for certain
downpayment assistance programs, including some of 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 prepared by OGC. OGC concluded that it found no
basis to challenge the legality of NOVA’s downpayment assistance programs. It determined that neither




64
                                                                                         CHAPTER 9 AUDIT RESOLUTION




HUD’s Interpretative Rule Docket No. FR (Federal Register)-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. HUD further stated that the use of funds derived
from the sale of a mortgage with a higher than market interest rate does not constitute premium pricing.
     Due to OIG’s disagreement with HUD’s stance, OIG referred the matter to the Principal Deputy Assistant
Secretary for Housing on November 19, 2015. On December 1, 2015, the Office of Housing issued a response
to OIG’s referral to the Principal Deputy Assistant Secretary for Housing. In its response, Housing upheld
the decision of Single Family Housing in disagreeing with OIG’s determinations. The decision points to the
August 11, 2015, 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.
     Single Family Housing’s position is that the downpayment assistance provided by housing finance
agencies through premium pricing is consistent with established law and guidance. OIG disagrees. OIG
determined that NOVA 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. OIG 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 because they were repaid by the borrower
through higher interest rates and fees. OIG determined that these downpayment assistance programs
violated established law and guidance because the borrowers were unfairly burdened with higher interest
rates to indirectly repay the gift. OIG does 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 the lender, NOVA was obligated to conduct its due diligence to ensure that planned downpayment
assistance gifts met the requirements described in HUD Handbook 4155.1 (since superseded by HUD
Handbook 4000.1, effective September 14, 2015). 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 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) funded the home
buyer’s cash investment after the closing by reimbursing third-party entities such as 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.
     OIG referred the recommendations to the Deputy Secretary on December 15, 2015. After many
discussions and meetings with HUD and OIG officials, the Deputy Secretary provided a decision on May
25, 2016, which generally stated that the downpayment assistance program as described in the audit is
permissible under law and that OIG has not established a violation of any FHA rules and regulations.
Further, the Deputy Secretary concluded that the “prohibited sources” provisions of section 203(b)(9)C) of
the National Housing Act do not mandate the conclusion that government entities are prohibited sources
of downpayment assistance in connection with FHA-insured mortgages, regardless of how such entities
generate their funds. As a result, the Deputy Secretary directed the recommendations to be closed with no
further action, except for one recommendation, which directed FHA to review and when appropriate, update
its guidance, including any internal control checklists, to include FHA rules and regulations governing
downpayment assistance, premium interest rates, and allowable fees.




                                                                                                               65
SEMIANNUAL REPORT TO CONGRESS




     OIG, however, strongly disagrees with the Deputy Secretary’s decision and contends that it has a number
of inaccuracies and relies heavily on OGC’s legal opinion, which OIG believes is flawed. Both the decision and
legal opinion considered only the primary FHA mortgage transaction and failed to consider the significant
role played by the secondary market transaction after loan closing. It is the secondary market transaction
that allows housing finance agency reimbursement and predetermines the nonnegotiable premium
interest rate that is unfairly imposed on FHA borrowers. While OIG does not take issue with the legality
of downpayment assistance programs in general, it is OIG’s position that the downpayment assistance
program structure in which the funding is provided or reimbursed by a party that benefits financially from
the transaction is not legal under the National Housing Act. Based on the Deputy Secretary’s decision, OIG
reversed the costs and closed the recommendations, except for one recommendation, which required some
additional action. (Audit Report: 2015-LA-1005)

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996
In fiscal year 2016, OIG noted that HUD’s financial management system continued its noncompliance with
three FFMIA, section 803(a), elements. HUD’s continued noncompliance was largely due to New Core
implementation challenges, improper accounting practices, and a reliance on disparate legacy financial
systems and their requisite limitations.
     FFMIA requires OIG to report in its Semiannual Reports to the Congress instances and reasons when
an agency has not met the intermediate target dates established in its remediation plan required by FFMIA. 
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.
     Like many other agencies, HUD has 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 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 Federal shared service provider
(FSSP), the U.S. Department of the Treasury, Bureau of Fiscal Service’s Administrative Resource Center (ARC).
     HUD experienced significant information processing and data quality challenges following the
transition of key financial management functions to ARC with release 3 of the New Core Project on October
1, 2015. Specifically, unresolved data conversion errors totaling more than $9 billion, inaccurate reports and
ineffective controls related to the New Core Interface System (NCIS), and key middleware between HUD’s
systems and FSSP systems contributed to HUD’s 2016 FFMIA noncompliance. Following the implementation
of release 3, HUD’s core program functions were still being controlled and processed through HUD’s legacy
applications. The delayed implementation of the automated reconciliation tool for the first 9 months of the
fiscal year and the failure to conduct manual reconciliations also significantly contributed to unresolved
issues. Initial reports from the reconciliation tool, when it was implemented in June 2016, identified $4.5
billion in differences between HUD’s legacy applications and the general ledger maintained by ARC. While
HUD has been working to address the multitude of postdeployment issues, additional work is required. In
April of 2016, HUD ended the New Core Project with the closeout of the release 3 implementation. HUD
decided that it would continue to use ARC’s systems and services for the capabilities that had already been
delivered but would not transition to shared services as a means for achieving the remaining New Core
capabilities. HUD will need to address weaknesses related to its IT governance and project management
practices as it continues to modernize its IT systems.




66
                                                                                                                            CHAPTER 9 AUDIT RESOLUTION




     HUD’s noncompliance with the three section 803(a) elements of FFMIA also relates to issues not
associated with the recent FSSP transition. HUD’s Integrated Disbursement and Information System (IDIS)
does not comply with applicable Federal accounting standards or the USSGL at the transaction level.12 CPD is
the system owner of IDIS, and the system is FFMIA noncompliant largely due to the use of the first-in, first-
out (FIFO) method to account for grant expenditures. In addition to completely eliminating FIFO, HUD will
need to add new data elements to the application and configure new automated controls and accounting logic
to remediate this weakness. While CPD has made progress in addressing this issue, updating the application
to specifically identify grants initiated during 2015 and going forward, funding constraints have delayed
further remediation. The halt in work caused the remediation of this noncompliance to be delayed.
     As of September 30, 2016, HUD reported that the Ginnie Mae Financial and Accounting System (GFAS)
was not compliant with FFMIA. We noted continuing noncompliance with the three elements of FFMIA
within HUD’s Ginnie Mae component. 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. Ginnie Mae remains unable to support key financial statement line items
related to its nonpooled loans portfolio acquired from defaulted issuers. Ginnie Mae’s challenges stem from
its lack of a financial system (or systems) capable of recording loan-level transaction details in compliance
with GAAP accounting requirements. Material weaknesses related to Ginnie Mae’s nonpooled loans
portfolio, approximately $4.5 billion and $5.4 billion, as of June 30, 2016, and September 30, 2015, remain
unresolved as of September 30, 2016.
     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, manual adjustments
continue to be required to compensate for system deficiencies related to recording contract obligations. To
remediate its FFMIA noncompliance, Ginnie Mae will need to address its loan and budgetary accounting
weaknesses.
     As of September 30, 2016, HUD reported that three Office of the Chief Procurement Officer (OCPO)
procurement systems, the HUD Procurement System (HPS), Small Purchase System (SPS), and HUD
Integrated Acquisition Management System (HIAMS), were not substantially compliant with FFMIA. These
systems have been replaced, and OCPO needs to perform procurement closeout actions in HPS and HIAMS
and validate SPS data before decommissioning. HUD hopes to complete decommissioning for these three
systems during fiscal year 2017.
     In addition to the specific financial system weaknesses identified above, material weaknesses stemming
from a lack of systems and deficiencies related to manual accounting processes exist. For example, current
material weaknesses include cash management processes implemented by PIH that do not comply with
FFMIA requirements.




