OFFICE OF INSPECTOR GENERAL SEMIANNUAL REPORT TO CONGRESS FOR THE PERIOD ENDING MARCH 31, 2017 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT SEMIANNUAL REPORT TO CONGRESS OUR MISSION To provide independent, objective, and impactful oversight of the Department to help ensure efficient and effective programs and operations. OUR VISION To be the Office of Inspector General of choice for driving accountability and trust in Federal programs. OUR VALUES Accountability Accountability is taking ownership of our decisions and actions. We hold one another accountable to a higher standard of conduct. Courage Courage is doing what is right, no matter how difficult. We ask questions and raise concerns when needed. Respect Respect is appreciating the uniqueness of our workforce. We treat others with dignity, civility, and mutual consideration. Stewardship Stewardship is accepting our responsibility to serve the public good. We care about leaving things better than we found them. Trust Trust is the result of promises kept. We deliver on our commitments and communicate honestly with our stakeholders. 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 U.S. In another significant audit, we reviewed HUD’s attempt to transition Department of Housing and Urban Development its aging core financial systems to a Federal shared service provider (HUD), Office of Inspector General’s (OIG) at the U.S. Department of the Treasury. During the last 14 years, Semiannual Report to Congress for the first HUD has spent more than $131 million to modernize its legacy half of fiscal year 2017. This report describes financial management systems. HUD’s most recent attempt, the New the extraordinary and varied accomplishments Core Project, was designed to complete the transition of data to the of the dedicated employees of HUD OIG. Treasury. However, this endeavor failed to significantly improve the Among these are a continuation of OIG’s handling of HUD’s financial management transactions or produce return on investment of 59 to 1 for every dollar spent on our work. reliable, useful, and timely financial information. As a result, the project By promoting better stewardship and accountability, HUD OIG staff was terminated, and 97 percent of HUD programmatic transactions ensures that we have a lasting, positive impact on the Department are still being executed using HUD’s aging legacy systems. and our communities for the benefit of the American people. HUD OIG’s Office of Investigation continues to have significant In the past reporting period, HUD OIG has conducted a number of impact on the Department through its investigative work. In one case, noteworthy audits, evaluations, and investigations. Many of these have HUD OIG investigated a senior housing development located in upstate their roots in longstanding problems that have crossed administrations New York, which was financed by a $46.5 million Federal Housing and HUD secretaries over the years. Significant among these are a Administration (FHA)-insured loan. The investigation determined that lack of priority in hiring skilled people to fill vitally needed positions. the developer fraudulently drew down more than $300,000 for personal This lack of priority includes taking more than 18 months to fill HUD’s use and also inflated bids for more than $865,000 in materials through Chief Financial Officer position. We also see the hiring of senior a kickback scheme. The developer and other conspirators were leaders at HUD with limited accounting backgrounds, even though their found guilty of a number of crimes and sentenced to 37 to 50 months primary responsibilities need that experience and education to execute incarceration plus other penalties and restitutions. In addition, the the duties and oversight in preparing Federal financial statements. developer defaulted on its FHA-insured mortgage, which resulted in the This problem was best illustrated during our financial audit, when development’s being auctioned off at a loss of more than $28 million. we found several instances in which rounding was performed to the In another case, in Baltimore, MD, a development company used nearest billion and hundred billion, while the Office of Management real estate agents to find straw buyers to purchase properties using and Budget’s standard of rounding is to the nearest million. FHA-insured mortgage loans supported by fraudulent documentation. We are also seeing serious shortcomings in information These loans swiftly fell into default and resulted in more than technology (IT) systems, of which 87 percent are at or near the end $1.8 million in losses to FHA. The investigation resulted in five of their life cycle. These systems include 400 IT products that no conspirators pleading guilty to violating multiple Federal criminal longer have technical support. This vital component of HUD also statutes and being sentenced to 15 to 27 months incarceration suffers from the same difficulty of filling critical staff positions with and paying more than $1.8 million in restitution to FHA. individuals having the appropriate skills, background, and knowledge One area of significant development has been the maturing of to oversee the rapidly changing world of computer systems, our Integrity and Compliance Program (ICP), which we launched in especially in an environment of increasing cybersecurity threats. December 2015. The ICP continues to demonstrate our commitment A direct result of these problems is seen in audits we conducted to the public to maintain a high level of integrity and dedication to during this reporting period, which were especially concerning. In an creating a values-based ethical culture. This then becomes the audit of HUD’s consolidated financial statements and notes for fiscal standard for every decision we make and every action we take. We years 2016 and 2015 (restated), dated November 15, 2016, we issued are currently finishing a manager-led training program for all of a disclaimer of opinion because of many irregularities and because our employees. This program incorporates scenarios and ethical HUD was unable to prepare its financial statements in time for this dilemmas that are based on actual events and require staff to use audit. However, after this audit was completed, we discovered more HUD OIG’s core values to address the issues presented. These core than half a trillion dollars in additional errors, which caused HUD to values have also been included in our staff’s performance plans. withdraw its financial statements included in its agency financial report. In closing, I would like to express my continued gratitude to HUD later revised its financial statements. On March 1, Congress and the Department for their sustained commitment to 2017, we revised and reissued our report which continued our improving HUD’s programs and operations. I also want to reiterate disclaimer opinion and showed that HUD’s financial statements my sincere appreciation of the people of HUD OIG for their dedication still had 11 material weaknesses, 7 significant deficiencies, to the vitally important work they undertake every day. Through and 5 instances of noncompliance with applicable laws and their collective effort, HUD OIG has surpassed its goals and regulations. This is the third year in a row in which HUD OIG fulfilled its mission and responsibilities to our Nation’s citizenry. could not issue a clean opinion on HUD’s financial statements. David A. Montoya | Inspector General PROFILE OF PERFORMANCE For the period October 1, 2016, to March 31, 2017 AUDIT RESULTS1 THIS REPORTING PERIOD Recommendations that funds be put to better use $3,316,329,791 Recommended questioned costs $144,534,022 Collections from audits $22,763,570 Administrative sanctions 0 Civil actions 2 Subpoenas 10 Personnel action 0 INVESTIGATION RESULTS1 THIS REPORTING PERIOD Total restitutions and judgments $196,109,878 Total recoveries and receivables to HUD programs $10,959,917 Arrests 157 Indictments and informations 154 Convictions, pleas, and pretrial diversions 105 Civil actions 19 Total administrative sanctions 157 Suspensions 68 Debarments 52 Limited denial of participation 1 Removal from program participation 0 Evictions 13 Other2 23 Systemic implication reports 2 Search warrants 27 Subpoenas 342 JOINT CIVIL FRAUD RESULTS1 THIS REPORTING PERIOD Recoveries and receivables to HUD programs or $54,754,576 HUD program participants Recoveries and receivables for other entities3 $12,869,422 Recommendations that funds be put to better use $0 Civil actions 4 Administrative sanctions 18 1T 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. 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. SEMIANNUAL REPORT TO CONGRESS TRENDING INSPECTOR GENERAL EMPOWERMENT ACT BACKGROUND AND SUMMARY The Inspector General Empowerment Act (Public Law 114-317) (IGEA), enacted in December 2016, mandates several new reporting requirements in the Offices of Inspectors General’s (OIG) Semiannual Report to Congress (SAR). Below are the statutory requirements stipulated in the IGEA with the internal document hyperlinks to the detailed information as addressed throughout the SAR, as appropriate: • Summary of all reports with no establishment comment o Trending Section (below) • Summary of all reports with outstanding unimplemented recommendations, including potential cost savings o Appendix 5 - Open Recommendations • Statistical table showing investigative report metrics o Trending Section • Whistleblower retaliation instances o Chapter 11 - Whistleblower Ombudsman • Instances of HUD interference through budget constraints, resistance, or objections o Trending Section • Undisclosed reports o Appendix 4 - Undisclosed Reports INVESTIGATIVE STATISTICS AND METRICS The IGEA requires the SAR to include statistical tables and metrics for investigative cases. For the statistical table below, the data used were extracted from the U.S. Department of Housing and Urban Development, Office of Inspector General’s (HUD OIG) Case Management System. The Case Management System and its underlying infrastructure allow for data input and maintain data integrity during the complete investigative case cycle, while ensuring data privacy and confidentiality. The system was developed in .Net 4.5.1, and the database is SQL 2012. HUD OIG develops queries to extract data from the Case Management System to meet business requirements, such as the information used to create this statistical table. The footnotes to the table provide additional guidance pertaining to each requested category of information. HUD OIG’s Case Management System is not currently configured to quantify persons referred for prosecution or differentiate whether a case or person was referred for Federal prosecution or State or local prosecution. SEMIANNUAL REPORT TO CONGRESS Investigative statistical table: Requirement Total A. Total number of investigative reports issued during the reporting period 4 220 B. Total number of persons referred to the U.S. Department of Justice for criminal 148 prosecution during the reporting period 5 C. Total number of persons referred to State and local prosecuting authorities for criminal 148 prosecution during the reporting period 6 D. Total number of indictments and criminal informations during the reporting period that 154 resulted from any prior referral to prosecuting authorities 7 INVESTIGATIONS OF SENIOR GOVERNMENT EMPLOYEES The IGEA requires the SAR to summarize each investigation involving a senior Government employee when allegations of misconduct were substantiated. Listed below are the cases for this reporting period: FALSIFICATION OF GOVERNMENT HIRING DOCUMENTS AND FAILURE TO TAKE APPROPRIATE ACTION During the selection process for a noncompetitive position, a HUD OIG director became aware of the fact that the resume of a potential applicant contained false information. Despite knowing this information, the director selected the candidate for the position. Furthermore, it was determined, that a senior HUD OIG executive was advised of the fraudulent resume and failed to take appropriate action against the director and applicant upon receipt of this information. The director was demoted to a GS-14 and received a 14-day suspension. The senior executive received a 15-day suspension. HUD OIG referred the case to the United States Attorney’s Office (USAO) on January 20, 2016, for false statements. On January 20, 2016, the USAO declined criminal prosecution due to available administrative remedies. PROHIBITED PERSONNEL PRACTICES AND OBSTRUCTION OF JUSTICE A HUD administrative officer-director admitted that she made an independent decision to hire a new Intern based on his gender, a violation of Title 5 United States Code (U.S.C.) 2302 - Prohibited personnel practices. Additionally, the director attempted to influence the statement of events that was being provided to investigators by witnesses in violation of Title 18 U.S.C. 73 - Obstruction of justice. HUD OIG referred the case to the USAO on August 31, 2016. On August 31, 2016, the USAO declined criminal prosecution due to available administrative remedies. The director received a verbal reprimand for her actions and retired from Federal service. CONFLICT OF INTEREST AND FAILURE TO TAKE APPROPRIATE ACTION 4 Includes approved reports of investigation. 5 Includes total cases presented for prosecution. HUD OIG’s Case Management System is not currently configured to quantify persons referred. 6 Includes total cases presented for prosecution. HUD OIG’s Case Management System is not currently configured to quantify persons referred. 7 Includes all charging documents reported: criminal complaints, indictments, informations, and superseding indictments. SEMIANNUAL REPORT TO CONGRESS A HUD attorney admitted she approved reimbursement for an ineligible legal services invoice. She admitted to this approval despite her direct knowledge of a subordinate employee’s existing conflict of interest in working on matters related to a particular housing authority at the time, a violation of 5 CFR (Code of Federal Regulations) Part 2635 - Standards of Ethical Conduct for Employees of the Executive Branch. HUD OIG referred the case to the USAO on May 8, 2014, for conflict of interest violations. On May 8, 2014, the USAO declined criminal prosecution. The case was declined based on the facts gathered and the USAO’s lack of interest in pursuing charges in this matter. OIG later referred this matter to HUD. HUD advised that additional corrective action was unnecessary as the Department had already taken corrective action before receiving OIG’s final report of investigation by conducting remedial training for the manager and employee. SUMMARY OF REPORTS WITH NO ESTABLISHMENT COMMENT The Empowerment Act requires OIGs to report on each audit and evaluation report for which the Department did not return comments within 60 days of HUD OIG providing the report to the Department. There are no instances to report this period. OIG INDEPENDENCE The IGEA requires the SAR to include a detailed description of any attempt by the establishment to interfere with the independence of OIG, including incidents in which the establishment has resisted or objected to oversight activities or restricted or significantly delayed access to information. There are no instances to report this period. SUMMARY OF REPORTS WITH OPEN RECOMMENDATIONS The Empowerment Act requires OIGs to report on each audit and evaluation report for which there are any outstanding unimplemented recommendations, including the aggregate potential cost saving of these recommendations. A summary of these recommendations for the Office of Audit and Office of Evaluation are presented below. The complete details of each open recommendation can be found in Appendix 5 Audit The following table summarizes the Office of Audit’s reports with open recommendations. The recommendations remain open because the agency management has not yet come to a decision about the recommendation; because the agency management has not yet finished implementing the recommendation; or because the agency management and the Inspector General disagree about the recommendations. SEMIANNUAL REPORT TO CONGRESS Number of open Cumulative estimated cost savings from Year recommendations open recommendations Pre-2001 6 $3,992,169 2001 1 $320,000 2002 7 $1,382,626 2003 15 $1,920,011 2004 9 $9,071,874 2005 5 $3,148,423 2006 37 $18,334,821 2007 27 $6,593,635 2008 51 $72,957,525 2009 33 $80,231,180 2010 46 $64,222,765 2011 74 $107,063,059 2012 56 $23,086,047 2013 173 $518,341,775 2014 265 $2,080,155,207 2015 369 $1,675,453,066 2016 743 $9,294,027,584 2017 166 $101,828,877 Total 2083 $14,062,130,644 Evaluation The Office of Evaluation conducts evaluations focused on improving departmental process and programs. As of the writing of this SAR, our recommendations have not focused on producing direct cost savings, but rather improve program effectiveness and reduce the likelihood of negative outcomes. For example, during this reporting period, some of our recommendations addressed how HUD should enhance the risk assessment process to provide grantee technical assistance. The following table summarizes the Office of Evaluation’s reports with open recommendations Number of Open Year Recommendations Pre -2013 0 2013 18 2014 27 2015 25 2016 24 2017 0 Total 94 TABLE OF CONTENTS Chapter 1 – Integrity and Compliance Program..............................................................................................1 Chapter 2 – Single-Family Programs................................................................................................................ 6 Audit.............................................................................................................................................................................................6 Investigation...............................................................................................................................................................................8 Chapter 3 – Public and Indian Housing Programs........................................................................................ 10 Audit...........................................................................................................................................................................................10 Investigation............................................................................................................................................................................. 12 Chapter 4 – Multifamily Housing and Office of Healthcare Programs....................................................... 14 Audit...........................................................................................................................................................................................14 Investigation.............................................................................................................................................................................16 Chapter 5 – Community Planning and Development Programs..................................................................17 Audit........................................................................................................................................................................................... 17 Investigation.............................................................................................................................................................................18 Chapter 6 – Disaster Recovery Programs...................................................................................................... 20 Audit........................................................................................................................................................................................... 21 Investigation.............................................................................................................................................................................23 Evaluation.................................................................................................................................................................................23 Chapter 7 – Other Significant Audits and Investigations............................................................................ 24 Audit...........................................................................................................................................................................................24 Evaluation................................................................................................................................................................................ 28 Chapter 8 – Joint Civil Fraud Initiatives........................................................................................................ 30 Chapter 9 – Legislation, Regulations, and Other Directives....................................................................... 33 Chapter 10 – Audit Resolution........................................................................................................................ 37 Chapter 11 – Whistleblower Ombudsman Program..................................................................................... 56 Appendix 1 – Peer Review Reporting............................................................................................................. 58 Appendix 2 – Audit Reports Issued................................................................................................................. 60 Appendix 3 – Tables.......................................................................................................................................... 66 Appendix 4– Undisclosed Reports.................................................................................................................. 90 Appendix 5 – Open Recommendations.......................................................................................................... 94 OIG Telephone Directory ..............................................................................................................................289 Acronyms and Abbreviations List.................................................................................................................293 Reporting Requirements ............................................................................................................................... 296 SEMIANNUAL REPORT TO CONGRESS CHAPTER 1 – INTEGRITY AND COMPLIANCE PROGRAM THE INTEGRITY & COMPLIANCE PROGRAM: ASSESSMENT AND NEXT STEPS In October 2015, the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), set out to establish its Integrity and Compliance Program (ICP). This program, modeled after private sector corporate ethics and compliance programs, was developed to provide a framework and foundation for ethical decision making and behavior. With the creation of the ICP, we have taken proactive steps to examine how we can build and sustain our values-based culture, which is reflected by our Core Values. It is the mission of every Office of Inspector General to conduct independent and objective oversight of the program and operations of its department or agency. Helping to ensure effective and efficient operations of its Departments and ferreting out fraud, waste, abuse, and mismanagement is at the heart of OIG’s mission. There is a high standard for those who work within the Inspector General community. Employees must comport themselves in a manner that cultivates trust, confidence, and respect in the performance of their duties as well as their interactions with their coworkers. KEY OBJECTIVES As we developed the ICP, we had several key objectives: assess our employees’ perceptions of OIG’s ethical culture, compare our results vis-à-vis the National Business Ethics Survey benchmarks 8, and help identify key strengths and areas of improvement regarding ethics and compliance within OIG. Since the creation of the program, the Chief Integrity and Compliance Officer has led the effort to educate staff on ICP advances and share the results of our cultural assessment survey. 8 The National Business Ethics Survey generates the U.S. benchmark on ethical behavior in corporations. 1 SEMIANNUAL REPORT TO CONGRESS CULTURAL ASSESSMENT SURVEY The assessment focused strongly on the leadership climate and ethical culture. This assessment was completed in December 2015 through an online survey conducted by an independent and objective third party. 9 In addition to identifying priorities for HUD OIG, the questions in the survey were designed to provide an assessment of the key objectives referenced above. HUD OIG is the first in the Executive Branch to undertake an agency wide employee survey focused exclusively on integrity and values. Of our 620 employees, 457 responded to the survey. Not only was the 74 percent response rate remarkable, it was among the highest of any organization, private and public, surveyed by the Ethics and Research Center. Overall 457 HUD OIG employees participated in the survey, a 74 % response rate. What the data clearly demonstrated was that employees agreed that HUD OIG has a strong ethical culture, were committed to the effort, and shared a common set of core values. But the result also showed that we had areas in need of improvement, such as a gap exists between top management’s commitment to integrity and employees’ perception of its commitment, and we need to do more to reward individuals who excel in upholding our core values. 9 The Ethics and Compliance Initiative conducted the survey for HUD OIG. 2 SEMIANNUAL REPORT TO CONGRESS CORE VALUES At the heart of the ICP is the establishment of the agency’s Core Values. As a result of employee feedback from the assessment, five Core Values were identified. They are: Accountability Courage Respect Stewardship Trust CORE VALUES: DEVELOPING OUR “SPEAK UP – LISTEN UP” CULTURE The Core Values identified in the survey serve as the foundation for our professional conduct and serve as the essential elements toward building a better workplace. A key step in the formulation of our program was to communicate these values to our staff. Communicating our values was accomplished through an internal interactive campaign focused across the workforce. From his first day on the job, Inspector General Montoya has communicated and advanced his belief that an Office of Inspector General has to model a “Speak Up – Listen Up” culture if it expects its parent organization to do the same. The communication initiative provided staff with the self-empowerment tools essential to raising concerns and institutionalizing a “Speak Up – Listen Up” culture. Our tools included written communications, brochures, and videos conveying to staff where they could go to raise questions or report concerns or suspected misconduct. Also, a guide was published clarifying the roles of each office and program that receives these reports. In December 2016, we took the unprecedented step of developing and disseminating a new Accountability Report to all staff. This report listed charges and actions taken regarding misconduct and ethical lapses of OIG employees. The introduction to the report noted that Accountability involves a process of seeing it, owning it, solving it, and doing it. Key to learning is accepting responsibility and being accountable for our decisions and actions. Accountability needs to have consequences, which are both positive and negative, and those consequences need to be consistently applied. It is important to not only practice accountability, but as much as possible, communicate that commitment to accountability. 3 SEMIANNUAL REPORT TO CONGRESS The release of the report demonstrates the importance of transparency and illustrates how HUD OIG holds its staff accountable. CORE VALUES TRAINING: BRICKS & MORTAR: BUILDING A BETTER WORKPLACE In March 2017, HUD OIG initiated a 2-hour, manager-led training program entitled “Bricks & Mortar: Building a Better Workplace.” The training, geared for all employees, included scenarios based on actual events that have occurred within OIG. Staff was encouraged to openly discuss ethical dilemmas and determine possible resolutions relative to HUD OIG core values. The training sessions were an opportunity to talk openly about our challenges, our work environment, and how our Core Values help us build a better workplace. The training also provided staff with the options available to raise questions or report concerns or suspected misconduct. All training sessions will be concluded in May 2017. 4 SEMIANNUAL REPORT TO CONGRESS NEXT STEPS The ICP is designed to strengthen and sustain our culture of compliance and integrity. In doing so, it supports a professional environment in which every individual is empowered to speak up and use our Core Values as a guide to make smart decisions and do the right thing. We hope our success will encourage the Department and other Federal agencies to follow our example, but more importantly, we hope to become a model for HUD to replicate, since such programs are relatively uncommon within the Executive Branch. “I am proud that we are the first OIG to create this type of program. It is my hope that through our ICP, we will demonstrate our commitment to the highest standard of integrity and that our efforts become a model for the rest of the Inspector General community and our Department.” -The Honorable David A. Montoya, Inspector General 5 SEMIANNUAL REPORT TO CONGRESS CHAPTER 2 – 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 5 audits $20,636 $2,238,721,464 REVIEW OF FHA PAYMENT OF DELAYED CLAIMS The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited HUD to determine whether it paid servicers’ claims for properties that did not foreclose or convey to HUD on time. HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or convey on time. OIG estimated that HUD paid nearly $142 million for servicers’ claims for unreasonable and unnecessary debenture interest that was incurred after the missed foreclosure or conveyance deadline and nearly $2.1 billion for servicers’ claims for unreasonable and unnecessary holding costs that were incurred after the deadline to convey. OIG recommended that HUD issue a change to 24 CFR (Code of Federal Regulations) Part 203 to correct deficiencies that allowed more than $2.2 billion in unreasonable and unnecessary costs to the FHA insurance fund. These changes include a maximum period for filing insurance claims and disallowance of expenses incurred beyond established timeframes. OIG also recommended that HUD develop a strategic information technology plan to make significant operational changes to its monitoring of single-family conveyance claims to ensure that servicers comply with foreclosure and conveyance timeframes. OIG further recommended that HUD develop and implement controls to identify noncompliance with current regulations at 24 CFR 203.402. (Audit Report: 2017-KC-0001) REVIEW OF DEPARTMENTAL CLEARANCE PROTOCOLS FOR FHA PROGRAMS HUD OIG audited FHA’s process for making changes to its programs, policies, and operations to determine whether HUD followed the proper requirements and procedures when implementing changes to FHA single-family programs, policies, and operations. HUD failed to follow required departmental clearance procedures when implementing changes to FHA programs. Specifically, HUD did not always pursue required departmental clearance and posted draft documents or directives in final form before conducting departmental clearance. When departmental clearance was pursued, HUD did not always ensure that key officials reviewed the documents before issuance. As a result, significant policy information 6 SEMIANNUAL REPORT TO CONGRESS was distributed without proper review and clearance, which undermined the intent and integrity of the process. This action effectively bypassed the required review by other HUD offices, including OIG, which had questioned or opposed document policies in some cases. Additionally, the risk of issuing incorrect or inconsistent information was increased, potentially resulting in significant financial losses or other unintended consequences. OIG recommended that HUD (1) pursue departmental clearance for the 13 documents and policies identified that did not go through required departmental clearance and recall any documents that cannot be appropriately cleared; (2) update its clearance tracking system to include missing concurrence forms; (3) ensure that appropriate concurrence forms were obtained and documented for directives issued by other HUD program offices; and (4) implement controls, update policies, and provide training to ensure that directives are reviewed and documented as required. (Audit Report: 2017-LA-0002) REVIEW OF HUD’S OVERSIGHT OF FHA-INSURED LOANS WITH BORROWER-FINANCED DOWNPAYMENT ASSISTANCE HUD OIG audited HUD’s oversight of FHA-insured loans originated with borrower-financed downpayment assistance to determine whether HUD had adequate controls to ensure that FHA-insured loans with downpayment assistance complied with HUD requirements. HUD failed to adequately oversee more than $16.1 billion in FHA loans that may have been originated with borrower-financed downpayment assistance to ensure compliance with HUD requirements, putting the FHA Mutual Mortgage Insurance Fund at unnecessary risk. Between October 1, 2015, and September 30, 2016, HUD guaranteed nearly $12.9 billion in FHA loans that may have contained questionable downpayment assistance. While government entities are not prohibited sources of downpayment assistance, the assistance provided through these programs did not comply with HUD requirements. FHA borrowers were required to obtain a premium interest rate and, therefore, repaid the assistance through higher mortgage payments and fees. Despite the prohibition against similar seller-funded programs, HUD’s requirements appeared to have enabled the growth of these questionable programs. In addition, HUD did not adequately track these types of loans and review the funding structure of these programs. Despite concerns raised by OIG, HUD failed to protect FHA borrowers against the higher monthly mortgage payments and higher fees imposed on them, which increased the risks to the Insurance Fund in the event of default. OIG recommended that HUD (1) reconsider its position on questioned borrower-financed downpayment assistance programs, (2) develop and implement policies and procedures for reviewing loans with downpayment assistance, (3) develop requirements for lenders to review downpayment assistance programs, (4) require lenders to obtain a borrower certification that details borrower participation, (5) ensure that lenders enter all downpayment assistance data into FHA Connection, and (6) implement data fields where lenders would be required to enter specific downpayment assistance information. (Audit Report: 2017-LA-0003) 7 SEMIANNUAL REPORT TO CONGRESS INVESTIGATION Program results Administrative - civil actions 54 Convictions - pleas - pretrial diversions 34 Financial recoveries $163,892,032 SEVEN IMPRISONED FOR LOAN MODIFICATION SCAM Seven employees of a mortgage modification company were sentenced in U.S. District Court in connection with earlier guilty pleas to conspiracy to commit mail fraud, wire fraud, and misprision of a felony. Collectively, the defendants were sentenced to more than 26 years imprisonment and ordered to pay more than $2.4 million in restitution to the victims. The defendants jointly operated a series of California-based companies that falsely purported to provide home loan modification services to many homeowners in exchange for upfront fees. To induce homeowners to pay these fees, the defendants told the homeowners they had been approved for modifications on extremely favorable terms, the modification already had been negotiated with the homeowner’s lenders, and they would receive financial assistance under various government relief programs. None of those promises were true, and few homeowners received any type of mortgage loan modification through the defendants’ companies. HUD OIG, the United States Postal Inspection Service, the Federal Bureau of Investigation (FBI), the Special Inspector General for the Troubled Asset Relief Program, the Federal Housing Finance Agency OIG, and Homeland Security Investigations conducted this investigation. (Bridgeport, CT) SEVEN MORTGAGE COMPANY EMPLOYEES ORDERED TO PAY ALMOST $57 MILLION FOR CONSPIRACY AND WIRE FRAUD Seven employees of an FHA-insured lender were sentenced in U.S. District Court for their earlier guilty pleas to conspiracy and wire fraud for their roles in a mortgage fraud conspiracy. Collectively, the defendants were sentenced to a total of 17 years of probation and ordered to pay almost $57 million in restitution to FHA. The employees participated in a mortgage fraud scheme by accepting, processing, and submitting fraudulent loan applications for as many as 189 FHA-insured mortgages that contained false information pertaining to borrower income, assets, employment, rental payments, and other credit worthiness documentation. HUD OIG and the FBI conducted this investigation. (Newark, NJ) FIVE SENTENCED TO PRISON FOR ROLE IN MORTGAGE FRAUD SCHEME Five codefendants were sentenced in U.S. District Court following their convictions of mail fraud, wire fraud, and conspiracy. Collectively, the defendants were sentenced to 10 years in jail and ordered to pay more than $1.8 million in restitution to FHA and $3.1 million to various victims. The codefendants recruited individuals to purchase renovated houses owned by development companies and falsified income and asset information in order 8 SEMIANNUAL REPORT TO CONGRESS for borrowers to qualify for the home loans. The defendants then received substantial payments from the proceeds of the sales. HUD OIG and the FBI conducted this investigation. (Baltimore, MD) MORTGAGE COMPANY FOUNDER ORDERED TO PAY MORE THAN $10 MILLION TO GOVERNMENT In a civil judgement filed in U.S. District Court, the founder of a mortgage company was ordered to pay the government $10.3 million for violations of the False Claims Act. The owner submitted false verification forms showing that the HUD-approved loan correspondent was not involved in any proceeding “that could result in or has resulted in a criminal conviction, debarment, limited denial of participation, suspension or civil monetary penalty,” when he was under indictment. FHA realized losses of more than $3.4 million when 237 FHA-insured loans defaulted. HUD OIG conducted this investigation. (Chicago, IL) 9 SEMIANNUAL REPORT TO CONGRESS CHAPTER 3 – PUBLIC AND INDIAN HOUSING PROGRAMS The U.S. Department of Housing and Urban Development (HUD) provides grants and subsidies to more than 3,300 public housing agencies (PHA) nationwide. Many PHAs administer both public housing and Section 8 programs. HUD also provides assistance directly to PHAs’ resident organizations to encourage increased resident management entities and resident skills programs. Programs administered by PHAs are designed to enable low- income families, the elderly, and persons with disabilities to obtain and reside in housing that is safe, decent, sanitary, and in good repair. Some of the highlights from this semiannual period are noted below. AUDIT STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF ERRONEOUS PAYMENTS IN RENTAL ASSISTANCE Key program results Questioned costs Funds put to better use Audit 9 audits $6,508,918 $12,531,138 SECTION 8 HOUSING CHOICE VOUCHER PROGRAM HUD OIG audited the Town of Amherst, NY’s Housing Choice Voucher program administered through a contractor, Belmont Housing Resources for Western New York, to determine whether officials established and implemented adequate controls over the Town’s Housing Choice Voucher program to ensure compliance with HUD regulations. The Town and its contractor generally established and implemented adequate controls over the Town’s Housing Choice Voucher program for admission, initial application, recertification, and rental assistance payment and unit size determinations; however, they did not ensure that units met housing