12 T
    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.




                                                                                                                                                         67
SEMIANNUAL REPORT TO CONGRESS




CHAPTER 10 – WHISTLEBLOWER
OMBUDSMAN PROGRAM

Whistleblowers play a critical role in keeping our Government honest, efficient, and accountable. The U.S. De-
partment of Housing and Urban Development, Office of Inspector General (HUD OIG), continues to ensure that
HUD and HUD OIG employees are aware of their rights to disclose misconduct, waste, or abuse in HUD programs
without reprisal and to assist HUD and HUD OIG employees in seeking redress when employees believe that they
have been subject to retaliation for whistleblowing. 


HUD OIG’s Whistleblower Ombudsman Program works with HUD and HUD OIG employees to provide
information on
•	 Employee options for disclosing misconduct, waste, or abuse in HUD programs;
•	   Statutory protections for Federal employees who make such disclosures; and
•	   How to file a complaint under the Whistleblower Protection Act when an employee believes he or she has
     been retaliated against for making protected disclosures.
    HUD OIG’s Whistleblower Ombudsman Program continued its focus on staff training and individual
assistance.  All HUD employees attended mandatory whistleblower training in October 2016, in conjunction
with the agency’s annual ethics training.  The training was presented live and then posted on HUD’s
whistleblower Web page.  Secretary Castro, consistent with his emphasis on this program, introduced the
training and stressed its importance.  
    Training sessions were also held for all HUD OIG staff, managers, and senior executives in June and July
2016, with Inspector General Montoya providing introductory remarks stressing his view of the importance
of the program. Training videos were retained on HUD OIG whistleblower and ethics Web sites   In
addition, Whistleblower training is incorporated into HUD’s new employee training. Further, HUD OIG’s
Whistleblower Ombudsman provided information on an individual basis to several HUD and HUD OIG
employees seeking to understand their rights and options as whistleblowers.
    Although it is not statutorily mandated, HUD OIG’s Whistleblower Ombudsman also provided
information to potential whistleblowers under the National Defense Authorization Act (41 U.S.C. (United
States Code) 4712) Pilot Program, which extended whistleblower protections to employees of Federal
contractors, subcontractors, and grantees. HUD OIG conducts investigations of alleged retaliation by HUD
grantees, contractors, and subcontractors against their employees for disclosures of misconduct relating to
HUD programs.
    HUD OIG is in the process of obtaining 2302(c) certification from the Office of Special Counsel for its
whistleblower training program. This certification is voluntary and held by approximately 20 percent of
Federal OIGs.




68
                                                                                                     CHAPTER 10 WHISTLEBLOWER OMBUDSMAN PROGRAM




                   Number of complaints received                                                                   81

 Number of complainants asserting whistleblower status13                                                 81 (58 to hotline)

       Employee14 complaints referred for investigation
                                                                                                                   23
         to the HUD OIG Office of Investigation (OI)     

       Employee complaint investigations opened by OI                                                               4

                      Complaints declined by OI                                                                     0

             Complaints currently under review by OI                                                                8

        Employee complaint investigations closed by OI                                                              11




13 Many complainants raise questions regarding treatment by housing authorities following alleging wrongdoing by the same housing authority.
   They define themselves as whistleblowers. These complaints are referred to our hotline for appropriate referral and disposition.
14 Employee complaints are those complaints received from employees, potential employees, and former employees of HUD as well as employees
   of contractors, subcontractors, and grantees.




                                                                                                                                                 69
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 assurance of perform-
ing and reporting in conformity with applicable professional standards in all material respects. Audit organizations can
receive a rating of pass, pass with deficiencies, or fail. The HUD OIG has received a peer review rating of pass.


PEER REVIEW CONDUCTED BY HUD OIG ON USPS OIG
HUD OIG conducted an external peer review of the United States Postal Service (USPS) OIG, Office of Audit,
and issued a final report September 22, 2015.  USPS OIG received a peer review rating of pass.  A copy of the
external quality control review report can be viewed at http://www.uspsoig.gov/document/hud-oig
-system-review-report
 
OFFICE OF INVESTIGATION
PEER REVIEW CONDUCTED BY HUD OIG ON SSA OIG
HUD OIG conducted an external peer review of the U.S. Social Security Administration (SSA) OIG, Office of
Investigation, and issued a final report on August 12, 2013. HUD OIG determined that SSA OIG complied with
applicable quality standards 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.



70
                                                                                               APPENDIX




APPENDIX 2 - AUDIT REPORTS ISSUED


INTERNAL REPORTS
AUDIT REPORTS

CHIEF FINANCIAL OFFICER

                             HUD Rushed the Implementation of Phase 1, Release 3, of the New
2016-DP-0004
                             Core Project, 09/20/2016.

                             Compliance With the Improper Payments Elimination and Recovery
2016-FO-0005
                             Act, 05/13/2016.

CHIEF INFORMATION OFFICER

                             Additional Review of Information System Controls Over FHA
2016-DP-0003
                             Information Systems, Washington, DC, 08/31/2016.

CHIEF PROCUREMENT OFFICER

                             HUD Needs To Improve Its Monitoring of the Travel and Purchase
2016-FO-0006                 Card Programs, 09/29/2016. Questioned: $528,147. Unsupported:
                             $528,147.

                             HUD Did Not Ensure That All Costs for Ginnie Mae’s Contract With
2016-PH-0002                 Burson-Marsteller Were Supported, Reasonable, and Necessary,
                             07/23/2016. Better use: $259,008.

COMMUNITY PLANNING AND DEVELOPMENT

                             HUD Did Not Always Provide Adequate Oversight of Property
2016-PH-0001                 Acquisition and Disposition Activities, 06/30/2016. Questioned:
                             $12,192,482. Unsupported: $12,188,268.

                             HUD Did Not Always Provide Accurate and Supported Certifications
2016-PH-0005                 of State Disaster Grantee Procurement Processes, 09/29/2016.
                             Better use: $4,872,056,594.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

                             Ginnie Mae Improperly Allowed Uninsured Loans To Remain in
2016-KC-0002                 Mortgage-Backed Securities Pools, 09/21/2016. Better use:
                             $49,300,000.




                                                                                                    71
SEMIANNUAL REPORT TO CONGRESS




  HOUSING

                                                       HUD Did Not Enforce and Sufficiently Revise Its Underwriting
  2016-AT-0001                                         Requirements for Multifamily Accelerated Processing Loans,
                                                       05/20/2016.

                                                       HUD Did Not Collect an Estimated 1,361 Partial Claims Upon
  2016-KC-0001                                         Termination of Their Related FHA-Insured Mortgages, 08/17/2016.
                                                       Questioned: $21,526,130. Better use: $21,526,130.

                                                       HUD Did Not Ensure That Lenders Verified That FHA-Insured
  2016-PH-0003                                         Properties in Flint, MI, Had Safe Water, 07/29/2016. Better use:
                                                       $10,813,662.

  PUBLIC AND INDIAN HOUSING

                                                       Operating Fund Calculations Were Not Always Adequately Verified,
  2016-NY-0001                                         09/12/2016. Questioned: $12,864,776. Unsupported: $12,748,558.
                                                       Better use: $1,191,767.

                                                       HUD’s Oversight of Legal Costs at Moving to Work Housing Agencies
  2016-PH-0004                                         Was Not Adequate To Ensure That Costs Were Reasonable and
                                                       Necessary, 09/29/2016.