quality standards. Specifically, of 70 units inspected, 63 failed to meet housing quality standards, and 41 were materially noncompliant. Additionally, the Town and its contractor did not conduct adequate housing quality standards quality control inspections and did not address tenant complaints related to the condition of program units adequately and in a timely manner. If the Town and its contractor do not improve the housing quality standards inspection process for the Town’s Housing Choice Voucher program, the Town could spend more than $9.3 million on units that fail to meet HUD’s minimum housing quality standards in the next year. OIG recommended that HUD instruct Town officials to (1) reimburse the program from non-Federal funds more than $118,000 spent on ineligible costs related to housing assistance payments disbursed and administrative fees received for units that materially failed to meet HUD’s housing quality standards and overpayments of housing assistance due to recertification errors; (2) certify that the identified deficiencies have been corrected for the units cited; and (3) implement procedures to ensure that the Town’s Housing Choice Voucher program units meet housing quality standards, housing quality standards quality control inspections are adequately conducted, and tenant complaints related to the condition of program units are resolved adequately and in a timely manner. (Audit Report: 2017-NY-1003) 10 SEMIANNUAL REPORT TO CONGRESS HUD OIG audited the public housing and Housing Choice Voucher programs of the Houston Housing Authority in Houston, TX, to determine whether the Authority (1) followed HUD requirements when it procured goods and services and incurred miscellaneous expenses, (2) calculated tenant housing assistance payments in accordance with HUD payment standards, and (3) conducted tenant certifications in a timely manner. The Authority did not follow HUD’s regulations or its own policies when contracting for goods and services and paying for miscellaneous expenses. It also did not always use correct payment standards or perform annual tenant recertifications for its program tenants in a timely manner and in accordance with HUD regulations and its administrative plan. As a result, the Authority paid more than $3.2 million in Federal funds for ineligible and unsupported costs. OIG recommended that HUD require the Authority to (1) repay more than $183,000 in ineligible expenditures; (2) support or repay more than $3 million in questionable costs; and (3) implement adequate internal controls, including written procedures, to ensure that its procurement and expense payments comply with HUD’s regulations and its own policies. (Audit Report: 2017-FW-1003) REVIEW OF PROGRAM PARTICIPANTS RECEIVING MULTIPLE SUBSIDIES HUD OIG audited HUD’s Office of Public and Indian Housing to determine whether HUD prevented program participants from concurrently receiving subsidies from both public housing and multifamily subsidy programs. HUD did not prevent program participants from receiving multiple subsidies in 38 of the 80 files reviewed. As a result, OIG estimated that HUD did not have more than $2.24 million available to assist other eligible participants. OIG recommended that HUD (1) require PHAs to run the Enterprise Income Verification existing tenant search during the admission process and retain the results in the tenant file, which would avoid unnecessary costs to HUD’s subsidy programs, allowing more than $935,000 to be put to better use; (2) require PHAs to report the program admission date to any multifamily property listed on the Enterprise Income Verification existing tenant search during the admission process; (3) require PHAs to maintain support for any communication with a multifamily property listed on the Enterprise Income Verification existing tenant search; (4) require HUD staff to review Enterprise Income Verification reports from the last 12-month period during onsite housing agency reviews to ensure that any multiple subsidies have been resolved; and (5) implement recommendations 1 through 4 to ensure that more than $2.24 million in housing assistance funds will be put to better use. (Audit Report: 2017-KC-0002) PUBLIC HOUSING PROGRAM HUD OIG audited the public housing program of the Port Huron Housing Commission in Port Huron, MI, to determine whether the Commission administered its program in accordance with HUD’s and its own program requirements. The Commission did not properly implement asset management. Specifically, it inappropriately allocated more than $1.4 million in expenses incurred by its central office cost center to its asset management projects. As a result, HUD and the Commission lacked assurance that the costs allocated to the Commission’s projects were (1) necessary and reasonable and (2) for eligible program-related activities or services received by the projects. 11 SEMIANNUAL REPORT TO CONGRESS OIG recommended that HUD require the Commission to (1) support that more than $1.4 million in central office cost center expenses allocated to the public housing program were eligible, necessary, and reasonable program costs and (2) implement adequate procedures and controls to address the issue cited. (Audit Report: 2017-CH-1001) HUD OIG audited the Housing Authority of the Township of Irvington, NJ, regarding the administration of its public housing program to determine whether the issues identified in a complaint could be substantiated and whether the Authority administered its public housing program in accordance with HUD regulations and had sufficient financial controls. The complaint allegations regarding serious financial and operational mismanagement were valid. Authority officials did not always administer the Authority’s public housing program in accordance with program requirements. Specifically, officials spent program funds for unsupported and ineligible costs, excessive compensation was provided to the former executive director, HUD was not notified about litigation, deficiencies were noted in rent collection, program income was spent for ineligible and unsupported costs, and controls over procurement were inadequate. As a result, HUD had no assurance that more than $1.2 million in expenditures charged by the Authority was eligible and adequately supported. OIG recommended that HUD require Authority officials to (1) reimburse the public housing program from non- Federal funds for more than $95,000 in ineligible expenditures, (2) provide supporting documentation to justify more than $1.1 million in unsupported expenditures charged to the public housing program or repay the program from non-Federal funds, and (3) establish adequate controls to ensure compliance with program requirements. OIG also recommended that HUD pursue administrative sanctions against any current or former Authority officials found to have spent public housing program funds for personal or unallowable use. (Audit Report: 2017-NY-1008) INVESTIGATION Program results Administrative - civil actions 83 Convictions - pleas - pretrial diversions 49 Financial recoveries $9,630,973 HOUSING AUTHORITY OFFICIALS SENTENCED FOR BRIBES Five former housing authority officials and contractors were sentenced in U.S. District Court for conspiracy, bribery, and tax evasion, among other charges, for their role in exchanging housing authority business and contracts for bribes. The former executive director was sentenced to 48 months imprisonment and ordered to pay more than $1.5 million in restitution to the housing authority and $363,781 in back taxes, penalties, and interest to the Internal Revenue Service. Other defendants were collectively sentenced to 18 months imprisonment and 5 years probation and ordered to pay more than $1.8 million in restitution and $100,000 in fines. The housing authority officials used their positions to direct contracts to known associates in exchange for payments. The executive director alone 12 SEMIANNUAL REPORT TO CONGRESS received approximately $1.5 million in payments from individuals related to the awarding of housing authority business. HUD OIG and the Federal Bureau of Investigation conducted this investigation. (Hartford, CT) GUILTY PLEA BY FORMER HOUSING OFFICIAL FOR THEFT OF FUNDS A former housing authority resident services coordinator pled guilty in U.S. District Court to one count of theft of funds from a program receiving Federal funds. The official embezzled $91,576 in funds from the HUD-funded Family Self-Sufficiency program, which is administered by the housing authority. The official embezzled an additional $1,300 from a housing authority resident tenant association. HUD OIG and the South Portland Police Department conducted this investigation. (Portland, ME) 13 SEMIANNUAL REPORT TO CONGRESS CHAPTER 4 – MULTIFAMILY HOUSING AND OFFICE OF HEALTHCARE PROGRAMS In addition to multifamily housing developments and Office of Healthcare Programs properties with U.S. Department of Housing and Urban Development (HUD)-held or HUD-insured mortgages, HUD subsidizes rents for low-income households, finances the construction or rehabilitation of rental housing, and provides support services for the elderly and 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 9 audits $7,812,102 $8,701,004 REVIEW OF MULTIFAMILY SPECIAL ESCROW FUNDS HUD’s Office of Inspector General (OIG) audited the multifamily special escrow funds of the Puerto Rico Department of Housing in San Juan, PR, to determine whether the Department administered and disbursed its escrow funds in accordance with its memorandum of understanding with HUD and whether funded activities fully provided the intended benefits. Since September 2012, the Department had maintained a high balance in its escrow accounts without awarding funds for new projects. In addition, it did not ensure the completion of three escrow-funded activities that showed signs of slow progress and did not support the eligibility and propriety of five disbursements. As a result, HUD had no assurance that more than $12 million in escrow funds was effectively used to meet program objectives and provide the intended benefits. The Department did not ensure that escrow deposits were fully secured by the Federal Government and that program beneficiaries met income limit requirements. In addition, it failed to certify to HUD that funded activities met program requirements. As a result, HUD lacked assurance that funds were properly safeguarded and used for authorized purposes. OIG recommended that HUD (1) determine the eligibility of more than $4 million in unsupported escrow fund disbursements and activities that showed signs of slow progress, (2) use more than $7 million in unspent escrow funds to meet program objectives and increase the supply of low- and moderate-income housing, and (3) require the transfer of unspent funds to a more sound financial institution to ensure that escrow account deposits are fully secured by the Federal Government. (Audit Report: 2017-AT-1003) 14 SEMIANNUAL REPORT TO CONGRESS REVIEW OF MULTIFAMILY MANAGEMENT AGENT HUD OIG audited Majestic Management, LLC, located in St. Louis, MO, to determine whether it charged only the appropriate fees in managing its projects, properly procured goods and services, and disbursed project funds only for eligible and supported expenses. Majestic Management improperly charged fees to its projects, did not properly procure goods and services, and spent project funds for ineligible and unsupported costs. As a result, it deprived its projects of more than $242,000 in funds needed to pay for essential items, and HUD and property owners had no assurance that the projects benefited from nearly $976,000 paid without adequate support. OIG recommended that HUD require Majestic Management to (1) support or reimburse the appropriate projects for the unsupported disbursements and improper procurements; (2) reimburse the appropriate projects their portion of the funds spent for work not completed, overbilled, or ineligible; (3) be monitored by HUD to ensure that employees understand and correctly apply procurement requirements; (4) update its management agreements to properly disclose its identity-of-interest companies to HUD and property owners; and (5) implement adequate controls to ensure that payments are adequately supported, goods and services are properly procured, and only authorized fees are collected. (Audit Report: 2017-KC-1001) REVIEW OF HUD’S OVERSIGHT OF THE FUNDS COVERED UNDER THE LOW-INCOME HOUSING PRESERVATION AND RESIDENT HOMEOWNERSHIP ACT OF 1990 HUD OIG audited HUD’s oversight of funds covered under the Low-Income Housing Preservation and Resident Homeownership Act of 1990 in HUD’s Line of Credit Control System to determine whether HUD had adequate oversight of funds covered under the Act to ensure that the balances in its projects’ grant accounts in HUD’s System were appropriate. HUD did not ensure that (1) it remitted its share of the proceeds from initial sales associated with resident home- ownership program grants to the U.S. Treasury, (2) excess capital funds were deposited into the reserve for replacements accounts for the projects, and (3) authorized capital funds in the projects’ grant accounts did not exceed the capital grant agreement amounts. As a result, (1) the U.S. Treasury did not have more than $1.2 million available for other appropriations, (2) HUD could not sufficiently support the use of more than $341,000 in proceeds from initial sales, and (3) six grantees did not have nearly $368,000 in capital funds in their projects’ reserve for replacements accounts. OIG recommended that HUD (1) ensure that the proceeds are remitted to the U.S. Treasury, (2) provide sufficient documentation to support what it did with proceeds from initial sales, (3) deposit capital funds into the reserve for replacements accounts for six projects, and (4) implement adequate procedures and controls to ensure that future proceeds from initial sales paid to HUD are remitted to the U.S. Treasury. (Audit Report: 2017-CH-0001) 15 SEMIANNUAL REPORT TO CONGRESS REVIEW OF HUD’S OVERSIGHT OF COMPLIANCE WITH PARTIAL PAYMENT OF CLAIM USE AGREEMENT RESTRICTIONS HUD OIG audited HUD’s implementation of use agreement restrictions for affordable set-aside units to determine whether HUD ensured compliance with use agreement restrictions for affordable set-aside units as a condition of partial payment of claims. HUD did not ensure compliance with use agreement restrictions for affordable set-aside units as a condition of partial payment of claims. As a result, HUD had no assurance that owners made available the affordable set-aside units required by the partial payment of claims use agreements. OIG recommended that HUD (1) develop and implement written procedures to track the required annual certifications using the Integrated Real Estate Management System (iREMS), (2) develop and implement written procedures to verify that properties comply with their partial payment of claims use agreement restrictions, and (3) obtain the missing annual certifications for two properties and record them in iREMS. (Audit Report: 2017-LA- 0001) INVESTIGATION Program results Administrative - civil actions 8 Convictions - pleas - pretrial diversions 9 Financial recoveries $21,907,216 THREE SENTENCED TO PRISON FOR KICKBACK SCHEME A developer and two contractors were sentenced in U.S. District Court in connection with their guilty pleas and jury convictions of conspiracy, mail fraud, money laundering, and making false statements. The developer was sentenced to 37 months imprisonment and ordered to pay $1.3 million in restitution to HUD. One contractor was sentenced to 50 months imprisonment, and both defendants were collectively ordered to pay $865,000 in restitution to HUD. The defendants participated in a kickback scheme to falsely inflate a framing contract by $865,000 for a HUD-insured multifamily development. The developer was unable to make mortgage payments on the fraudulently inflated loan, and the development went into default, leading to HUD’s realizing losses of $28 million. HUD OIG conducted this investigation. (White Plains, NY) 16 SEMIANNUAL REPORT TO CONGRESS CHAPTER 5 – COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS The Office of Community Planning and Development (CPD) seeks to develop viable communities by promoting integrated approaches that provide decent housing, suitable living environments, and expanded economic opportunities for low- and moderate-income persons. The primary means toward this end is the development of partnerships among all levels of government and the private sector. Some of the highlights from this semiannual period are shown below. AUDIT STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES Key program results Questioned costs Funds put to better use Audit 8 audits 10 $51,110,230 $3,687,984 The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited the Community Development Block Grant (CDBG) and HOME Investment Partnerships Program. COMMUNITY DEVELOPMENT BLOCK GRANT HUD OIG audited the City of Pittsburgh, PA’s administration of its CDBG program to determine whether the City administered its program in accordance with applicable HUD and Federal requirements. The City did not always administer its CDBG program in accordance with HUD and Federal requirements. Specifically, of seven activities reviewed, the City did not (1) prepare independent cost estimates before awarding contracts for three activities with costs of more than $1.4 million, (2) ensure that more than $1 million disbursed to subrecipients for two activities was for costs that benefited the activity, and (3) document its determination that seven activities with costs totaling more than $4.7 million were exempt or categorically excluded from environmental review requirements. Additionally, the City did not always properly report program accomplishments to HUD. As a result, it could not show that costs totaling more than $4.7 million complied with applicable requirements and accomplishments were accurately reported. OIG recommended that HUD require the City to provide documentation to show that (1) prices paid for products and services of more than $1.4 million were fair and reasonable, (2) disbursements to subrecipients totaling more than $1 million were for costs that benefited the activity, and (3) seven activities with costs of nearly $2.3 million were exempt or categorically excluded from environmental reviews or repay its program from non-Federal funds for any amount that it cannot support. OIG also recommended that HUD require the City to review its accomplishment data to ensure accurate reporting. (Audit Report: 2017-PH-1001) 10 The total CPD audits, questioned costs, and funds put to better use amounts include any disaster recovery type audits conducted in the CPD area (6 audits). The write-ups for thee audits may be shown separately in chapter 6 of this semiannual report. 17 SEMIANNUAL REPORT TO CONGRESS HOME INVESTMENT PARTNERSHIPS PROGRAM HUD OIG audited Union County, NJ’s HOME Investment Partnerships Program to determine whether County officials had established and implemented adequate controls to ensure that the County’s program was administered in compliance with HOME program requirements. The County’s HOME program was not always administered in compliance with program requirements. Specifically, the County’s HOME fund was not reimbursed for assistance spent on partially canceled and noncompliant activities, was used for ineligible and unsupported community housing development organizations (CHDO), and was maintained in a bank account while drawdowns were made from the line of credit. In addition, activities were not administered in compliance with program requirements, income was not always collected and reported in the Integrated Disbursement and Information System, HOME match was not accurately calculated, and units were either leased to tenants or sold to home buyers without documentation to support eligibility. As a result, more than $242,000 was spent on ineligible CHDOs; more than $4.7 million was unavailable for eligible activities and CHDOs; nearly $924,000 was spent on unsupported costs, a CHDO, and two home buyers; and HUD’s and the County’s interest of nearly $598,000 in assisted properties was not protected. OIG recommended that HUD instruct County officials to (1) reimburse more than $3.7 million for disbursements made for terminated and noncompliant activities and an ineligible CHDO; (2) impose deed restrictions on two properties assisted with nearly $598,000; (3) reallocate nearly $574,000 to an eligible CHDO; (4) provide documents to support the eligibility of a CHDO that received nearly $228,000 in CHDO reserve funds, two home buyers who received nearly $261,000 in HOME assistance, and unsupported costs of more than $435,000; (5) reimburse nearly $537,000 to the local bank account for the uncollected and unreported program income; and (6) disburse nearly $93,000 to pay eligible HOME costs before making additional drawdowns from the Line of Credit Control System. (Audit Report: 2017-NY-1005) INVESTIGATION Program results Administrative - civil actions 17 Convictions - pleas - pretrial 4 diversions Financial recoveries $274,306 THREE SENTENCED TO PRISON FOR BID-RIGGING SCHEME A nonprofit employee, two contractors, and a construction company were sentenced in U.S. District Court for theft of Federal funds and violations of State lead-based paint program requirements for their role in a bid-rigging scheme. Collectively, the defendants were sentenced to 5 years imprisonment and ordered to pay $32,280 in restitution to the nonprofit and $9,000 in fines. The corporation was sentenced to 5 years probation and ordered to pay a special cost to a training-licensing institution for lead abatement worker training and licensing for its eight employees. The individuals and the corporation conspired to commit bribery concerning programs receiving 18 SEMIANNUAL REPORT TO CONGRESS Federal funds. The nonprofit employee provided the contractors confidential bid sheets and the information contained on the bid sheets for various HUD community planning and development rehabilitation projects before bids were submitted to the nonprofit. Combined, the two contractors were falsely awarded approximately $610,000 in contracts, which reached nearly $1 million after change orders were paid. In addition, the contractor and corporation accepted responsibility for violating lead-based paint program requirements, and the nonprofit employee was found to have embezzled money from the nonprofit. HUD OIG, the Federal Bureau of Investigation, and the Environmental Protection Agency, Criminal Investigation Division, conducted this investigation. (Cleveland, OH) 19 SEMIANNUAL REPORT TO CONGRESS CHAPTER 6 – 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 $49.2 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 $47.1 billion in active disaster grants, the funds have been allocated nationwide, with nearly $38.1 billion obligated and $34.9 billion disbursed as of March 31, 2017. Funds Percentage of funds Fiscal year Disaster Funds disbursed allocated disbursed funds allocated Louisiana, Texas $1.8 billion $0 0 2016 & West Virginia Hurricane Sandy $15.2 billion $7.1 billion 47 2013 Hurricanes Ike, $6.1 billion $5.1 billion 84 2008 Gustav & Dolly Hurricanes Katrina, Rita & $19.5 billion $19 billion 97 2006 & 2008 Wilma 9-11 $3.5 billion $3.1 billion 89 2001-2002 Other $1.0 billion $0.57 billion 53 Various Keeping up with communities in the recovery process can be a challenging position for HUD. HUD OIG continues to take steps to ensure that the Department remains diligent in assisting communities with their recovery efforts. 20 SEMIANNUAL REPORT TO CONGRESS AUDIT Strategic Initiative 3: Contribute to the strengthening of communities Key program results Questioned costs Funds put to better use Audit 6 audits 11 $41,320,063 $1,887,712 HUD OIG audited the City of New York, Office of Management and Budget’s administration of the Interim Assistance Rapid Repairs Program, funded with Community Development Block Grant Disaster Recovery (CDBG- DR) funds provided by HUD to assist in the disaster recovery and rebuilding efforts resulting from Hurricane Sandy. The objective of the audit was to determine whether City officials had adequate controls to ensure that the use of CDBG-DR funds was consistent with the Program guidelines established under the HUD-approved action plan, applicable Federal requirements, and City policy. City officials lacked adequate controls to ensure that the use of CDBG-DR funds was always consistent with the action plan and applicable Federal and State regulations. Specifically, they disbursed more than $18.2 million in CDBG-DR funds for State sales tax on repairs and maintenance services that the City was exempt from paying under New York State tax law, section 1116(a)(1). As a result, they could not assure HUD that the funds were disbursed for allowable, reasonable, and necessary expenses in compliance with the action plan and Federal and State requirements. OIG recommended that HUD instruct City officials to (1) reimburse the Program from non-Federal funds for the exempt State sales tax on repairs and maintenance services and (2) strengthen controls over disbursements to ensure that all costs charged to the Program are allowable, reasonable, and necessary in compliance with the HUD- approved action plan and Federal and State requirements. (Audit Report: 2017-NY-1004) HUD OIG audited the CDBG-DR assistance grant provided to the State of Connecticut to determine whether the State complied with CDBG-DR requirements for its Owner Occupied Rehabilitation and Rebuilding and Owner Occupied Reimbursement programs. The State did not always comply with CDBG-DR requirements. Specifically, procurements were not always executed in accordance with HUD requirements. The State also did not always support the low- and moderate- income national objective. Further, not all costs were eligible because the State did not always complete environmental reviews in accordance with requirements. In addition, the State did not always properly support and calculate the unmet need of homeowners. As a result, more than $2.4 million in CDBG-DR funds was ineligible, and more than $13.5 million was unsupported. Further, HUD did not have assurance that all environmental hazards were appropriately identified and addressed or that low- and moderate-income information reported by the State in HUD’s Disaster Recovery Grant Reporting system was accurate. 11 Disaster-related audits consist of community planning and development audits. The questioned costs and funds put to better use amounts relate only to disaster-related costs. 21 SEMIANNUAL REPORT TO CONGRESS OIG recommended that HUD instruct State officials to (1) repay from non-Federal funds or support that the more than $13.3 million awarded for architect, engineer, and construction management services contracts was fair and reasonable; (2) repay from non-Federal funds nearly $317,000 in payments made for services outside the scope of work for seven contracts; (3) repay from non-Federal funds or support that more than $227,000 in funds awarded met the low- and moderate-income national objective; (4) repay from non-Federal funds more than $2.1 million in ineligible CDBG-DR funds spent without the notice of intent and request for release of funds being published; and (5) strengthen program controls over procurement, contract scope of work, national objective documentation, environmental review determinations, and unmet need determinations. (Audit Report: 2017-BO-1001) HUD OIG audited the City of New York, Mayor’s Office of Housing Recovery Operations’ administration of the Build it Back Single Family Program, funded with HUD CDBG-DR funds to assist in the disaster recovery and rebuilding efforts resulting from Hurricane Sandy. The objective of the audit was to determine whether City officials had adequate controls to ensure that the use of CDBG-DR funds was consistent with the Build it Back Single Family Program guidelines established under the HUD-approved action plan. City officials implemented policies that did not always ensure that CDBG-DR funds were disbursed in accordance with the action plan and Federal requirements. Specifically, the policies did not ensure that all eligible homeowners were reimbursed in accordance with the action plan and the Program and CDBG-DR-assisted homes complied with HUD’s Lead Safe Housing Rule requirements. In addition, City officials did not maintain complete and accurate Program files and records. As a result, they could not assure HUD that the use of CDBG-DR funds benefited eligible homeowners in a fair and equitable manner, assisted homes were lead safe, and Program records were properly maintained. OIG recommended that HUD instruct City officials to (1) submit an amended action plan for approval to ensure that it agrees with the City’s policies regarding the use of nearly $4.5 million and planned use of more than $1.3 million in additional CDBG-DR assistance to homeowners with Small Business Administration loans and more than $32,000 in assistance above the Program’s 60 percent reimbursement rate, (2) reimburse more than $101,000 in additional grants owed to 11 homeowners, and (3) provide documentation to support that more than $1 million in CDBG-DR funds was disbursed for lead-safe homes. (Audit Report: 2017-NY-1001) HUD OIG audited the CDBG-DR assistance grant provided to the City of Springfield, MA, to determine whether the City properly followed Federal procurement requirements and whether payments to vendors were adequately supported. A review of more than $8.3 million, representing 60 percent of more than $13.9 million in CDBG-DR funds obligated, found that the funds were budgeted for eligible and HUD-approved activities. However, City officials did not ensure that more than $1.9 million met Federal procurement requirements or payments to vendors were adequately supported. Further, the City did not always document the duplication of benefits in accordance with requirements. OIG recommended that HUD instruct City officials to (1) provide evidence showing that more than $1.4 million was spent for supported, necessary, and reasonable costs or repay HUD from non-Federal funds; (2) obtain support for more than $472,000 or reprogram the funds to other allowable activities; and (3) strengthen and follow 22 SEMIANNUAL REPORT TO CONGRESS procurement policies and financial and administrative controls to ensure compliance with Federal requirements. (Audit Report: 2017-BO-1002) INVESTIGATION Program results Administrative - civil actions 8 Convictions - pleas - pretrial diversions 7 Financial recoveries $301,813 FRAUDSTER ORDERED TO REPAY ALMOST $100,000 IN HURRICANE SANDY FUNDS A recipient of Hurricane Sandy disaster relief funds was sentenced in State Superior Court to 24 months probation and ordered to pay restitution of $96,710 to the New Jersey Department of Community Affairs in connection with her guilty plea to theft by deception. In June 2013, the recipient filed an application for damage assistance with the State of New Jersey Department of Community Affairs, the Federal Emergency Management Agency, and the Small Business Administration, claiming that her house in Amboy, NJ, was her primary residence at the time of Hurricane Sandy, when she resided in Keyport, NJ, during and after the storm. Only primary residence properties were entitled to Federal disaster assistance. The recipient received HUD CDBG-DR funds in the New Jersey State- run Rehabilitation, Reconstruction, Elevation, and Mitigation Grant program. HUD OIG and the Middlesex County Prosecutor’s Office conducted this investigation. (Middlesex, NJ) EVALUATION OPPORTUNITIES FOR IMPROVEMENT WITHIN CPD’S RISK MANAGEMENT PROCESS FOR HURRICANE SANDY GRANTS The Office of Community Planning and Development (CPD) manages $15.2 billion in disaster recovery funding that Congress appropriated as part of the Disaster Relief Appropriations Act of 2013. To date, the OIG Office of Audit has identified nearly $450 million, or nearly 3 percent of the appropriated funds, in questioned costs. HUD OIG evaluated the risk analysis process for Hurricane Sandy grants performed by CPD. The objective was to assess CPD’s risk management process to identify opportunities for improvement. OIG observed five areas in which CPD could improve the risk analysis process. OIG observed that (1) the risk analysis worksheet did not consider risk related to performance outputs, (2) the risk analysis did not consider the likelihood of risk events occurring, (3) there was no clear correlation between the risk analysis and monitoring, (4) CPD made limited use of data analytics in its risk management process, and (5) CPD staff was not trained to conduct a risk analysis. OIG recommended that (1) CPD revise the risk assessment worksheet to include measurement of performance outputs; (2) update risk analysis guidance to include the assessment of the likelihood of risk occurrence; (3) ensure that monitoring strategies correlate to the high-risk areas identified during risk analysis; and (4) ensure that CPD staff that plans for, awards, and manages grants and other forms of financial assistance receives formal risk analysis training. In its written response to OIG’s report, HUD agreed with the last two recommendations but disagreed with the first two findings and recommendations. (Evaluation Report: 2016-OE-0004S) 23 SEMIANNUAL REPORT TO CONGRESS CHAPTER 7 – OTHER SIGNIFICANT AUDITS AND EVALUATIONS 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 10 Audits $76,891,010 $1,034,919,570 The U.S. Department of Housing and Urban Development, Office of Inspector General’s (HUD OIG) more significant audits are discussed below. AUDIT OF HUD’S FISCAL YEARS 2016 AND 2015 FINANCIAL STATEMENTS In accordance with the Chief Financial Officers Act of 1990, as amended, HUD OIG is required to annually audit HUD’s consolidated financial statements and the stand-alone financial statements of the Federal Housing Administration (FHA) and Government National Mortgage Association (Ginnie Mae). The objective was to express an opinion on the fairness of the financial statements in accordance with generally accepted accounting principles (GAAP). This report presents the results of OIG’s audit of fiscal years 2016 and 2015 (restated) HUD consolidated financial statements, including its report on HUD’s internal controls and a test of compliance with applicable laws and regulations. On November 15, 2016, HUD OIG issued a disclaimer of opinion on HUD’s consolidated financial statements for fiscal years 2016 and 2015 (restated) due to HUD’s inability to deliver principal financial statements for the fiscal years ending September 30, 2016 and 2015 (restated), and accompanying notes in a timely manner. OIG then discovered that the consolidated financial statements that were published in HUD’s agency financial report (AFR) contained material errors, and the Office of the Chief Financial Officer withdrew the AFR to revise and reissue it. The total amounts of errors corrected in HUD’s notes and consolidated financial statements were more than $516.4 billion and nearly $3.4 billion, respectively. On March 1, 2016, OIG completed its review of the revised financial statements, withdrew its previous independent auditor’s report issued on November 15, 2016, and replaced it with a report that removed one basis for disclaimer due to HUD’s inability to deliver principal financial statements and accompanying notes in a timely manner. However, OIG’s previous audit opinion of a disclaimer of opinion remains unchanged due to other unresolved material matters identified in its audit, which restricted its ability to obtain sufficient, appropriate evidence to express an opinion. Those matters related to (1) the Office of General Counsel’s refusal to sign the management representation letter, (2) HUD’s improper use of cumulative and first-in, first-out budgetary accounting methods of disbursing community planning and development program funds, (3) the more than $4.2 billion in nonpooled loan assets from Ginnie Mae’s stand-alone financial statements that OIG could not audit because Ginnie Mae could not provide adequate support to enable the testing of these asset balances, (4) the improper accounting for HUD’s assets and liabilities, and (5) material differences between HUD’s subledger and general ledger accounts. 24 SEMIANNUAL REPORT TO CONGRESS Primarily, HUD (1) lacked adequate controls over its financial reporting preparation process, (2) inadequately accounted for assets and liabilities in accordance with GAAP, (3) delayed completion of significant reconciliations, (4) did not account for the Office of Community Planning and Development’s formula grant programs’ commitments and disbursements in accordance with GAAP, and (5) lacked adequate financial management systems to ensure accurate and reliable financial reporting. OIG provided additional details on 11 material weaknesses, 7 significant deficiencies, and 5 instances of noncompliance with applicable financial management laws and regulations. Details of the results of the audit of HUD’s component entities, FHA and Ginnie Mae, can be found in separate audit reports. OIG recommended that HUD (1) properly account for all financial transactions in accordance with GAAP, (2) improve internal controls over the financial reporting process, (3) transition nearly $168.3 million in excess funding from public housing agencies to HUD-held reserves, and (4) deobligate nearly $332.4 million in invalid or inactive obligations. Additionally, OIG made recommendations to FHA and Ginnie Mae to improve and strengthen internal controls over financial reporting and governance of financial operations. (Audit Reports: 2017-FO-0003 and 2017- FO-0005) AUDIT OF THE FEDERAL HOUSING ADMINISTRATION’S FINANCIAL STATEMENTS FOR FISCAL YEARS 2016 AND 2015 In accordance with the Chief Financial Officers Act of 1990 (Public Law 101-576), as amended, HUD OIG is required to audit the financial statements of FHA annually. The scope of the audit included FHA’s fiscal years 2016 and 2015 financial statements, which are composed of the balance sheets and the related statements of net cost and changes in net position and the combined statements of budgetary resources for the years then ended, and the related notes to the financial statements. This report presented the results of OIG’s audit of FHA’s fiscal years 2016 and 2015 financial statements, including its report on FHA’s internal controls and a test of compliance with selected provisions of laws and regulations that apply to FHA. In OIG’s opinion, except for the effects of FHA’s general counsel’s refusal to sign off on certain matters included in the management representation letter concerning all known actual or possible FHA litigations, claims, and assessments, FHA’s fiscal years 2016 and 2015 financial statements were presented fairly, in all material respects, in accordance with GAAP. The audit disclosed two material weaknesses, three significant deficiencies in internal controls, and one instance of noncompliance with applicable laws and regulations. OIG’s audit recommendations were directed toward improving and strengthening FHA’s internal controls over financial reporting. (Audit Report: 2017-FO-0002) AUDIT OF THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION’S FISCAL YEARS 2016 AND 2015 FINANCIAL STATEMENTS HUD OIG audited Ginnie Mae’s fiscal years 2016 and 2015 (restated) financial statements, including reporting on Ginnie Mae’s internal control and test of compliance with selected provisions of laws and regulations applicable to Ginnie Mae. 25 SEMIANNUAL REPORT TO CONGRESS For the third consecutive year, in fiscal year 2016, OIG was unable to obtain sufficient, appropriate evidence to express an opinion on the fairness of more than $4.2 billion (net of allowance) in nonpooled loan assets from Ginnie Mae’s defaulted issuers’ portfolio as of September 30, 2016. Ginnie Mae also continued to improperly account for FHA reimbursable costs as an expense instead of capitalizing them. The combination of these unresolved issues for a number of years was both