  AUDIT-RELATED MEMORANDUMS15

  CHIEF FINANCIAL OFFICER

                                                       Independent Attestation Review: U.S. Department of Housing and
  2016-FO-0802
                                                       Urban Development, DATA Act Implementation Efforts, 08/26/2016.

  EXTERNAL REPORTS
  AUDIT REPORTS

  COMMUNITY PLANNING AND DEVELOPMENT

                                                       The City of Miami Beach Did Not Always Properly Administer Its
  2016-AT-1006                                         HOME Program, 06/17/2016. Questioned: $742,270. Unsupported:
                                                       $362,723. Better use: $300,278.

                                                       The City of Miami Beach Did Not Always Properly Administer Its
  2016-AT-1007                                         CDBG Program, 06/22/2016. Questioned: $336,150. Unsupported:
                                                       $227,587.

                                                       The Municipality of Bayamon, PR, Did Not Always Ensure Compliance
  2016-AT-1012                                         With HUD Program Requirements, 08/29/2016. Questioned:
                                                       $1,172,078. Unsupported: $982,851.
15 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; or to report on the results of a survey,
   attestation engagement, or civil actions or settlements.




72
                                                                               APPENDIX




               The State of Connecticut Did Not Always Administer Its
               Neighborhood Stabilization Program in Compliance With HUD
2016-BO-1003
               Regulations, 06/28/2016. Questioned: $2,884,534. Unsupported:
               $2,184,650. Better use: $212,496.

               The State of Indiana’s Administrator Lacked Adequate Controls Over
               the State’s Community Development Block Grant Disaster Recovery
2016-CH-1003
               Program Income and Posting of Quarterly Performance Reports,
               06/30/2016. Questioned: $372,783.

               Boulder County, CO, Generally Approved Its Grants and Procured
2016-DE-1003   Consultants in Accordance With Applicable Federal Requirements,
               09/28/2016.

               The Wyoming Community Development Authority of Casper, WY, Did
               Not Always Spend Its HOME and NSP Funds in Accordance With
2016-DE-1005
               Program Requirements, 09/28/2016. Questioned: $1,344,326.
               Unsupported: $1,236,066.

               The State of Louisiana’s Subrecipient Did Not Always Comply With Its
               Agreement and HUD Requirements When Administering Its Disaster
2016-FW-1006
               Assistance Programs, 08/31/2016. Questioned: $1,572,079.
               Unsupported: $1,572,079. Better use: $5,365,327.

               The Harris County Community Services Department Needs to
2016-FW-1008   Improve Procurement and Subrecipient Oversight in Its CDBG
               Program Activities, 09/27/2016.

               The State of Oklahoma Did Not Obligate and Spend Its CDBG
               Disaster Recovery Funds in Accordance With Requirements,
2016-FW-1010
               09/30/2016. Questioned: $11,717,288. Unsupported: $11,717,288.
               Better use: $81,982,712.

               The City of Olathe, KS, Did Not Always Comply With the
               Requirements of HUD’s NSP, CDBG Program, and HOME Investment
2016-KC-1005
               Partnerships Program, 09/28/2016. Questioned: $706,216.
               Unsupported: $614,566.

               The City of Joplin, MO, Did Not Always Comply With the
               Requirements of Section 3 of the Housing and Urban Development
2016-KC-1006
               Act of 1968 for Its Disaster Recovery Program, 09/28/2016. Better
               use: $2,275,177.

               The City of Pasadena, CA, Did Not Always Follow Community
2016-LA-1007   Development Block Grant Program Requirements, 08/17/2016.
               Questioned: $383,385. Unsupported: $334,774.




                                                                                      73
SEMIANNUAL REPORT TO CONGRESS




                                The City and County of Honolulu, HI, Did Not Administer Its
                                Community Development Block Grant in Accordance With
  2016-LA-1009
                                Requirements, 08/26/2016. Questioned: $15,918,909. Unsupported:
                                $15,918,909.

                                The City of Huntington Beach, CA, Administered Its Community
  2016-LA-1012                  Development Block Program in Accordance With HUD Rules and
                                Requirements, 09/28/2016.

                                The State of New York Had Weaknesses in Its Administration of the
  2016-NY-1009                  Tourism and Marketing Program, 08/12/2016. Questioned:
                                $21,958,549. Unsupported: $21,958,549.

                                The City of Camden, NJ, Did Not Ensure That Activities Always
                                Complied With National Objective, Procurement, and Environmental
  2016-PH-1003
                                Review Requirements, 05/24/2016. Questioned: $3,149,248.
                                Unsupported: $2,831,445.

                                Luzerne County, PA, Did Not Always Use Disaster Funds in
  2016-PH-1004                  Accordance With HUD and Federal Requirements, 06/18/2016.
                                Questioned: $336,836. Unsupported: $336,836.

                                The State of New Jersey Did Not Disburse Disaster Funds to Its
                                Contractor in Accordance With HUD, Federal, and Other Applicable
  2016-PH-1009
                                Requirements, 09/30/2016. Questioned: $43,080,932.
                                Unsupported: $42,951,942.

  HOUSING

                                The Members and Operator Did Not Comply With the Executed
                                Regulatory Agreement and HUD’s Requirements for Saltillo Assisted
  2016-AT-1009
                                Living, Saltillo, MS, 08/02/2016. Questioned: $1,111,634.
                                Unsupported: $865,142.

                                The Georgia Housing and Finance Authority, Atlanta, GA, Did Not
                                Adequately Implement the Federal Housing Administration’s Home
  2016-AT-1011                  Affordable Modification Program in Accordance With HUD’s
                                Requirements, 08/05/2016. Questioned: $1,176,550. Unsupported:
                                $1,016,537. Better use: $120,516.

                                The Kentucky Housing Corporation Did Not Always Accurately
  2016-AT-1015
                                Report on FHA-Insured Loans to HUD, 09/30/2016.

                                P.K. Management Group, Inc., Doral, FL, Did Not Always Provide
                                Property Preservation and Protection Services in Accordance With Its
  2016-CH-1008
                                Contract With HUD and Its Own Requirements, 09/29/2016.
                                Questioned: $21,739. Better use: $2,532,000.




74
                                                                                APPENDIX




               The Condominium Association and Management Agent Lacked
2016-CH-1009   Adequate Controls Over the Operation of West Park Place
               Condominium, Chicago, IL, 09/30/2016. Better use: $13,878,088.

               The Owner and Former Management Agent for Baldwin Creek
               Apartments, Fort Wayne, IN, Did Not Always Operate the Project in
2016-CH-1010   Accordance With HUD’s Requirements and the Regulatory
               Agreement, 09/30/2016. Questioned: $16,260. Unsupported:
               $8,050.

               Mortgage Services III, LLC, Bloomington, IL, Generally Complied With
2016-CH-1011   HUD’s Underwriting and Quality Control Requirements, 09/30/2016.
               Questioned: $5,343.

               University Village Took Distributions Without Being in a Surplus-Cash
2016-DE-1004   Position or Having Prior HUD Approval, 09/28/2016. Questioned:
               $305,353.

               Central City Housing Development Corporation, New Orleans, LA,
               Did Not Always Operate Satchmo Plaza in Accordance With Its
2016-FW-1004
               Regulatory Agreement and HUD Requirements, 07/27/2016.
               Questioned: $2,810. Unsupported: $1,931. Better use: $322,784.

               Selene Finance, LP, Houston, TX, Did Not Communicate in a Timely
2016-FW-1005
               Manner With Delinquent Borrowers, 07/28/2016.