material and pervasive because it impacted multiple financial statement line items across all of Ginnie Mae’s basic financial statements. As a result of the scope limitation in OIG’s audit work and the effects of material weaknesses in internal controls, OIG was not able to obtain sufficient and appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s fiscal years 2016 and 2015 (restated) statements. OIG identified four material weaknesses, one significant deficiency, and one reportable noncompliance with selected provisions of laws and regulations. OIG’s audit recommendations were directed toward improving and strengthening Ginnie Mae’s governance of its financial operations. (Audit Report: 2017-FO-0001) REVIEW OF CHIEF PROCUREMENT OFFICER’S PROCUREMENT OF MAJOR SERVICE CONTRACTS HUD OIG audited HUD’s procurement of major service contracts to determine whether HUD had adequate procedures in place to plan and monitor major service contracts to prevent waste and abuse. HUD did not always support that Federal acquisition requirements were met when planning and monitoring major service contracts. A review of 10 contracts found violations of HUD procurement policies for specific contracts or agreements, resulting in unreasonable and unnecessary costs of more than $21.3 million, more than $9.6 million in funds to be put to better use, and ineligible costs of nearly $162,000. OIG recommended that HUD (1) provide adequate documentation to support that more than $21.3 million in obligated funds was spent for reasonable and necessary costs; (2) strengthen and implement acquisition controls to ensure that proper cost and price documentation is obtained, adequate monitoring is conducted, adequate market research is conducted, contractors are evaluated to assess their capability to perform the work, and required contract documentation is maintained in the file to ensure that more than $9.6 million will not be spent for unreasonable and unnecessary costs; and (3) seek reimbursement of nearly $162,000 in ineligible funds disbursed for equipment and support services not specified in a scanning services contract. (Audit Report: 2017-BO-0001) ATTESTATION REVIEW OF HUD’S DATA ACT IMPLEMENTATION EFFORTS The Digital Accountability and Transparency Act of 2014 (DATA Act) and implementation guidance provided in Office of Management and Budget Memorandum M-15-12 mandate that Federal agencies report their financial, budgetary, and programmatic information to the USASpending.gov website by the statutory May 2017 deadline. HUD OIG reviewed HUD’s compliance with implementation efforts as of December 16, 2016. It assessed whether HUD completed steps 5-8 and reassessed outstanding issues related to steps 3 and 4 of the U.S. Department of the Treasury’s DATA Act Playbook, which provides guidance for reporting agencies. OIG concluded that HUD had begun steps to implement the DATA Act. However, it remained not on track to provide complete departmentwide, comprehensive reporting by the statutory May 2017 deadline. HUD continued to be unable to show that it had 26 SEMIANNUAL REPORT TO CONGRESS completed most required Playbook steps for its contract, grant, and subsidy programs. Additionally, HUD would not be able to report most of its required data files for its FHA and Ginnie Mae components before the reporting deadline. OIG’s recommendations were intended to ensure that HUD becomes compliant with the DATA Act by (1) allocating resources for system updates, (2) resolving errors and data quality issues that the agency identified during implementation, (3) designating official points of contact for FHA and Ginnie Mae and completing implementation plans, and (4) completing data mapping. (Audit Memorandum: 2017-FO-0801) AUDIT OF HUD’S TRANSITION TO FEDERAL SHARED SERVICES HUD OIG audited HUD’s computing environment 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 audit objective was to assess the effectiveness of the controls over the New Core Interface Solution (NCIS) and PRISM™ and the impact of the implementation of release 3 of phase 1 of the New Core Project on the preparation of HUD’s financial statements. Since 2003, HUD had spent more than $131 million on two projects to replace its core financial system. The latest project, the New Core Project, provided for a transition to a Federal shared service provider. HUD ended the project and its transition to the Federal shared service provider before completion in April 2016 after spending more than $96.3 million. Although the service provider maintained the system of record for HUD fiscal year 2016 funds, the transition did not significantly improve the handling of HUD’s financial management transactions. A year after the transition, HUD had inaccurate data resulting from the conversions and continued to execute 97 percent of its programmatic transactions in its legacy applications. In addition, HUD did not decommission all of the applications it wanted to, including its core financial system, nor did it achieve the planned cost savings. OIG recommended that HUD complete the actions necessary to address the procurement data conversion errors, classify NCIS as mission critical, and include it in HUD’s disaster recovery exercises. OIG also recommended that the New Core staff from the Office of the Chief Financial Officer work with the Office of the Chief Information Officer on the projects HUD created to address functionality that was not completed in the New Core implementation. (Audit Report: 2017-DP-0001) AUDIT OF HUD’S FHA SINGLE FAMILY PREMIUMS COLLECTION SUBSYSTEM HUD OIG audited the general and application controls over FHA’s Single Family Premiums Collection Subsystem – Periodic (SFPCS-P) and Single Family Acquired Asset Management System (SAMS) 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 audit objective was to review the general and application controls over SFPCS-P and SAMS for compliance with HUD information technology (IT) policies and Federal information system security and financial management requirements. 27 SEMIANNUAL REPORT TO CONGRESS 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 listed on the report distribution list. (Audit Report: 2017-DP- 0002) EVALUATION TOPIC BRIEF: EVALUATION MONITORING OF NONBANK ISSUERS PRESENTING CHALLENGES FOR GINNIE MAE Upon his recent departure from Ginnie Mae, its president expressed concerns with regard to the size and complexity of the Ginnie Mae portfolio. He was specifically concerned with the role nonbanks are playing in the mortgage industry. Separately, Ginnie Mae contracted with a private firm to assess its staffing relative to changes in the mortgage industry. The private firm concluded that Ginnie Mae staffing had not kept pace with the changes. HUD OIG developed a topic brief to highlight issues with Ginnie Mae, its staffing, and the role of nonbanks in the mortgage industry. The topic brief highlights OIG’s past, present, and future efforts related to the monitoring of nonbanks. Ginnie Mae had made guarantees on loans with remaining principal balances of $1.7 trillion as of early calendar year 2017. This total is expected to exceed $2 trillion shortly. In fiscal year 2016, nonbank issuers accounted for 73 percent of Ginnie Mae’s single-family mortgage-backed securities issuance volume for the year, up from 18 percent in fiscal year 2010. Although the growth of nonbanks has diversified the pool of issuers, Ginnie Mae must now oversee significantly more issues than in the past. In addition, Ginnie Mae may not rely on bank regulators to ensure that a majority of its servicers can meet their financial obligations. FEDERAL AUDIT EXECUTIVE COUNCIL IT SUBCOMMITTEE FISMA MATURITY MODEL DEVELOPMENT HUD OIG continued its collaboration with the Federal Audit Executive Council (FAEC) IT Subcommittee by participating in a project that developed maturity models for the remaining Federal Information Security Modernization Act (FISMA) Inspector General (IG) metrics. The maturity models allow the Office of Management and Budget to measure and report Federal agency cybersecurity more consistently. The maturity models will replace the IG FISMA metrics during the fiscal year 2017 FISMA assessments of Federal agencies. HUD OIG was one of only a handful of IG offices to volunteer to help develop these models. MANAGEMENT ASSISTANCE REVIEW 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 OIG management to recommend improvements in management and operations. 28 SEMIANNUAL REPORT TO CONGRESS During this 6-month period, OIG reported on the following: • the Information Systems Audit Division, Washington, DC, audit activities (Evaluation Report: 2016- OE-MAR6); • the Region 9, Los Angeles, CA, audit and investigation activities (Evaluation Report: 2016-OE- MAR7); • the fiscal year 2016 summary of reported results (Evaluation Report: 2017-OE-MAR1); • the 3-year recurring issues for the Office of Audit, ending fiscal year 2016 (Evaluation Report: 2017- OE-MAR2); and • the 3-year recurring issues for the Office of Investigation, ending fiscal year 2016 (Evaluation Report: 2017-OE-MAR3). 29 SEMIANNUAL REPORT TO CONGRESS CHAPTER 8 – 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 partnerships with other enforcement groups, result in civil outcomes that are meant to help HUD recover from unwarranted damages sustained due to fraud. Some of the highlights from this semiannual period, resulting from these joint civil fraud efforts, are noted below. Strategic Initiative 1: Contribute to the reduction of fraud in single-family insurance programs Program results Recoveries and receivables to HUD $54,754,576 programs or HUD program participants Recoveries and receivables for other entities $12,869,422 Recommendations that funds be put to $0 better use Civil actions 4 SINGLE FAMILY HUD OIG assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, Eastern District of Michigan, in the civil investigation of United Shore Financial Services, LLC. United Shore is a Federal Housing Administration (FHA)-approved mortgage lender with its principal place of business located in Troy, MI. United Shore became an FHA-approved direct endorsement lender in March 1988. As a direct endorsement lender, United Shore 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 United Shore, 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 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. 30 SEMIANNUAL REPORT TO CONGRESS On December 28, 2016, United Shore entered into a settlement agreement with the Federal Government to pay $48 million to avoid lengthy litigation of certain civil claims the Government stated that it had against United Shore. As part of the settlement, United Shore agreed that it engaged in certain conduct in connection with its origination, underwriting, quality control, and endorsement of single-family residential mortgage loans insured by FHA. As a result of United Shore’s conduct, HUD insured loans approved by United Shore that were not eligible for FHA mortgage insurance under the direct endorsement program and that HUD would not otherwise have insured. (Audit Memorandum: 2017-CF-1803; Joint Civil Fraud Division) HUD OIG, in coordination with the U.S. Department of Justice’s Civil Division and the U.S. Attorney’s Office for the Northern District of Illinois’ Eastern Division, conducted a joint review of the former president and founder of MDR Mortgage Corporation in Palatine, IL. MDR Mortgage provided annual verifications to HUD in 2006, 2007, and 2008, certifying that none of its principals, owners, officers, directors, or employees were involved in proceedings that could result or had resulted in criminal conviction, debarment, suspension, or civil monetary penalty by a Federal, State, or local government. However, on April 7, 2005, the former president and founder of MDR Mortgage was indicted in the U.S. District Court for the Northern District of Illinois, Eastern Division. This indictment was not disclosed in the annual verifications. The U.S. Government later identified 237 loans that MDR Mortgage processed between January 2006 and August 2008 that had defaulted and resulted in claims paid by FHA. The U.S. District Court for the Northern District of Illinois found the former president and founder liable under the False Claims Act and Financial Institutions Reform, Recovery, and Enforcement Act for loans insured from 2006 through August 7, 2008, the period in which MDR Mortgage operated using the false verifications. On November 23, 2016, a judgment of more than $10 million was entered against the former president and founder of MDR Mortgage in favor of the U.S. Government. Of the more than $10 million judgment, HUD’s loss totaled more than $3.4 million. (Audit Memorandum: 2017-CH-1801; Office of Audit Region 5 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 District of New Jersey in a civil investigation of Security National Mortgage Company. Security National is an FHA- approved mortgage lender with its principal place of business located in Salt Lake City, UT. On September 22, 2016, Security National entered into a settlement agreement with the Federal Government to pay $4.25 million to avoid lengthy litigation. As part of the settlement, Security National agreed that for 100 FHA- insured loans, it engaged in certain conduct in connection with its origination and underwriting of the loans. The settlement was neither an admission of liability by Security National nor a concession by the United States that its claims were not well founded. As a result of Security National’s conduct, HUD insured loans approved by Security National that were not eligible for FHA mortgage insurance and that HUD would not otherwise have insured. HUD incurred substantial losses when it paid insurance claims on the loans covered by the settlement agreement. (Audit Memorandum: 2017-CF- 1802; Joint Civil Fraud Division and Office of Investigation Regions 4, 5, and 7/8/10) 31 SEMIANNUAL REPORT TO CONGRESS 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 Primary Residential Mortgage, Inc. Primary has its principal place of business in Salt Lake City, UT. Primary became an FHA-approved direct endorsement lender on October 15, 1998. The direct endorsement lender program authorizes private-sector mortgage lenders to approve mortgage loans for FHA insurance. As a result of Primary’s conduct, HUD insured loans approved by Primary that were not eligible for FHA mortgage insurance under the direct endorsement program and that HUD would not otherwise have insured. On September 30, 2016, Primary entered into a settlement agreement with the Federal Government to pay $5 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation. Primary agreed that for 100 FHA-insured loans, it failed to follow all HUD requirements in connection with its origination, underwriting, and endorsement of the loans. The settlement was neither an admission of liability by Primary nor a concession by the United States that its claims were not well founded. (Audit Memorandum: 2017-CF-1801; Joint Civil Fraud Division and Office of Investigation Regions 4 and 7/8/10) 32 SEMIANNUAL REPORT TO CONGRESS CHAPTER 9 – LEGISLATION, REGULATIONS, AND OTHER DIRECTIVES Reviewing and making recommendations on legislation, regulations, and policy issues is a critical part of the Office of Inspector General’s (OIG) responsibilities under the Inspector General Act. During this 6-month reporting period, OIG has committed more than 588 hours to reviewing 151 issuances. The draft directives consisted of 93 notices, 18 mortgagee letters, and 40 other directives. OIG provided comments on 34 (or 23 percent) of the issuances, and nonconcurred on 7 but lifted 2. Of the 40 other directives, OIG reviewed 9 final rules. OIG had no position on the 9 rules. A summary of selected reviews for this 6-month period follows. Notices, Policy Issuances, and Final Rules SINGLE-FAMILY HOUSING Loan review system – OIG reviewed a mortgagee letter and associated Handbook 4000.1 update announcing the implementation of a new loan review system. This review system will be used to manage Title II single-family loan reviews; monitoring reviews; and mortgagee self-reporting of fraud, misrepresentation, and other material findings. The review system will incorporate the Single Family Housing Loan Quality Assessment Methodology (defect taxonomy). OIG’s audit of HUD’s oversight of the directives process identified the defect taxonomy as an item for which HUD did not complete a full clearance review. Specifically, two of the six required reviewing offices did not provide comments, and the item was put into the clearance process after it was posted for public view. Although OIG did not have issues with the specific mortgagee letter and corresponding handbook update announcing the new loan review system, it commented that its position did not supersede or impact open OIG recommendations pertaining to the defect taxonomy. Mortgagee letter 2017-08 was issued March 23, 2017. The new loan review system will be implemented May 15, 2017. PUBLIC AND INDIAN HOUSING Operations notice for the expansion of the Moving to Work demonstration program solicitation of comment – On January 23, 2017, HUD published a notice soliciting comments. The operations notice establishes requirements for the implementation and continued operations of the Moving to Work (MTW) demonstration program under the 2016 MTW Expansion Statute. HUD seeks public comment on all aspects of the operations notice as well as on the topic of regionalization in the MTW demonstration. The 2016 MTW Expansion Statute authorizes HUD to expand the MTW demonstration program from 39 public housing agencies (PHA) to an additional 100 PHAs over 7 years. The PHAs will be added in groups (cohorts) that will be tasked to implement one specific policy change. The operations notice describes a new framework for the MTW demonstration that streamlines and simplifies HUD’s oversight of participating PHAs while providing for rigorous evaluation of each specific policy change by cohort. A key feature of the new framework is that HUD will grant a set of general waivers to all MTW agencies when they are designated. In addition, HUD seeks to reduce the data collection and reporting requirements for PHAs under the new framework, focusing on financial data, basic program monitoring and performance assessment, and evaluation of the specific policy changes to be tested through each cohort. Rental Assistance Demonstration: revised program notice – On January 19, 2017, HUD published a notice announcing further revisions to the Rental Assistance Demonstration program (RAD) and soliciting public comment on changes to some of the selection and eligibility criteria for conversions of public housing under the first component. The changes subject to notice and comment are (1) consolidating the selection priority categories for 33 SEMIANNUAL REPORT TO CONGRESS new applications into two buckets – high investment applications and all other applications; (2) allowing PHAs to submit a simple letter of interest, rather than an application, when a waiting list has formed – a letter of interest would serve to reserve a project or portfolio’s position on the waiting list subject to future submission of a RAD application; and (3) making eligible an entire contiguous HOPE VI project that was developed in phases as long as the earliest phase is more than 10 years old. MULTIFAMILY HOUSING Improving previous participation reviews - On October 14, 2016, HUD published a final rule, FR-5850-F-04, which revises its regulations for reviewing the previous participation in Federal programs of certain participants seeking to take part in multifamily housing and healthcare programs. The rule clarifies and simplifies 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 is not only to bring greater certainty and clarity to the process, but also greater flexibility, avoiding a one- size-fits-all approach. Policy for amended and restated use agreement – On October 28, 2016, HUD published a housing notice, H 2016- 16, which clarifies the circumstances under which a Low-Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA) use agreement may be amended and restated, the amendments that may be allowed, and the conditions that must be met in the proposed preservation transaction to be considered for approval. The notice also provides implementation guidance for the recent changes to LIHPRHA that were made when the Fixing America’s Surface Transportation Act, Public Law 114-94, was enacted in December of 2015. These changes will allow unlimited distributions of surplus cash and the release of all accumulated residual receipts to an owner upon request after HUD has determined that the statutory criteria have been met. Establishing a more effective fair market rent system – On November 16, 2016, HUD published a final rule, FR- 5855-F-03, which applies the use of small area fair market rents (FMR) in the administration of the Housing Choice Voucher program for certain metropolitan areas. This final rule provides for the use of small area FMRs, in place of the 50th percentile rent (the currently codified regulations), to address high levels of voucher concentration in certain communities. The use of small area FMRs is expected to give Housing Choice Voucher program tenants access to areas of high opportunity and lower poverty areas by providing a subsidy that is adequate to cover rents in those areas, thereby reducing the number of program families that reside in areas of high poverty concentration. Narrowing the digital divide through installation of broadband infrastructure – On December 20, 2016, HUD published a final rule, FR-5890-F-02, which requires installation of broadband infrastructure at the time of new construction or substantial rehabilitation of multifamily rental housing that is funded or supported by HUD, the point at which such installation is generally easier and less costly than when undertaken as a stand-alone effort with exceptions. Installing a unit-based broadband infrastructure in multifamily rental housing will provide a platform for individuals and families residing in such housing to participate in the digital economy and increase their access to economic opportunities. HUD approval of requests for transfers of multifamily housing project-based rental assistance, HUD-held or insured debt, and income-based use restrictions – On January 19, 2017, HUD published a notice, FR-5967-N-01, which establishes the terms and conditions by which HUD will approve a request for the transfer of project-based rental assistance, debt held or insured by the HUD Secretary, and statutorily required income-based use restrictions from one multifamily housing project to another (or among several such projects). The 2016 appropriations act gives the Secretary the authority to approve transfer requests through 2017. 34 SEMIANNUAL REPORT TO CONGRESS COMMUNITY PLANNING AND DEVELOPMENT Effective November 3, 2016, HUD will begin collecting a fee from borrowers of loans guaranteed under HUD’s Section 108 Loan Guarantee Program to offset the credit subsidy costs. The fee was necessitated by The Consolidated and Further Continuing Appropriations Act, 2015, and The Continuing Appropriations Act, 2016. On November 21, 2016, HUD published a notice allocating $500 million in Community Development Block Grant Disaster Recovery (CDBG-DR) funds appropriated by the Continuing Appropriations Act, 2017. The funding was to assist long-term recovery in Louisiana, Texas, and West Virginia. The notice also described applicable waivers and alternative requirements, relevant statutory provisions for grants provided under the notice, the grant award process, criteria for plan approval, and eligible disaster recovery activities. On December 2, 2016, HUD published an interim final rule, which changed the method by which HUD complied with the statutory 24-month commitment requirement from a cumulative method to a grant-specific method. The rule also established a method of administering program income that prevents participating jurisdictions from losing appropriated funds when they spend program income. On January 17, 2017, HUD granted a waiver to allow the Lower Manhattan Development Corporation (LMDC) to transfer property acquired and cleared with CDBG-DR funds in exchange for other property interests. HUD will allow LMDC to compensate its CDBG-DR for funds spent on acquisition and clearance of the properties through the long-term lease and purchase of other properties. On January 18, 2017, HUD allocated more than $1.8 billion in CDBG-DR funds appropriated by the Further Continuing and Security Assistance Appropriations Act, 2017, for assisting long-term recovery in Florida, Louisiana, North Carolina, South Carolina, Texas, and West Virginia. The funds are to be spent for disaster relief, long-term recovery, restoration of infrastructure and housing, and economic revitalization in the most impacted and distressed areas resulting from a major disaster declared in 2016 and occurring before December 10, 2016. 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 website, 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 one single-family fraud alert and three Office of Community Planning and Development (CPD) industry advisories, which are summarized below. Appraiser Identity Theft – OIG uncovered a series of cases of appraiser identity theft. The schemes varied but resulted from someone using the State certification number of a Federal Housing Administration (FHA) roster appraiser. The FHA roster appraisers were unaware of the misuse until it came to light, usually by accident. Implementing the Five Key Internal Controls – Internal controls are processes put into place by management to help an organization operate efficiently and effectively to achieve its objectives. Managers often think of internal 35 SEMIANNUAL REPORT TO CONGRESS controls as the purview and responsibility of accountants and auditors. The fact is that management at all levels of an organization is responsible for ensuring that internal controls are set up, followed, and reviewed regularly. Documenting the Life Cycle of a CPD Grant – The purpose of this bulletin is to make grantees and subrecipients aware of the impact that insufficient documentation can have on their grant programs and offer guidance on how to avoid these findings through the life cycle of a CPD grant. Key Components of Financial Management for CPD Grants – Financial management is the systematic application of procedures, forms, rules of conduct, and standards. For a grantee or subrecipient in receipt of Federal funds, its financial management practices must comply with the cost principles established by the Office of Management and Budget. This bulletin is intended to identify components of a sound financial management system and offer guidance on avoiding some of the common challenges grantees face when managing Federal funds. 36 SEMIANNUAL REPORT TO CONGRESS CHAPTER 10 – AUDIT RESOLUTION In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing and Urban Development (HUD) management agree upon needed actions and timeframes for resolving audit recommendations. Through this process, OIG strives to achieve measurable improvements in HUD programs and operations. The overall responsibility for ensuring that the agreed-upon changes are implemented rests with HUD managers. This chapter describes 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 provides a status report on HUD’s implementation of the Federal Financial Management Improvement Act of 1996 (FFMIA). In addition to this chapter on audit resolution, see appendix 3, table B, “Significant Audit Reports for Which Final Action Had Not Been Completed Within 12 Months After the Date of the Inspector General’s Report.” AUDIT REPORTS ISSUED BEFORE START OF PERIOD WITH NO MANAGEMENT DECISION AS OF MARCH 31, 2017 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 for 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 stated that in coordination with the Office of the Chief Information Officer, plans were being developed to address the recommendation. However, OIG had not been able to confirm HUD’s plans, and a new proposal had not been made as of March 31, 2017. (Audit Report: 2014-FO-0003) 37 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 the Chief Financial Officer (OCFO) to work with PIH and the Office of Multifamily Housing Programs to ensure sufficient and accurate IPERA reporting in its agency financial report (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 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 had not heard back from OCFO on this matter until a revised management decision was submitted to OIG on March 30, 2017. OIG is reviewing it at the time of this report. OCFO submitted a management decision for the other recommendation on March 31, 2016. However, OIG disagrees with this management decision because OIG believes that HUD’s decision gives HUD the option to 38 SEMIANNUAL REPORT TO CONGRESS 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. OIG had not heard back from OCFO on this matter until a revised management decision was submitted to OIG on March 30, 2017. OIG is reviewing it at the time of this report. (Audit Report: 2014-FO-0004) 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 in place to monitor indemnification agreements and recover losses on FHA single-family loans. HUD did not always bill lenders for FHA single-family loans that had an indemnification agreement and a loss to HUD. Specifically, it did not bill lenders for any loans that were part of the Accelerated Claims Disposition (ACD) program or the Claims Without Conveyance of Title (CWCOT) program or loans that went into default before the indemnification agreement expired but were not in default on the expiration date. There were a total of 486 loans from January 2004 to February 2014 that had enforceable indemnification agreements and losses to HUD but were not billed. This condition occurred because HUD’s Financial Operations Center was not able to determine loss amounts for loans that were part of the ACD program, was not aware of the CWCOT program, and considered the final default date for billing only. As a result, HUD did not attempt to recover a loss of $37.1 million for 486 loans that had enforceable indemnification agreements. In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that were streamline refinanced. As a result, HUD incurred losses of more than $373,000 for 5 loans, and 16 loans had a potential loss to HUD of approximately $1 million. The remaining 43 loans were either terminated or did not go into delinquency before the indemnification agreement expired, or the agreement did not state that it would extend to loans that were streamline refinanced. OIG rejected three management decisions proposed by the Offices of Single Family Housing and Finance and Budget because they did not follow the plain language explicitly stated in signed indemnification agreements. The Offices of Single Family Housing and Finance and Budget disagree with OIG’s determination that HUD should have billed lenders for FHA loans that either were in default or went into default during the indemnification agreement period. OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on January 8, 2015. OIG met with the HUD Office of General Counsel (OGC) and the Offices of Housing, Single Family Housing, and Finance and Budget on January 30, 2015. The meeting ended in disagreement; however, HUD OGC and the OIG Office of Legal Counsel continued discussions. Single Family Housing received two legal opinions from HUD OGC, dated January 26, 2015, and February 24, 2015. 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. 39 SEMIANNUAL REPORT TO CONGRESS 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 HUD OGC, Single Family Housing, and Finance and Budget regarding the recommendations in question but has not reached agreeable management decisions. On March 31, 2015, OIG referred the recommendations to the Deputy Secretary for a decision and is awaiting that decision. (Audit Report: 2014-LA-0005) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS 2014 AND 2013 FINANCIAL STATEMENTS AUDIT, ISSUE DATE: FEBRUARY 27, 2015 HUD OIG audited the Government National Mortgage Association’s (Ginnie Mae) fiscal year 2014 stand-alone financial statements. OIG conducted this audit in accordance with the Chief Financial Officers Act of 1990 as amended. OIG found a number of material weaknesses in Ginnie Mae’s financial reporting specifically related to the auditability of several material assets and reserve for loss liability account balances. The audit report had 20 audit recommendations to (1) correct the financial statement misstatements identified during the audit and (2) take steps to strengthen Ginnie Mae’s financial management operations. 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 for management decision on three of nine management decisions that OIG 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, but HUD’s corrective action plan to provide the oversight of Ginnie Mae lacked specificity. As of March 31, 2017, the Deputy Secretary had not provided a decision. (Audit Report: 2015-FO-0003) 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 the 14 audit recommendations, OIG did not reach consensus on the necessary corrective actions for 3. Ginnie Mae did not provide a response to OIG to explain Ginnie Mae’s refusal to implement one audit recommendation related to compliance with the 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 40 SEMIANNUAL REPORT TO CONGRESS 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, 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 to the Acting Deputy Secretary on March 6, 2017. As of March 31, 2017, OIG was awaiting a decision. (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 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. 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 (IHBG) grantees 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, IHBG grantees report their investments as “cash on hand” on OMB SF-425, in which the instructions state for cash on hand, “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 41 SEMIANNUAL REPORT TO CONGRESS advances on its financial statements based on accounting principles. On March 29, 2017, OCFO submitted a revised position; however, OCFO still does not agree. OIG is reviewing OCFO’s position. OIG also reported that HUD is not recognizing the accounts payable arising from shortages identified in PIH’s cash management reconciliations. PIH’s position is that it does not record the payables because the cash management reconciliations are completed 45-60 days after each quarter. By the time they are conducted, the PHA could have used either restricted or unrestricted net position balances or requested frontload funding to cover the shortages. OIG does not agree that this practice complies with GAAP because adjusting the prepaid expense after payables have been paid is not accrual accounting. PIH has not submitted a revised position on this matter. 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. It could not accept the proposed management decisions because (1) OCFO 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 they 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. A new proposal was submitted for one recommendation but was rejected because management did not understand the intention of the recommendation and did not include an action plan to document its processes as indicated in the recommendation. OIG has not received any new proposals for the remaining outstanding recommendations. 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 and, 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 Investment Partnerships 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 would 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 would implement a recapture plan after the results of the Antideficiency Act investigation even though the criteria for an Antideficiency Act violation and an improper payment differ. OIG does not agree that one is contingent upon the outcome of the other. In regard to 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 would be included. As of March 31, 2017, no new proposals were submitted. (Audit Report: 2016-FO-0003) 42 SEMIANNUAL REPORT TO CONGRESS 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. 12 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 had no assurance that the agreements were in HUD’s best interest, negotiated at a reasonable cost, or free from 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 the HUD 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 require outside organizations to support or repay nearly $50,000 in unsupported payments. 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: 1) Recommendation 1A - Establish a central point of review and authority for IPA agreements. 2) Recommendation 1F - Resubmit its revised IPA policy for departmental clearance. 3) Recommendation 2A - Establish points of responsibility for oversight and monitoring of personnel assigned to HUD under the IPA. 4) Recommendation 2C - Provide formal performance appraisals for IPA assignees. 5) Recommendation 2E - Establish controls to ensure IPA assignees receive required information technology security awareness training. 