               Park View Care Center, Fort Worth, TX, Did Not Always Comply With
2016-FW-1009   Its Regulatory Agreement and HUD Requirements, 09/29/2016.
               Questioned: $220,282.

               James B. Nutter & Company, Kansas City, MO, Did Not Always Follow
2016-KC-1003   HUD’s Rules and Regulations for Loss Mitigation, 05/16/2016.
               Questioned: $287,922. Better use: $289,960.

               The Dolores Frances Affordable Housing Project, Los Angeles, CA,
               Was Not Administered in Accordance With Its Regulatory Agreement
2016-LA-1008
               and HUD Requirements, 08/26/2016. Questioned: $507,030. Better
               use: $10,926,975.

               Sun West Mortgage Company, Cerritos, CA, Did Not Always Meet
2016-LA-1010   HUD-FHA Loan Underwriting and Quality Control Requirements,
               08/29/2016. Questioned: $144,891. Better use: $97,937.

               Evergreen Home Loans, Las Vegas, NV, Branch Did Not Always
2016-LA-1011   Comply With HUD FHA Origination Regulations, 09/12/2016. Better
               use: $1,172,005.




                                                                                       75
SEMIANNUAL REPORT TO CONGRESS




                                Folts, Inc., Herkimer, NY, Did Not Administer the Folts Adult Home
                                and Folts Home Projects in Accordance With Their Regulatory
  2016-NY-1010
                                Agreements, 09/29/2016. Questioned: $3,860,221. Unsupported:
                                $2,047,444.

                                Sunset Manor, Limited Partnership, Blackfoot, ID, Did Not Administer
                                Its Section 8 Program in Accordance With HUD Rules and
  2016-SE-1002
                                Regulations, 06/23/2016. Questioned: $451,691. Unsupported:
                                $338,751.

                                Solace LLC, Rexburg, ID, Did Not Always Correctly Compute Tenant
                                Annual Income, Conduct Timely Tenant Income Verifications, or
  2016-SE-1003                  Request the Appropriate Assistance When Tenants Moved Out,
                                09/12/2016. Questioned: $7,708. Unsupported: $6,804. Better use:
                                $714.

                                Reflection5 LLC, Pocatello, ID, Did Not Always Retain Tenant Files,
                                Perform Recertifications, Obtain Verifications, or Support Hardship
  2016-SE-1004
                                Exemptions, 09/12/2016. Questioned: $168,897. Unsupported:
                                $168,897.

  INSPECTOR GENERAL

                                Disaster Relief Appropriations Act, 2013: Financial Status,
  2016-FW-1007
                                Observations, and Concerns, 09/12/2016.

  PUBLIC AND INDIAN HOUSING

                                The Housing Authority of the City of Durham, NC, Did Not Adequately
  2016-AT-1005                  Enforce HUD’s and Its Own Housing Quality Control Standards,
                                05/10/2016. Questioned: $108,390. Better use: $7,560,158.

                                The Sanford Housing Authority, Sanford, NC, Did Not Comply With
  2016-AT-1008                  Procurement and Financial Requirements, 07/19/2016. Questioned:
                                $420,397. Unsupported: $412,546.

                                The Mobile Housing Board, Mobile, AL, Did Not Disclose an Apparent
  2016-AT-1010                  Conflict of Interest and Occupy One-Third of Its Public Housing Units,
                                08/04/2016. Questioned: $1,241,958. Unsupported: $1,241,958.

                                The Sanford Housing Authority, Sanford, NC, Did Not Comply With HUD’s
                                and Its Own Section 8 Housing Choice Voucher Program Requirements,
  2016-AT-1013
                                09/13/2016. Questioned: $253,862. Unsupported: $3,092. Better use:
                                $3,317,262.




76
                                                                                      APPENDIX




               The Broward County Housing Authority, Lauderdale Lakes, FL, Did Not
               Always Comply With HUD’s and Its Own Section 8 Housing Choice
2016-AT-1014
               Voucher Program Requirements, 09/30/2016. Questioned: $28,199.
               Better use: $1,010.

               The Administration of Accounting, Inventory, and Procurement of the
               Bridgeport Housing Authority in Bridgeport, CT, Did Not Always Comply
2016-BO-1002
               With HUD Regulations, 06/27/2016. Questioned: $9,066,364.
               Unsupported: $8,524,158.

               The Somerville Housing Authority, Somerville, MA, Did Not Always Support
2016-BO-1004   Its Allocation of Costs to Asset Management Projects, 08/12/2016.
               Questioned: $731,206. Unsupported: $731,206.

               The Housing Authority of the City of Anderson, Anderson, IN, Did Not
               Always Comply With HUD’s and Its Own Requirements Regarding the
2016-CH-1004
               Administration of Its Housing Choice Voucher Program, 07/28/2016.
               Questioned: $719,945. Unsupported: $9,382. Better use: $7,758.

               The Jefferson Metropolitan Housing Authority, Steubenville, OH, Failed To
               Manage Its Procurements and Contracts in Accordance With HUD’s and
2016-CH-1005
               Its Own Requirements, 08/03/2016. Questioned: $964,365.
               Unsupported: $964,365. Better use: $5,869,770.

               The Housing Authority of the City of Muncie, Muncie, IN, Did Not Always
               Comply With HUD’s Requirements and Its Own Policies Regarding the
2016-CH-1006
               Administration of Its Housing Choice Voucher Program, 08/23/2016.
               Questioned: $705,616. Unsupported: $617,465. Better use: $308,104.

               The Housing Authority of the City of Rock Island, Rock Island, IL, Did Not
               Always Comply With HUD’s Requirements Regarding the Administration
2016-CH-1007
               of Its Housing Choice Voucher Program, 09/28/2016. Questioned:
               $637,214. Unsupported: $130,040. Better use: $2,109.

               The Dayton Metropolitan Housing Authority, Dayton, OH, Did Not Follow
               HUD’s and Its Own Requirements for the Procurement of Capital Grant-
2016-CH-1012
               Funded Contracts, 09/30/2016. Questioned: $407,636. Unsupported:
               $405,691. Better use: $94,548.

               The Lucas Metropolitan Housing Authority, Toledo, OH, Did Not Follow
2016-CH-1013   HUD’s or Its Own Procurement Requirements, 09/30/2016. Questioned:
               $276,677. Better use: $409,663.

               The Housing Authority of the County of Salt Lake Did Not Always Procure
2016-DE-1001   Goods and Services in Accordance With Applicable Requirements,
               08/17/2016. Questioned: $734,074. Unsupported: $734,074.




                                                                                            77
SEMIANNUAL REPORT TO CONGRESS




                                The Evanston Housing Authority, Evanston, WY, Misspent HUD Funds and
  2016-DE-1002                  Mismanaged Its Program Income, 09/13/2016. Questioned: $110,763.
                                Unsupported: $94,685.

                                The Housing Authority of Fort Worth, Fort Worth, TX, Generally Complied
                                With HUD Regulations When Administering Its Housing Choice Voucher
  2016-FW-1002
                                Program and Financial Transactions, 05/24/2016. Questioned: $807.
                                Unsupported: $156.

                                The Muscogee (Creek) Nation, Okmulgee, OK, Did Not Always Comply
  2016-FW-1003                  With HUD Requirements, 07/08/2016. Questioned: $219,839.
                                Unsupported: $99,258. Better use: $7,880.

                                The Alton Housing Authority, Alton, IL, Improperly Phased In Flat Rents for
  2016-KC-1004
                                Its Public Housing Program, 05/19/2016. Better use: $58,528.