12 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 43 SEMIANNUAL REPORT TO CONGRESS 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. On September 30, 2016, OIG referred the recommendations to the Deputy Secretary. Although OIG continued to work with HUD to revise these management decisions, as of March 31, 2017, HUD had not submitted management decisions. (Audit Report: 2016-FW-0001) HUD DID NOT ALWAYS PROVIDE ADEQUATE OVERSIGHT OF PROPERTY ACQUISITION AND DISPOSITION ACTIVITIES, ISSUE DATE: JUNE 30, 2016 HUD OIG audited HUD’s Community Development Block Grant (CDBG) program’s property acquisition and disposition activities. OIG’s audit objective was to determine whether HUD had adequate oversight of property acquisition and disposition activities under its CDBG program. OIG found that 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. These conditions occurred because HUD did not have adequate controls to ensure that it enforced its monitoring findings and its grantee risk assessment procedures did not specifically address oversight of property acquisition and disposition activities. The OIG report included a recommendation (1C) that the Deputy Assistant Secretary for Grant Programs develop and implement controls to ensure that HUD expeditiously takes action to enforce grantee compliance with monitoring findings or pursue one of the established remedies for noncompliance. It also included a recommendation (1G) that the Deputy Assistant Secretary for Grant Programs direct 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. The Acting Deputy Assistant Secretary for Grant Programs proposed management decisions for both recommendations on December 22, 2016. However, after discussions with HUD, OIG rejected the proposed management decision for recommendation 1C because it did not directly address the development and implementation of controls as recommended. OIG also rejected the proposed management decision for recommendation 1G because it did not directly address directing 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 as recommended. For OIG to consider the proposed management decisions as acceptable alternative actions, OIG requested clarification and documentation from HUD. However, HUD had not provided the requested information and documentation by the end of the reporting period. OIG referred these recommendations to the Acting Assistant Secretary for Community Planning and Development on March 30, 2017. (Audit Report: 2016-PH-0001) 44 SEMIANNUAL REPORT TO CONGRESS INDEPENDENT ATTESTATION REVIEW: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, DATA ACT IMPLEMENTATION EFFORTS, ISSUE DATE: AUGUST 26, 2016 HUD OIG reviewed HUD’s efforts as of July 15, 2016, to comply with steps 1-4 of the U.S. Department of the Treasury’s DATA Act Playbook to determine whether HUD is positioned to meet the statutory May 2017 deadline. OIG concluded that HUD was not on track to provide complete, departmentwide reporting by the statutory deadline. OIG noted that the implementation issues were a result of HUD’s having three different senior accountable officials in a 6-month span and the conclusion that the DATA Act applied to FHA and Ginnie Mae was not made until approximately May 2016. These conditions delayed implementation efforts and precluded the reasonable expectation that the deadline would be met. In addition to the FHA and Ginnie Mae delays, as of July 15, 2016, HUD had not completed its inventory of data elements or the mapping of agency data to the DATA Act schema. HUD had also been unable to resolve data quality issues that have impeded the complete and accurate reporting of departmental contract, grant, loan, and other financial assistance awards in USAspending.gov. Among other issues, OIG recommended that HUD (1) identify the universe of all program obligations and disbursements, including the appropriations account level of obligations and outlays by program activity and by object class for compliant USASpending.gov reporting, and (2) execute a plan to resolve errors already identified in programmatic expenditure information transferred to USASpending.gov before full implementation and ensure that similar types of errors are identified in a timely manner and promptly resolved before implementation. In response to these recommendations, OCFO disagreed, stating that the challenges encountered by HUD were not unique to HUD and affected all agencies. Additionally, OCFO stated that it was implementing corrective actions related to current USASpending data and legacy system data quality issues, which included developing a comprehensive plan to lay the groundwork for assessing the completeness and accuracy of financial DATA Act submissions. OIG did not agree with OCFO’s proposed corrective actions because OIG believed it was necessary for HUD to develop procedures to reconcile the complete list of its currently funded appropriations and programs and identify the portfolio of funding identified that supports each program. Additionally, to fully address the recommendation, OCFO’s corrective action plan should include a reconciliation of (1) the activity of obligations and outlays with budget execution reports, (2) the fund balance with Treasury, and (3) its status of funds reports on the performance of such reconciliations or similar reconciliations, which are generated from the Oracle® U.S. Federal Financials. Further, although OCFO stated that HUD had a team working on corrective actions for data quality issues, OIG was not provided sufficient evidence and assurance on how the corrective actions would resolve data relatability issues identified during its review. OIG referred its disagreement to the Deputy Chief Financial Officer on February 3, 2017. As of March 31, 2017, OIG’s disagreement with OCFO had been referred to the Acting Deputy Secretary for decision. (Audit Memorandum: 2016-FO-0802) 45 SEMIANNUAL REPORT TO CONGRESS HUD DID NOT ALWAYS PROVIDE ACCURATE AND SUPPORTED CERTIFICATIONS OF STATE DISASTER GRANTEE PROCUREMENT PROCESSES, ISSUE DATE: SEPTEMBER 29, 2016 HUD OIG audited HUD’s controls over its certifications of State disaster recovery grantee procurement processes to determine whether HUD certifications of State disaster grantee procurement processes were accurate and supported. The OIG report found that 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. These conditions occurred because HUD did not have adequate controls over the certification process. Due to the weaknesses identified, HUD did not have assurance that State grantees had proficient procurement processes in place, and the Secretary’s certifications did not meet the intent of the Disaster Relief Appropriations Act of 2013. 13 The report included five recommendations for the Deputy Assistant Secretary for Grant Programs. The Acting Deputy Assistant Secretary for Grant Programs proposed corrective actions on January 11, 2017, and OIG rejected the proposed actions on January 27, 2017. OIG referred the recommendations to the General Deputy Assistant Secretary for Community Planning and Development on February 6, 2017. The General Deputy Assistant Secretary responded to the referral on February 21, 2017. For all of the recommendations, the General Deputy Assistant Secretary stated that OIG’s disagreement regarding the definition of a proficient procurement process as it relates to State disaster grantees and the meaning of “equivalent” as it relates to a State’s procurement policies and procedures being “equivalent to” or “aligned with” the Federal procurement standards was closed by the former Deputy Secretary in her decision regarding resolution of recommendations from OIG’s audit of New Jersey’s Sandy Integrated Recovery Operations and Management System. 14 In the January 10, 2017, decision, the Deputy Secretary wrote that the State certified that its procurement standards were equivalent to the standards at 24 CFR 85.36 and HUD had also certified to the proficiency of the State’s policies and procedures. The Deputy Secretary noted that two legal opinions from the Office of General Counsel concluded that the standards at 24 CFR 85.36 did not apply and, therefore, there was no legal basis for the finding and associated recommendations. The General Deputy Assistant Secretary asserted that the legal opinion for the New Jersey audit applied to this audit. Based on this information, the General Deputy Assistant Secretary believed it was appropriate to close all of the recommendations. OIG disagrees with the General Deputy Assistant Secretary’s request to close the recommendations in this audit based on the Deputy Secretary’s decision to resolve recommendations from OIG’s audit of New Jersey’s Sandy Integrated Recovery Operations and Management System. OIG has two main areas of disagreement with the decision: (1) OIG continues to assert that 24 CFR 85.36 was applicable to the State because its procedures needed to be equivalent to these Federal standards, and (2) OIG asserts that the applicability of 24 CFR 85.36 was not the only basis for the recommendations in the New Jersey audit report and believes that the decision failed to consider the other bases of the recommendations. Further, the Deputy Secretary’s decision did not address all of the issues with HUD’s process for certifying State disaster grantee procurement processes that were identified in the subject audit report. OIG referred these recommendations to the Acting Deputy Secretary on March 31, 2017. (Audit Report: 2016-PH-0005) 13 Public Law 113-2, dated January 29, 2013 14 2015-PH-1003, dated June 4, 2015 46 SEMIANNUAL REPORT TO CONGRESS THE STATE OF NEW JERSEY DID NOT DISBURSE DISASTER FUNDS TO ITS CONTRACTOR IN ACCORDANCE WITH HUD, FEDERAL, AND OTHER APPLICABLE REQUIREMENTS, ISSUE DATE: SEPTEMBER 30, 2016 HUD OIG audited the State of New Jersey’s CDBG-DR-funded Superstorm Sandy Housing Incentive Program contract. OIG conducted the audit because the contract involved more than $67.7 million in grant funds, was critical to the implementation of three of the State’s disaster programs, and was terminated less than 1 year into the 3-year contract term. OIG’s objective was 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. OIG found that the State 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. These conditions occurred because the State did not have adequate controls in place to administer its contract and monitor contract performance and was not fully aware of Federal procurement and cost principle requirements. As a result, HUD did not have assurance that the nearly $43.1 million disbursed under the contract was for costs that were eligible, supported, reasonable, and necessary. The report included five recommendations for the Deputy Assistant Secretary for Grant Programs to direct the State to provide documentation to show that disbursements complied with applicable requirements or repay any amounts that it could not support and one recommendation for the State to repay HUD for ineligible disbursements. The Acting Deputy Assistant Secretary for Grant Programs provided proposed management decisions for all of the recommendations on February 14, 2017. HUD agreed to take corrective action on the recommendations. However, HUD noted that the audit did not reflect applicable Federal procurement and cost principle requirements because States were not required to follow 24 CFR 85.36. HUD stated that if the State cannot show that the amounts associated with the recommendations complied with requirements, it will take one or more actions to prevent a continuation of the deficiencies, as outlined in 24 CFR 570.495. Further, if HUD takes one or more of the remedies in 24 CFR 570.495 and finds that the State does not make an appropriate or timely response, it will pursue one or more of the remedies found in 24 CFR 570.496. Although OIG agrees with HUD’s plan to review the documentation provided by the State, it does not agree with HUD’s planned remedies. The remedies in 24 CFR 570.495 and 24 CFR 570.496 include several options that do not require repayment from non-Federal funds. OIG rejected the proposed management decisions on March 27, 2017. To satisfy the recommendations, HUD needs to agree that if the State is unable to show that amounts associated with the recommendations complied with requirements, it must repay HUD from non-Federal funds any amount that it cannot support. OIG continues to assert that requirements at 24 CFR 85.36 were applicable to the State because its procurement procedures needed to be equivalent to these Federal standards. The State’s process was not equivalent to the requirements for a cost estimate and cost analysis in 24 CFR 85.36 because the State did not develop a measure for evaluating the reasonableness of contractors’ proposed costs or prices and for evaluating the separate elements that made up the contractors’ total costs. OIG referred these recommendations to the Acting Assistant Secretary for Community Planning and Development on March 31, 2017. (Audit Report: 2016-PH-1009) 47 SEMIANNUAL REPORT TO CONGRESS 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 one report in which there were significantly revised management decisions. 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 IPERA. OIG found that HUD did not comply with IPERA reporting requirements. In addition, PIH’s and Multifamily Housing’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. Therefore, OIG recommended that these program offices reassess their corrective actions and develop management-level reports in the Enterprise Income Verification system to allow management to efficiently and effectively identify processing entities that are responsible for improper payments. In 2014, PIH agreed with OIG’s recommendations, and OIG accepted its management decisions. However, as PIH tried to implement its action plans, it realized that to fully address these recommendations, it needed to make several business process improvements, completely redesign its income verification tool, and train PHAs and staff on its new processes. PIH submitted two new management decisions with milestones for completing these items, and OIG accepted these management decisions on March 14, 2017. While this has extended the date for completion, OIG believes that this approach is more holistic and will put PIH in a better place to efficiently and effectively reduce improper payments. (Audit Report: 2014-FO-0004) SIGNIFICANT MANAGEMENT DECISIONS WITH WHICH OIG DISAGREES During the reporting period, OIG had four reports in which it disagreed with the significant management decision. 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 48 SEMIANNUAL REPORT TO CONGRESS million in HOPE VI funds drawn in excess of need to cover project expenditures and (2) establish procedures to ensure that program funds are drawn in accordance with the grant agreement and regulations. The Office of Public Housing Investments (OPHI) disagreed with recommendations 1A, 1B, and 1C and believed the funds questioned by OIG were non-Federal cost savings, which could be better used for HOPE VI-eligible activities in the Center Court neighborhood. OPHI believed there was no authority to require non-Federal cost savings to be returned to 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 OGC regarding the proposed management decisions. On March 26, 2015, OIG referred the disagreement to the Acting Assistant Secretary for Public and Indian Housing as a legal determination had not been provided. On April 28, 2015, the Associate General Counsel, Office of Assisted Housing and Community Development, provided an opinion on the proposed management decisions and the related OIG concerns. This opinion concluded that approximately $1.5 million in questioned costs was program income under the definition of excess income and did not have to be repaid to the U.S. Treasury. The Counsel to the Inspector General reviewed the OGC opinion and agreed that the OIG recommendations should be retained, the questioned costs were not program income, and the interest earned on these funds was also not program income. Also, exhibit H of the annual contributions contract amendment would have required program income to have been spent before the 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 the disagreement on the management decisions to the Deputy Secretary for a decision as the departmental audit resolution official. On January 19, 2017, the Deputy Secretary provided a final decision on the management decisions and concluded that the Authority is not required to return the funds to the U.S. Treasury. The decision noted that the remaining funds are excess income (program income) and that the Authority could have amended its budget and revitalization plan to use these funds for additional betterments to the previous phases or for other purposes that benefit the project residents or the development. OIG closed the recommendations with disagreement. In its various responses to resolve the audit, HUD’s Office of Public Housing, OGC, and the Deputy Secretary redefined the funds as program income and ignored expenditure deadline requirements that would have required that the funds be repaid and remitted to the Treasury. OIG maintains that HUD’s characterization of the funds as program income is unsupported and that its actions have violated the intent of the HOPE VI grant agreement and 31 U.S.C. (United States Code) 1552. (Audit Report: 2014-NY-1007) 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 CDBG-DR-funded Sandy Integrated Recovery Operations and Management System. OIG determined that the State did not procure services and products for its system in 49 SEMIANNUAL REPORT TO CONGRESS accordance with Federal procurement and cost principle requirements. It did not do so because its procurement process was not equivalent to Federal procurement standards. Specifically, it did not prepare an independent cost estimate and analysis before awarding the system contract to the only responsive bidder. Further, it did not ensure that option years were awarded competitively and included provisions in its request for quotation that restricted competition. 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. As a result, the State did not show that the more than $38.5 million contract price and options years totaling nearly $21.7 million were fair and reasonable and that the more than $1.5 million it disbursed was adequately supported. The State began taking corrective actions during the audit and began providing documentation to resolve these deficiencies. HUD needed to assess the documentation to determine the appropriateness of all contract costs. The OIG report included five recommendations (1A, 1B, 1C, 1D, and 1E) for HUD’s Deputy Assistant Secretary for Grant Programs. 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 maintained that it had an ongoing disagreement with OIG regarding the applicability of the procurement regulations at 24 CFR 85.36 to State CDBG-DR grantees. HUD also disagreed with OIG concerning the interpretation of the March 5, 2013, Federal Register notice for CDBG-DR grants under Public Law 113-2, which provided that States must have fiscal and administrative requirements for spending and accounting for all funds. HUD contended that the requirements at 24 CFR 85.36, including the cost estimate requirements, do not apply to States unless a State elects to adopt the provisions at 24 CFR 85.36 as its procurement standards. Otherwise, the State must comply with regulations at 24 CFR 570.489 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 intent of the recommendations. On March 29, 2016, OIG referred the recommendations to the Deputy Secretary for a decision. On January 10, 2017, the Deputy Secretary provided a final decision. The Deputy Secretary stated that since the State did not adopt the procurement standards in 24 CFR 85.36 and instead followed its own procurement standards, the standards at 24 CFR 85.36 did not apply to the State and could not be used as a basis for OIG findings and recommendations. Because all of the recommendations cited 24 CFR 85.36 as their basis and these regulations were inapplicable to the State, the Deputy Secretary found that there was no basis for the OIG finding and recommendations 1A, 1B, 1C, and 1E. Therefore, these recommendations warranted no further action other than closing them out. OIG disagrees with the Deputy Secretary’s decision. OIG has two main areas of disagreement with the decision: (1) OIG continues to assert that 24 CFR 85.36 was applicable to the State because its procedures needed to be equivalent to these Federal standards based on its certification to HUD, and (2) OIG asserts that the applicability of 24 CFR 85.36 was not the only basis for the recommendations in the audit report and believes that the Deputy Secretary’s decision did not consider the other bases of the recommendations, such as regulations at 2 CFR Part 225 that address factors affecting the allowability of costs, including the need for costs to be reasonable and necessary, and the contract that required the contractor to include copies of at least three quotes when submitting invoices for payment of direct costs. To satisfy recommendations 1A, 1B, and 1C, HUD needed to assess whether the documentation the State provided and any additional documentation it provided after the audit were adequate to show that prices were fair and reasonable.. OIG closed the recommendations with disagreement but maintains that the standards at 24 CFR 85.36 applied to the State because its procedures needed to be equivalent to these Federal standards and the Deputy Secretary’s decision did not consider the other bases for the recommendations. (Audit Report: 2015-PH-1003) 50 SEMIANNUAL REPORT TO CONGRESS 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 rendered a decision on the NOVA audit in May 2016, that decision did not include loanDepot. OIG strongly disagreed with the Deputy Secretary’s decision on NOVA and noted its disagreement at that time and in the last Semiannual Report to Congress. However, the Deputy Secretary essentially reaffirmed HUD’s position when it rendered similar decisions on the loanDepot audits on January 19, 2017. The overarching issue of borrower-financed downpayment assistance is still in disagreement between HUD and OIG. 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, at the time of the audit, this was 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 did a second audit of loanDepot’s FHA-insured loans with Golden State Finance Authority downpayment assistance gifts, which again disclosed that loanDepot did not always comply with HUD requirements. This action 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. 51 SEMIANNUAL REPORT TO CONGRESS 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 disagrees with OIG’s conclusions that the downpayment assistance provided by housing finance agencies through premium pricing is not consistent with established law, guidance, and practice. 