                                The Orange County Housing Authority, Santa Ana, CA, Did Not Always
  2016-LA-1003                  Ensure That Housing Units Met HUD’s Housing Quality Standards,
                                04/21/2016. Questioned: $217,916. Better use: $48,665,810.

                                The Richmond Housing Authority, Richmond, CA, Did Not Always Procure
  2016-LA-1004                  Services and Manage Rents in Accordance With HUD Requirements,
                                04/28/2016. Questioned: $541,651. Unsupported: $541,651.

                                The Orange County Housing Authority, Santa Ana, CA, Did Not
  2016-LA-1005                  Adequately Monitor Its Contractors’ Performance of HUD’s Housing
                                Quality Standards Inspections, 05/13/2016. Questioned: $52,215.

                                The Richmond Housing Authority, Richmond, CA, Mismanaged Its
  2016-LA-1006                  Financial Operations, 06/03/2016. Questioned: $3,154,785.
                                Unsupported: $944,910. Better use: $60,000.

                                Inglewood Housing Authority, Inglewood, CA, Did Not Effectively Manage
  2016-LA-1013                  the Financial Operations of Its Housing Choice Voucher Program,
                                09/30/2016. Questioned: $796,186. Unsupported: $796,186.

                                Officials of the Rochester Housing Authority, Rochester, NY, Generally
                                Administered the Housing Choice Voucher Program in Accordance With
  2016-NY-1008
                                HUD Regulations, 08/05/2016. Questioned: $6,922. Unsupported:
                                $4,238.

                                The Westmoreland County Housing Authority, Greensburg, PA, Did Not
                                Always Ensure That Its Program Units Met Housing Quality Standards and
  2016-PH-1002
                                That It Accurately Calculated Housing Assistance Payment Abatements,
                                04/27/2016. Questioned: $64,432. Better use: $4,014,103.




78
                                                                                                                                                    APPENDIX




                                                       The Richmond Redevelopment and Housing Authority, Richmond, VA,
                                                       Did Not Always Charge Eligible and Reasonable Central Office Cost
  2016-PH-1005
                                                       Center Fees, 08/17/2016. Questioned: $5,434,976. Unsupported:
                                                       $4,927,176.

                                                       The Housing Authority of the City of Annapolis, MD, Did Not Always
                                                       Administer Its Resident Opportunities and Self-Sufficiency Program in
  2016-PH-1006
                                                       Accordance With Applicable Requirements, 08/31/2016. Questioned:
                                                       $412,109. Unsupported: $401,859. Better use: $2,444.

                                                       The Housing Authority of the City of Annapolis, MD, Did Not Always
  2016-PH-1007                                         Follow Applicable Procurement Requirements, 09/27/2016. Questioned:
                                                       $3,028,666. Unsupported: $3,028,666.

                                                       The Housing Opportunities Commission of Montgomery County,
                                                       Kensington, MD, Did Not Always Ensure That Its Program Units Met
  2016-PH-1008
                                                       Housing Quality Standards, 09/29/2016. Questioned: $44,887. Better
                                                       use: $7,576,867.

  AUDIT-RELATED MEMORANDUMS16

  GENERAL COUNSEL

                                                       Final Civil Action: Branch Banking and Trust Company Settled
  2016-AT-1802                                         Alleged Violations of Federal Housing Administration Loan
                                                       Requirements, 09/30/2016. Questioned: $35,700,000.

                                                       Final Civil Action: Franklin American Mortgage Company Settled
                                                       Allegations of Failing To Comply With HUD’s Federal Housing
  2016-CF-1801
                                                       Administration Loan Requirements, 09/08/2016. Questioned:
                                                       $70,000,000.

                                                       Final Civil Action: Pilgrim Village Settled Allegations of Making
  2016-CF-1802                                         Unauthorized Distributions and Improper Disbursements of
                                                       Multifamily Project Funds, 09/08/2016. Questioned: $650,979.

                                                       Final Civil Action: Cunningham and Company Settled Alleged
  2016-CF-1803                                         Violations of Failing To Comply With Federal Housing Administration
                                                       Loan Requirements, 09/08/2016. Questioned: $77,527.

                                                       Final Civil Action: M&T Bank Settled Allegations of Failing To Comply
  2016-CF-1804                                         With HUD’s Federal Housing Administration Loan Requirements,
                                                       09/19/2016. Questioned: $43,350,000.




16 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; or to report on the results of a survey,
   attestation engagement, or civil actions or settlements.




                                                                                                                                                         79
SEMIANNUAL REPORT TO CONGRESS




                                Final Civil Action: Land Home Financial Services, Inc., Settled
                                Allegations of Failing To Comply With HUD’s Federal Housing
  2016-CF-1805
                                Administration Loan Requirements, 09/19/2016. Questioned:
                                $45,000.

                                Final Civil Action: Freedom Mortgage Corporation Settled Allegations
  2016-CF-1806                  of Failing To Comply With HUD’s Federal Housing Administration
                                Loan Requirements, 09/19/2016. Questioned: $76,000,000.

                                Final Civil Action: The Alphabet Group, LLC, Marks Group, LLC, and
  2016-CF-1807                  Imagineers, Inc., Settled Allegations Related to Section 8 Rent
                                Certifications, 09/19/2016. Questioned: $4,200.

                                Final Civil Action: American Midwest Mortgage Corporation Settled
  2016-CF-1808                  Allegations of Failing To Comply With Federal Housing Administration
                                Underwriting Requirements, 09/23/2016. Questioned: $110,000.

                                Final Civil Action: Knox Pest Control Settled Allegations of Charging
                                Unallowable Costs for Preservation of HUD-Owned Properties in the
  2016-CF-1810
                                Federal Housing Administration Program, 09/29/2016. Questioned:
                                $91,377.

                                Final Civil Action: Regions Bank Settled Allegations of Failing To
  2016-CF-1811                  Comply With HUD’s Federal Housing Administration Loan
                                Requirements, 09/29/2016. Questioned: $37,700,000.

                                Final Civil Action: Real Estate Agent and Two Borrowers Settled
                                Allegation of Making a False Certification to HUD Regarding a Home
  2016-CF-1812
                                Purchase Under the Federal Housing Administration Program,
                                09/29/2016. Questioned: $11,000.

                                Final Civil Action: Owner and Management Agents Settled
                                Allegations of Failing To Comply With the Regulatory Agreements for
  2016-CF-1813
                                Multifamily Projects Willow Run I and Willow Run II, 09/30/2016.
                                Questioned: $510,000.

                                Final Civil Action: RANlife, Inc., Settled Allegations That It Violated the
                                False Claims Act When Originating, Underwriting, and Endorsing
  2016-DE-1802
                                Certain Loans With Federal Housing Administration Insurance,
                                09/12/2016. Questioned: $1,032,715.

                                Final Civil Action: The City of Brackettville Housing Authority’s Prior
  2016-FW-1802                  Executive Director Improperly Used Authority Funds for Personal
                                Expenses, 09/06/2016. Questioned: $5,000.

                                Final Civil Action: The City of Malakoff Housing Authority’s Prior
  2016-FW-1803                  Executive Director Improperly Hired and Contracted With Family
                                Members, 09/13/2016. Questioned: $2,000.




80
                                                                                                 APPENDIX




                            Final Action Memo: Agent-Broker of HUD-Insured Single-Family
                            Property Settled Allegations of Making a False Certification on a
2016-KC-1801
                            Preforeclosure Sale Closing Worksheet, 09/21/2016. Questioned:
                            $10,000.

                            Final Action Memo: Agent-Broker of HUD-Insured Single-Family
                            Property Settled Allegations of Making a False Certification on a
2016-KC-1802
                            Preforeclosure Sale Closing Worksheet, 09/21/2016. Questioned:
                            $26,500.

                            Final Civil Action: Wells Fargo Bank, N.A., Settled Allegations of
2016-KC-1803                Failing To Comply With HUD’s FHA Underwriting Requirements,
                            09/28/2016. Questioned: $642,000,000.

                            Final Civil Action: Shea Mortgage, Inc., Settled Allegations of Making
2016-LA-1801                False Certifications Regarding Federal Housing Administration Loans,
                            09/28/2016. Questioned: $119,336.

                            Final Civil Action: DHI Mortgage Company Ltd. Settled Allegations of
2016-LA-1802                Making False Certifications Regarding Federal Housing Administration
                            Loans, 09/29/2016. Questioned: $180,000.

                            Final Civil Action: Borrower Settled Alleged Violations of Home Equity
2016-PH-1802
                            Conversion Mortgage Program, 09/09/2016. Questioned: $7,000.

                            Final Civil Action: Borrower Settled Alleged Violations of Home Equity
2016-PH-1803
                            Conversion Mortgage Program, 09/09/2016. Questioned: $24,500.

                            Final Civil Action: Borrowers Settled Alleged Violations of Home Equity
2016-PH-1804
                            Conversion Mortgage Program, 09/09/2016. Questioned: $12,000.

                            Final Civil Action: City First Mortgage Services, LLC, and Van
2016-SE-1801                Wagoner Investment Company Settled Allegations of Making False
                            Certifications, 09/12/2016. Questioned: $425,000.

HOUSING

                            Final Civil Action: Permanent Claim Block Placed on Borrower’s
2016-CF-1809                Federal Housing Administration Loan Because It Did Not Qualify for
                            Insurance, 09/29/2016. Better use: $55,405.

PUBLIC AND INDIAN HOUSING

                            The District of Columbia Housing Authority, Washington, DC, Did Not
                            Always Make Payments for Outside Legal Services in Compliance
2016-PH-1801
                            With Applicable Requirements, 04/04/2016. Questioned: $999,977.
                            Unsupported: $999,977.




                                                                                                     81
SEMIANNUAL REPORT TO CONGRESS




APPENDIX 3 TABLE A

Audit reports issued before the start of period with no management decision at 9/30/2016
*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
                                                                      See chapter 9, page 49   12/16/2013
 HUD’s Fiscal Years 2013 and 2012 (Restated) Financial Statements

 * 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the
                                                                      See chapter 9, page 50   04/15/2014
 Improper Payments Elimination and Recovery Act of 2010

 * 2014-NY-1007 The Niagara Falls Housing Authority Did Not
 Always Administer Its HOPE VI Grant Program and Activities in        See chapter 9, page 51   07/10/2014
 Accordance With HUD Requirements

 * 2014-LA-0005 HUD Did Not Always Recover FHA Single-Family
 Indemnification Losses and Ensure That Indemnification               See chapter 9, page 51   08/08/2014
 Agreements Were Extended

 * 2015-FO-0003 Audit of the Government National Mortgage
                                                                      See chapter 9, page 52   02/27/2015
 Association’s Financial Statements for Fiscal Years 2014 and 2013

 * 2015-PH-1003 The State of New Jersey Did Not Comply With
 Federal Procurement and Cost Principle Requirements in               See chapter 9, page 53   06/04/2015
 Implementing Its Disaster Management System

 * 2015-CH-1801 Final Civil Action: GTL Investments, Inc., Doing
 Business as John Adams Mortgage Company, Settled Allegations         See chapter 9, page 54   09/30/2015
 of Failing To Comply With HUD’s FHA Loan Requirements

 * 2015-LA-1009 loanDepot’s FHA-Insured Loans With Downpayment
                                                                      See chapter 9, page 55   09/30/2015
 Assistance Funds Did Not Always Meet HUD Requirements

 * 2015-LA-1010 loanDepot’s FHA-Insured Loans With Golden
 State Finance Authority Downpayment Assistance Gifts Did Not         See chapter 9, page 55   09/30/2015
 Always Meet HUD Requirements

 * 2016-FO-0001 Audit of Fiscal Years 2015 and 2014 (Restated)
                                                                      See chapter 9, page 57   11/13/2015
 Financial Statements

 * 2016-FO-0003 Additional Details To Supplement Our Fiscal
 Years 2015 and 2014 (Restated) U.S. Department of Housing and        See chapter 9, page 58   11/18/2015
 Urban Development Financial Statement Audit

 * 2016-FW-0001 HUD Did Not Effectively Negotiate, Execute, or
                                                                      See chapter 9, page 59   03/30/2016
 Manage Its Agreements Under the Intergovernmental Personnel Act




82
                                                                                                    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



                                                                                                      83
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 1
                        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 1
                        Downpayment Initiative-Funded Afford-A-
                        Home Program, Cleveland, OH

                        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

                        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




84
                                                                                                TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

               The Lafayette Parish Housing Authority
               Violated HUD Procurement Requirements
2011-AO-0001                                                 06/22/2011   10/13/2011   02/28/2017
               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 Trust     09/29/2011   01/26/2012   Note 2
               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   05/05/2017
               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   Note 2
               2010 Financial Statements

               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 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



                                                                                                  85
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                           DECISION     FINAL
                        REPORT TITLE                                 ISSUE DATE
 NUMBER                                                                           DATE         ACTION

                        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

                        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   02/01/2017
                        With Recovery Act, HUD’s, and Its Own
                        Requirements, Flint, MI

                        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 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




86
                                                                                               TABLES




REPORT                                                                   DECISION     FINAL
               REPORT TITLE                                 ISSUE DATE
NUMBER                                                                   DATE         ACTION

               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

               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 It's
               HOME Investment Partnerships Program in
2013-NY-1006                                                05/13/2013   09/06/2013   Note 1
               Accordance With HUD Requirements,
               Nassau County, NY

               The Management and Board of
               Commissioners of the Harris County
2013-FW-1006                                                06/19/2013   02/11/2014   08/13/2017
               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




                                                                                                 87
SEMIANNUAL REPORT TO CONGRESS




 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   Note 2
                        Recovery and Reinvestment Act of 2009,
                        Lansing, MI

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

                        The City of Hawthorne Did Not Administer
                        Its CDBG Program Cost Allocations in
 2013-LA-1010                                                        09/20/2013   01/06/2014   Note 1
                        Accordance With HUD Rules and
                        Requirements, Hawthorne, CA

                        The Malakoff Housing Authority Did Not
                        Have Sufficient Controls Over Its Public
 2013-FW-1805                                                        09/26/2013   12/19/2013   04/30/2036
                        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 1
                        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   06/17/2017
                        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-R Program in
 2013-CH-1010                                                        09/30/2013   01/15/2014   Note 1
                        Accordance With HUD’s and Its Own
                        Requirements, Toledo, OH

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




88
                                                                                                 TABLES




REPORT                                                                     DECISION     FINAL
               REPORT TITLE                                   ISSUE DATE
NUMBER                                                                     DATE         ACTION

               The Hamtramck Housing Commission Did
               Not Administer Its Grant in Accordance
2013-CH-1012                                                  09/30/2013   01/21/2014   06/17/2017
               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 1
               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 1
               Activities Under the Housing and Economic
               Recovery Act of 2008, Detroit, MI

               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




                                                                                                   89
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        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 1
                        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 1
                        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   06/17/2017
                        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 1
                        NJ's HOME Investment Partnerships
                        Program, Middlesex County, NJ




90
                                                                                               TABLES




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 2
               Data in FHA’s Default and Claims Systems

               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

               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

               The City of Richmond Did Not Administer
2014-LA-1005   Its NSP in Accordance With Requirements,     08/22/2014   12/19/2014   Note 2
               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




                                                                                                 91
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        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

                        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

                        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

                        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

                        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   Note 2
                        Construction Projects and Program
                        Income, Chicago, IL

                        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

                        Information System Control Weaknesses
 2015-DP-0001           Identified in the Single Family Housing       10/21/2014   12/12/2014   Note 2
                        Enterprise Data Warehouse




92
                                                                                                 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 Office of the Commissioner for
               Municipal Affairs Needs To Make
2015-AT-1001                                                  12/05/2014   04/03/2015   Note 2
               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   09/30/2017
               Over Financial Reporting

               Office of the Chief Financial Officer Loan
2015-DP-0004                                                  12/09/2014   04/17/2015   Note 2
               Accounting System

               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

               The County of Beaver Did Not Always
               Administer Its HOME Program in
2015-PH-1001                                                  01/30/2015   08/31/2015   11/30/2016
               Accordance With Applicable HUD and
               Federal Requirements, Beaver Falls, PA

               Final Civil Action: Court Ordered a Former
               Executive Director of the Philadelphia
2015-PH-1804   Housing Authority To Pay Civil Penalties for   02/19/2015   09/13/2016   10/07/2016
               Violating Federal Lobbying Disclosure
               Requirements and Restrictions

               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




                                                                                                   93
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                             DECISION     FINAL
                        REPORT TITLE                                   ISSUE DATE
 NUMBER                                                                             DATE         ACTION

                        Fiscal Year 2014 Review of Information
 2015-DP-0005           Systems Controls in Support of the Financial   02/24/2015   07/02/2015   01/21/2017
                        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   Note 2
                        Regulations, Providence, RI

                        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   Note 2
                        Implemented Sufficient Controls for
                        Administering Its Neighborhood
                        Stabilization Program

                        Veterans First, Santa Ana, CA, Did Not
 2015-LA-1002           Administer and Spend Its HUD Funding in        04/16/2015   08/14/2015   01/15/2017
                        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   11/01/2016
                        Claims

                        The City of Paterson, NJ's HOME
                        Investment Partnerships Program Controls
 2015-NY-1005                                                          04/30/2015   06/03/2015   Note 2
                        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   Note 2
                        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   Note 2
                        Shelter Plus Care Program Funds for
                        Ineligible and Unsupported Participants




94
                                                                                                 TABLES




REPORT                                                                     DECISION     FINAL
               REPORT TITLE                                   ISSUE DATE
NUMBER                                                                     DATE         ACTION

               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

               Potential Antideficiency Act Violation
2015-FO-0801                                                  06/16/2015   12/11/2015   10/24/2016
               HOME Investment Partnership 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   03/31/2017
               Administering Its 2013 Disaster Relief Grant

               HUD Did Not Provide Adequate Oversight of
2015-LA-0002   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 Paint 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   11/12/2016
               Assistance Gifts Did Not Always Meet HUD
               Requirements

               The State of Florida, Tallahassee, FL, Did
               Not Properly Support the Eligibility of Some
2015-AT-1006                                                  07/27/2015   11/24/2015   11/23/2016
               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
2015-KC-1005   Temtor Project That Was Not Economically       08/04/2015   12/02/2015   11/16/2016
               Sound




                                                                                                   95
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                            DECISION     FINAL
                        REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                            DATE         ACTION

                        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

                        HUD’s Office of Multifamily Asset
                        Management and Portfolio Oversight Did
 2015-AT-0002                                                         08/21/2015   12/16/2015   Note 2
                        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   10/25/2016
                        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   10/29/2016
                        Payment Standards Under Its Moving to
                        Work Housing Choice Voucher Program

                        St. Francis Hospital, Inc., Did Not Comply
                        With the Executed Regulatory Agreement
 2015-AT-1009                                                         09/03/2015   10/17/2015   10/20/2016
                        and Federal Regulations for the HUD
                        Section 242 Program

                        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
 2015-NY-1010                                                         09/17/2015   03/01/2016   02/16/2017
                        Buyout Program in Accordance With
                        Federal and State Regulations

                        Program Control Weaknesses Lessened
                        Assurance That New York Rising Housing
 2015-NY-1011                                                         09/17/2015   03/18/2016   03/08/2017
                        Recovery Program Funds Were Always
                        Disbursed for Eligible Costs




96
                                                                                                TABLES




REPORT                                                                    DECISION     FINAL
               REPORT TITLE                                  ISSUE DATE
NUMBER                                                                    DATE         ACTION

               HUD Did Not Have Effective Controls or
2015-LA-0003   Clear Guidance in Place for the FHA-HAMP      09/18/2015   03/23/2016   12/15/2016
               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
2015-CH-1008   HUD 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

               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




                                                                                                  97
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                             DECISION     FINAL
                        REPORT TITLE                                   ISSUE DATE
 NUMBER                                                                             DATE         ACTION

                        The City of Richmond, CA, Did Not
                        Adequately Support Its Use of HUD-Funded
 2015-LA-1803                                                          09/30/2015   01/08/2016   11/30/2016
                        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

                        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




98
                                                                                                  TABLES




Significant audit reports issued within the past 12 months that were described in previous
semiannual reports for which final action had not been completed as of 09/30/2016

 REPORT                                                                     DECISION     FINAL
                 REPORT TITLE                                  ISSUE DATE
 NUMBER                                                                     DATE         ACTION

                 Fiscal Year 2015 Review of Information
 2016-DP-0001    System Controls in Support of the Financial   11/13/2015   02/01/2016   Note 2
                 Statements Audit

                 Audit of Fiscal Years 2015 and 2014
 2016-FO-0001                                                  11/13/2015   03/24/2016   Note 3
                 (Restated) Financial Statements

                 Fiscal Years 2015 and 2014 Financial
 2016-FO-0002                                                  11/16/2015   03/16/2016   11/30/2016
                 Statements Audit

                 Additional Details To Supplement Our Fiscal
                 Years 2015 and 2014 (Restated) U.S.
 2016-FO-0003                                                  11/18/2015   03/22/2016   Note 3
                 Department of Housing and Urban
                 Development Financial Statement Audit

                 Review of Information System Controls
 2016-DP-0801    Over the Government National Mortgage         11/30/2015   03/30/2016   01/02/2017
                 Association

                 Provident Bank, Iselin, NJ Needs To
                 Improve Controls Over Its Servicing of FHA-
 2016-NY-1001                                                  11/30/2015   03/29/2016   11/30/2016
                 Insured Mortgages and Loss Mitigation
                 Efforts

                 The Municipality of Toa Alta, PR, Did Not
 2016-AT-1002    Properly Administer Its Section 108 Loan      12/17/2015   04/12/2016   03/31/2017
                 Guarantee Program

                 Single Family Insurance System and Single
 2016-DP-0002                                                  12/21/2015   03/31/2016   08/21/2017
                 Family Insurance Claims Subsystem

                 The City of Rochester, NY, Did Not Always
                 Administer Its Community Development
 2016-NY-1003                                                  02/05/2016   06/17/2016   12/30/2016
                 Block Grant Program in Accordance With
                 HUD Requirements

                 The State of Missouri Did Not Correctly
 2016-KC-1001    Allocate Salaries to Its Disaster Recovery    02/22/2016   06/20/2016   05/30/2017
                 Grants

                 HUD Lacked Adequate Oversight of Public
 2016-CH-0001    Housing Agencies' Compliance With Its         02/26/2016   06/20/2016   10/01/2019
                 Declaration of Trust Requirements




                                                                                                    99
SEMIANNUAL REPORT TO CONGRESS




 REPORT                                                                                    DECISION          FINAL
                        REPORT TITLE                                    ISSUE DATE
 NUMBER                                                                                    DATE              ACTION

                        Homewood Terrace, Auburn, WA, Did Not
                        Always Conduct Timely Reexaminations,
 2016-SE-1001                                                           03/09/2016         07/06/2016        07/06/2017
                        Properly Request Assistance Payments, or
                        Verify Income Information

                        The Puerto Rico Department of Housing,
 2016-AT-1004           San Juan, PR, Did Not Adequately Enforce        03/14/2016         04/15/2016        12/31/2016
                        HUD’s Housing Quality Standards

                        The City of Baton Rouge and Parish of East
                        Baton Rouge, LA, Office of Community
 2016-FW-1001           Development, Did Not Always Properly            03/21/2016         05/03/2016        03/01/2017
                        Administer Its Community Development
                        Block Grant Program Activities

                        New York State Did Not Always Disburse
                        Community Development Block Grant
 2016-NY-1006                                                           03/29/2016         07/27/2016        07/25/2017
                        Disaster Recovery Funds in Accordance
                        With Federal and State Regulations

                        The City of Jersey City, NJ's Community
                        Development Block Grant Program Had
 2016-NY-1007                                                           03/30/2016         06/08/2016        03/29/2017
                        Administrative and Financial Control
                        Weaknesses



Audits excluded:
79 audits under repayment plans
34 audits under debt claims collection processing, formal judicial review, investigation, or legislative solution


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




100
                                                                                                                                                      TABLES




TABLE C

Inspector General-issued reports with questioned and unsupported costs at 9/30/2016
(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                                                       28                $449,726                  $245,497
           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                                                                                                    0                    2,980                     326
           reports in beginning inventory

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

  B1       Which were issued during the reporting period                                              88                1,100,551                   158,761

  B2       Which were reopened during the reporting period                                              0                          0                      0

  SUBTOTALS (A + B)                                                                                  121              1,580,590                    409,754

           For which a management decision was made
  C                                                                                                 5617                1,287,117                  212,597
           during the reporting period

           (1) Dollar value of disallowed costs:                                                    3618               1,070,440                          3
                Due HUD                                                                               20                  216,442                  212,550
                Due program participants

           2) Dollar value of costs not disallowed                                                    019                          0                      0

           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                                                  60                  266,140                   191,987
  E
           made by the end of the reporting period                                             <159>    20
                                                                                                                    <235,364>      20
                                                                                                                                                <188,568>20

17 Thirteen audit reports also contain recommendations with funds to be put to better use.
18 One audit report also contains recommendations with funds due program participants.
19 Two audit reports also contain recommendations with funds agreed to by management.
20 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




                                                                                                                                                       101
SEMIANNUAL REPORT TO CONGRESS                                                                                                                         TABLES




TABLE D

Inspector General-issued reports with recommendations that funds be put to better
use at 9/30/2016 (thousands)

                                                                                                              NUMBER OF
                                                                                                                                       DOLLAR
  AUDIT REPORTS                                                                                               AUDIT
                                                                                                                                       VALUE
                                                                                                              REPORTS

          For which no management decision had been made by the
  A1                                                                                                                           22              $3,627,284
          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                                                                        37               5,152,635

  B2      Which were reopened during the reporting period                                                                       0                       0

  SUBTOTALS (A + B)                                                                                                            61               8,781,773

          For which a management decision was made during the
  C                                                                                                                          2421               1,600,420
          reporting period

          (1) D
               ollar value of recommendations that were agreed
              to by management:                                                                                                 9                1,169,593
                Due HUD                                                                                                        14                 372,158
                Due program participants

          2) D
              ollar value of recommendations that were not agreed to by
                                                                                                                              322                  58,669
             management

          For which a management decision had been made not to
  D       determine costs until completion of litigation, legislation, or                                                        1                  1,694
          investigation

          For which no management decision had been made by the end                                                            36                7,179,659
  E
          of the reporting period                                                                                        <53>23              <5,198,700>23

21 Thirteen audit reports also contain recommendations with questioned costs.
22 Two audit reports also contain recommendations with funds agreed to by management.
23 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.




102
                                                                                                          TABLES




EXPLANATIONS OF TABLES C AND D

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




                                                                                                           103
SEMIANNUAL REPORT TO CONGRESS




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

					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




104
                                              OIG TELEPHONE DIRECTORY




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




                                                                105
SEMIANNUAL REPORT TO CONGRESS




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




106
                                               OIG TELEPHONE DIRECTORY




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




                                                                 107
SEMIANNUAL REPORT TO CONGRESS




ACRONYMS AND ABBREVIATIONS LIST

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

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

ARC..................................................................Administrative Resource Center

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

CNCS................................................................Corporation for National and Community Service

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

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

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

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

EJW..................................................................Equal Justice Works

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

FAR...................................................................Federal Acquisition Regulations

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

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

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

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

FSS....................................................................Family Self-Sufficiency program

FSSP..................................................................Federal shared service provider

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

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

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

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

GLO-DR............................................................General Land Office Disaster Recovery




108
                                                                                                                              ACRONYMS LIST




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

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

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

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

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

HUDCAPS.........................................................HUD’s Central Accounting and Program System

ICP....................................................................Integrity and Compliance Program

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

IG......................................................................Inspector General

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

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

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

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

MRB..................................................................Mortgagee Review Board

MSS..................................................................master subservicer

NAHASDA.........................................................Native American Housing Assistance and Self-Determination Act

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

NEPA.................................................................National Environmental Policy Act

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




                                                                                                                                      109
SEMIANNUAL REPORT TO CONGRESS




ACRONYMS AND ABBREVIATIONS LIST                                                                               (CONTINUED)



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

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

PII.....................................................................personally identifiable information

PKMG...............................................................P.K. Management Group, Inc.

SFIS...................................................................Single Family Insurance System

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

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

UPCS................................................................uniform physical condition standard

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

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




110
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                                                                              45

   Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to the                                                     14 - 41,
   administration of programs and operations of the Department.                                                                                      68 - 69

   Section 5(a)(2)-description of recommendations for corrective action with respect to                                                                     49
   significant problems, abuses, and deficiencies.

   Section 5(a)(3)24-identification of each significant recommendation described in previous                                                      Appendix 3,
   Semiannual Report on which corrective action has not been completed.                                                                            Table B,
                                                                                                                                                   Page 83

   Section 5(a)(4)-summary of matters referred to prosecutive authorities and the                                                                    14 - 41
   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                                                          71
   and the dollar value of recommendations that funds be put to better use.

   Section 5(a)(7)-summary of each particularly significant report.                                                                                  14 - 41

   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.                                                                                             Table C, 101

   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, 102

   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, 82

   Section 5(a)(11)-a description and explanation of the reasons for any significant revised                                                                60
   management decisions made during the reporting period.

   Section 5(a)(12)-information concerning any significant management decision with which                                                                   61
   the Inspector General is in disagreement.

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


24 Unsupported costs are a subset of questioned costs that the IG Act requires be identified separately from the cumulative questioned costs identified.
                                                                                                                                                                 111
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.




112
                                                                 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.




                                                                            113
                   U.S. DEPARTMENT
                   OF HOUSING
                   AND URBAN
                   DEVELOPMENT



Report Number 76
www.hudoig.gov