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 repeated that there are no restrictions on how a government entity may fund its downpayment assistance programs. It considers the downpayment assistance funding mechanisms to be permissible. These mechanisms include generating funds through capital market vehicles, which may result in a negotiated interest rate that is higher than a negotiated interest rate for mortgage loans without downpayment assistance. In response to OIG’s audit report 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. 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. 52 SEMIANNUAL REPORT TO CONGRESS 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. After many discussions and meetings with HUD and OIG officials, the Deputy Secretary rendered a decision on the NOVA audit 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. Consequently, the Deputy Secretary directed the recommendations to be closed with no further action except for one recommendation, which directed FHA to review and, as appropriate, update its guidance, including any internal control checklists, to include FHA rules and regulations governing downpayment assistance, premium interest rates, and allowable fees. OIG, however, noted its strong disagreement with the Deputy Secretary’s decision and contended that it has a number of inaccuracies and relies heavily on HUD OGC’s legal opinion, which OIG believes is flawed. Despite OIG’s clear disagreement, the Deputy Secretary failed to reconsider HUD’s position and rendered a similar decision on the two loanDepot audits on January 19, 2017. 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. (Audit Reports: 2015-LA-1009 and 2015-LA-1010) FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996 In fiscal year 2016, OIG noted that HUD’s financial management system continued its noncompliance with the 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 different legacy financial systems and their requisite limitations. FFMIA requires OIG to report in its Semiannual Reports to Congress instances and reasons when an agency has not met the intermediate target dates established in its remediation plan required by FFMIA. Section 803(a) of FFMIA requires that each agency establish and maintain financial management systems that comply with (1) Federal financial management system requirements, (2) Federal accounting standards, and (3) the USSGL at the transaction level. 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). 53 SEMIANNUAL REPORT TO CONGRESS 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, OIG noted unresolved data conversion errors totaling more than $9 billion. Inaccurate reports and ineffective controls between HUD and FSSP systems through the New Core Interface System (NCIS) contributed to HUD’s 2016 FFMIA noncompliance. Following the implementation of release 3, HUD relied and will continue to rely on legacy applications (such as HUDCAPS) as the authoritative data source for program-related financial data. HUD delayed implementation of the NCIS automated reconciliation tool for the first 9 months of fiscal year 2016 and failed to conduct manual reconciliations, adding to the data quality 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 many 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. 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. The Office of Community Planning and Development (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 disbursements from fiscal year 2014 and prior-year grants. While CPD has made progress in addressing this issue for fiscal year 2015 grants and forward, funding constraints and complexities in removing the cumulative method of accounting to meet HOME program commitment rules have delayed completion of the IDIS remediation plan. The plan also includes additional adjustments to the system that are needed to ensure accurate accounting at the USSGL transaction level. To fully remediate this weakness, FIFO will need to be removed retroactively, and the system needs to be completely configured to support USSGL transaction-level accounting. OIG plans to assess the status of HUD’s IDIS remediation efforts during the course of the fiscal year 2017 audit. As of September 30, 2016, HUD reported that the Ginnie Mae Financial and Accounting System (GFAS) was not compliant with FFMIA. OIG 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. OIG issued a disclaimer of opinion on Ginnie Mae’s 2016 financial statements due to its continued inability to support nonpooled loan portfolio balances totaling $4.2 billion and $5.2 billion, net, as of September 30, 2016 and 2015, respectively. 15 OIG also noted that, despite progress, Ginnie Mae had not completely resolved deficiencies related to its recording of contract obligations. To remediate its FFMIA noncompliance, Ginnie Mae will need to address its loan and budgetary accounting weaknesses. 15 Audit of the Government National Mortgage Association’s Financial Statements for Fiscal Years 2016 and 2015 (Restated), Audit Report 2017-FO- 0001, November 14, 2016; https://www.hudoig.gov 54 SEMIANNUAL REPORT TO CONGRESS 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, there are material weaknesses stemming from a lack of systems and deficiencies related to manual accounting processes. For example, current material weaknesses include cash management processes implemented by PIH that do not comply with FFMIA requirements. 55 SEMIANNUAL REPORT TO CONGRESS CHAPTER 11 – WHISTLEBLOWER OMBUDSMAN PROGRAM Whistleblowers play a critical role in keeping our Government honest, efficient, and accountable. The U.S. Department 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. The HUD OIG 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 also retained on HUD OIG whistleblower and ethics websites. This training normally occurs during this semiannual reporting period but is provided with annual ethics training, which was conducted earlier in 2016 to offer guidance on the Hatch Act in an election year. In addition, whistleblower training is incorporated into HUD’s new employee training. HUD OIG’s Whistleblower Ombudsman also provided information on an individual basis to HUD and HUD OIG employees seeking to understand their rights and options as whistleblowers. 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. Although 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 (NDAA Program), which extended whistleblower protections to employees of Federal contractors, subcontractors, and grantees. In addition, if a grantee’s or contractor’s employee believes he or she has been retaliated against for whistleblowing, the employee may submit a complaint to OIG, and OIG will review and investigate those complaints. It is HUD OIG’s practice generally to refer HUD employees with whistleblower retaliation complaints to the Office of Special Counsel (OSC). HUD OIG does not track these matters unless OSC requests HUD OIG assistance in investigating a complaint. During this semiannual reporting period, HUD OIG did not investigate any whistleblower retaliation complaints by HUD employees. HUD OIG did receive a number of complaints under the NDAA Program. 56 SEMIANNUAL REPORT TO CONGRESS The table below provides further information on those complaints. Number of complaints received 50 Number of complainants asserting whistleblower 50 status 16 Complaints referred for investigation to the HUD 21 OIG Office of Investigation (OI) Complaint investigations opened by OI 21 Complaints declined by OI 0 Complaints currently under review by OI 15 Employee complaint investigations closed by OI 6 16 29 cases were referred to the hotline and determined to not have whistleblower status. Many complainants raise questions regarding treatment by housing authorities following alleging wrongdoing by the same housing authority. They define themselves as whistleblowers but are not employees of the housing authority. These complaints are referred to our hotline for appropriate referral and disposition. 57 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 111-203), section 989C, requires inspectors general to report the latest peer review results in their semiannual reports to Congress. The purpose in doing so is to enhance transparency within the government. Both the Office of Audit and Office of Investigation are required to undergo a peer review of their individual organizations every 3 years. The purpose of the review is to ensure that the work completed by the respective organizations meets the applicable requirements and standards. The following is a summary of the status of the latest round of peer reviews for the organization. PEER REVIEW CONDUCTED ON HUD OIG The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), received a grade of pass (the highest rating) on the peer review report issued by the Treasury Inspector General for Tax Administration on September 30, 2015. There were no recommendations included in the System Review Report. The report stated: In our opinion, the system of quality control for the audit organization of the HUD OIG in effect for the year ended March 31, 2015, has been suitably designed and complied with to provide the HUD OIG with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Audit organizations can receive a rating of pass, pass with deficiencies, or fail. The HUD OIG has received a peer review rating of pass. PEER REVIEW CONDUCTED BY HUD OIG ON USPS OIG HUD OIG conducted an external peer review of the United States Postal Service (USPS) OIG, Office of Audit, and issued a final report September 22, 2015. USPS OIG received a peer review rating of pass. A copy of the external quality control review report can be viewed at https://www.uspsoig.gov. 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. 58 SEMIANNUAL REPORT TO CONGRESS 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. 59 SEMIANNUAL REPORT TO CONGRESS APPENDIX 2 – AUDIT REPORTS ISSUED Internal Reports AUDIT REPORTS Chief Financial Officer Additional Details To Supplement Our Fiscal Years 2016 and 2015 (Restated) U.S. Department 2017-FO-0003 of Housing and Urban Development Financial Statement Audit, 11/15/2016. Better use: $500,689,142. 2017-FO-0004 Fiscal Years 2016 and 2015 (Restated) Consolidated Financial Statements Audit, 11/18/2016. HUD’s Fiscal Years 2016 and 2015 (Restated) Consolidated Financial Statements Audit 2017-FO-0005 (Reissued), 03/01/2017. Chief Procurement Officer HUD’s OCPO Did Not Always Comply With Acquisition Requirements When Planning and 2017-BO-0001 Monitoring Major Service Contracts, 03/22/2017. Questioned: $21,535,180. Better use: $9,645,864. Deputy Secretary HUD’s Transition to a Federal Shared Service Provider Failed To Meet Expectations, 2017-DP-0001 02/01/2017. Government National Mortgage Association Audit of Fiscal Years 2016 and 2015 (Restated) Financial Statements, 11/14/2016. Better use: 2017-FO-0001 $248,016,624. Housing HUD Needs To Improve Its Oversight of Funds Covered Under the Low-Income Housing 2017-CH-0001 Preservation and Resident Homeownership Act of 1990, 10/25/2016. Questioned: $341,230. Unsupported: $341,230. Better use: $219,372. 60 SEMIANNUAL REPORT TO CONGRESS Review of Information Systems Controls Over FHA’s Single Family Premiums Collection 2017-DP-0002 Subsystem – Periodic and the Single Family Acquired Asset Management System, 02/09/2017. Audit of the Federal Housing Administration’s Financial Statements for Fiscal Years 2016 and 2017-FO-0002 2015 (Restated), 11/14/2016. Questioned: $55,350,830. Unsupported: $55,350,830. Better use: $276,567,940. FHA Paid Claims for an Estimated 239,000 Properties That Servicers Did Not Foreclose Upon 2017-KC-0001 or Convey on Time, 10/14/2016. Better use: $2,238,721,464. HUD Did Not Ensure Compliance With Partial Payment of Claim Use Agreement Restrictions, 2017-LA-0001 10/27/2016. HUD Failed To Follow Departmental Clearance Protocols for FHA Programs, Policies, and 2017-LA-0002 Operations, 01/25/2017. HUD Failed To Adequately Oversee FHA-Insured Loans With Borrower-Financed 2017-LA-0003 Downpayment Assistance, 03/03/2017. Public and Indian Housing The U.S. Department of Housing and Urban Development Did Not Always Prevent Program 2017-KC-0002 Participants From Receiving Multiple Subsidies, 01/20/2017. Better use: $3,179,963. AUDIT-RELATED MEMORANDUMS 17 CHIEF FINANCIAL OFFICER Independent Attestation Review: U.S. Department of Housing and Urban Development, 2017-FO-0801 DATA Act Implementation Efforts, 03/02/2017. 17 The memorandum format is used to communicate the results of review not performed in accordance with generally accepted government audit 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. 61 SEMIANNUAL REPORT TO CONGRESS EXTERNAL REPORTS AUDIT REPORTS COMMUNITY PLANNING AND DEVELOPMENT The City of Tuscaloosa, AL, Administered Its CDBG Disaster Recovery Funds in Accordance 2017-AT-1001 With HUD Requirements, 01/18/2017. Shelby County, TN, Administered Its CDBG Disaster Recovery Program Funds for 2017-AT-1002 Infrastructure in Accordance With HUD Requirements, 01/18/2017. The State of Connecticut Did Not Always Comply With CDBG Disaster Recovery Assistance 2017-BO-1001 Requirements, 10/12/2016. Questioned: $16,053,062. Unsupported: $13,592,687. The City of Springfield, MA, Needs To Improve Its Compliance With Federal Regulations for 2017-BO-1002 Its CDBG Disaster Recovery Assistance Grant, 10/17/2016. Questioned: $1,448,663. Unsupported: $1,448,663. Better use: $472,246. The City of New York, NY, Implemented Policies That Did Not Always Ensure That CDBG Disaster Recovery Funds Were Disbursed in Accordance With Its Action Plan and Federal 2017-NY-1001 Requirements, 11/02/2016. Questioned: $5,544,284. Unsupported: $1,044,878. Better use: $1,415,466. The City of New York, NY, Lacked Adequate Controls To Ensure That the Use of CDBG-DR 2017-NY-1004 Funds Was Always Consistent With the Action Plan and Applicable Federal and State Requirements, 12/21/2016. Questioned: $18,274,054. Union County, NJ’S HOME Investment Partnerships Program Was Not Always Administered 2017-NY-1005 in Compliance With Program Requirements, 01/13/2017. Questioned: $5,057,726. Unsupported: $1,278,483. Better Use: $1,800,272. The City of Pittsburgh, PA, Did Not Always Administer Its CDBG Program in Accordance 2017-PH-1001 With HUD and Federal Requirements, 03/22/2017. Questioned: $4,732,441. Unsupported: $4,732,441. 62 SEMIANNUAL REPORT TO CONGRESS HOUSING The Puerto Rico Department of Housing, San Juan, PR, Did Not Properly Administer Its 2017-AT-1003 Multifamily Special Escrow Funds, 03/02/2017. Questioned: $4,609,004. Unsupported: $4,609,004. Better use: $7,984,429. Staffing Costs and Charges at Pine Grove Health Center, Pascoag, RI, Did Not Always Comply 2017-BO-1003 With Regulatory Requirements and Management Agreements, 01/24/2017. Questioned: $675,734. Unsupported: $353,420. Better use: $139,027. Village North Generally Verified Each Tenant’s Income, Social Security Number, and 2017-DE-1001 Citizenship Status in Accordance with HUD’s Rules and Regulations, 02/28/2017. Majestic Management, LLC, a Multifamily Housing Management Agent in St. Louis, MO, Did 2017-KC-1001 Not Always Comply With HUD’s Requirements When Disbursing Project Funds, 12/16/2016. Questioned: $1,218,206. Unsupported: $975,931. New Horizons, Kansas City, MO, Received Improper Section 8 Housing Assistance Payments, 2017-KC-1002 03/03/2017. Questioned: $887,642. Unsupported: $743,086. Seneca Mortgage Servicing LLC, Elma, NY, Generally Complied With HUD’s Loss Mitigation 2017-NY-1007 Program Requirements for Servicing Its Portfolio of FHA-Insured Mortgages, 02/17/2017. Questioned: $19,136. The Owner of Laurentian Hall Apartments, Pittsburgh, PA, Did Not Always Manage Its HUD- 2017-PH-1002 Mortgaged Project in Accordance With HUD Requirements, 03/24/2017. Questioned: $80,286. Unsupported: $71,689. Better use: $358,176. PUBLIC AND INDIAN HOUSING The Port Huron Housing Commission, Port Huron, MI, Did Not Properly Implement Asset 2017-CH-1001 Management, 01/24/2017. Questioned: $1,432,222. Unsupported: $1,432,222. The Lubbock Housing Authority, Lubbock, TX, Had Weaknesses in Managing Its Capital Fund 2017-FW-1001 Program Operations, 12/12/2016. Questioned: $38,232. Unsupported: $29,115. 63 SEMIANNUAL REPORT TO CONGRESS Fort Worth Housing Solutions, Fort Worth, TX, Generally Complied With HUD Regulations In 2017-FW-1002 Its Transactions With Its Related Entity, QuadCo Management Solutions, LLC, 12/21/2016. The Houston Housing Authority, Houston, TX, Needs To Improve Its Procurement and 2017-FW-1003 Financial Operations and Its Housing Choice Voucher Program Subsidy Determinations, 12/27/2016. Questioned: $3,212,757. Unsupported: $3,015,824. The Tarrytown Municipal Housing Authority, Tarrytown, NY, Did Not Always Comply With 2017-NY-1002 HUD’s Procurement, Administrative, and Program Requirements, 11/22/2016. Questioned: $474,571. Unsupported: $474,571. The Town of Amherst, NY, Did Not Ensure That Its Housing Choice Voucher Program Units 2017-NY-1003 Met Housing Quality Standards, 12/14/2016. Questioned: $118,060. Better use: $9,351,175. The New Rochelle Municipal Housing Authority, New Rochelle, NY, Did Not Always 2017-NY-1006 Administer Its Public Housing in Accordance With HUD’s Rules and Regulations, 01/31/2017. Questioned: $28,349. Unsupported: $13,329. The Irvington, NJ, Housing Authority Did Not Always Administer Its Public Housing Program 2017-NY-1008 in Accordance With Program Requirements, 3/10/2017. Questioned: $1,204,727. Unsupported: $1,109,487. AUDIT-RELATED MEMORANDUMS 18 GENERAL COUNSEL Final Civil Action: Primary Residential Mortgage, Inc., Settled Allegations of Failing To Comply 2017-CF-1801 With HUD’s Federal Housing Administration Loan Requirements, 01/19/2017. Questioned: $3,129,000. Security National Mortgage Company Settled Allegations of Failing To Comply With HUD’s 2017-CF-1802 Federal Housing Administration Loan Requirements, 03/02/2017. Questioned: $3,173,077. 18 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted government audit 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, an attestation engagement, or civil actions or settlements. 64 SEMIANNUAL REPORT TO CONGRESS United Shore Financial Services, LLC, Settled Allegations of Failing To Comply With HUD’s 2017-CF-1803 Federal Housing Administration Loan Requirements, 03/29/2017. Questioned: $45,000,000. Final Civil Action: Judgment Imposed on the Former President and Founder of MDR Mortgage 2017-CH-1801 Corporation Regarding Allegations of Failing To Comply With HUD’s Federal Housing Administration Requirements, 03/31/2017. Questioned: $3,452,499. Final Action Memorandum: Purchaser of HUD-Insured Single-Family Property Settled 2017-KC-1801 Allegations of Causing the Submission of a False Claim, 02/23/2017. Questioned: $5,000. Final Civil Action Borrower Settled Alleged Violations of Home Equity Conversion Mortgage 2017-PH-1801 Program, 01/06/2017. Questioned: $1,500. HOUSING Sons of Divine Providence Did Not Ensure That the Don Orione Home, East Boston, MA, 2017-BO-1801 Operated in Accordance With Its Regulatory Agreement, 10/13/2016. 65 SEMIANNUAL REPORT TO CONGRESS APPENDIX 3 – TABLES TABLE A AUDIT REPORTS ISSUED BEFORE START OF PERIOD WITH NO MANAGEMENT DECISION AT (03/31/2017) *Significant audit reports described in previous Semiannual Reports REASON FOR LACK OF MANAGEMENT REPORT NUMBER AND TITLE ISSUE DATE DECISION * 2014-FO-0003 Additional Details To Supplement Our Report On HUD’s Fiscal Years 2013 and 2012 See chapter 10, page 37 12/16/2013 (Restated) Financial Statements * 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the Improper Payments See chapter 10, page 38 04/15/2014 Elimination and Recovery Act of 2010 * 2014-LA-0005 HUD Did Not Always Recover FHA Single-Family Indemnification Losses and See chapter 10, page 39 08/08/2014 Ensure That Indemnification Agreements Were Extended * 2015-FO-0003 Audit of the Government National Mortgage Association’s Financial Statements for See chapter 10, page 40 02/27/2015 Fiscal Years 2014 and 2013 * 2016-FO-0001 Audit of Fiscal Years 2015 and See chapter 10, page 40 11/13/2015 2014 (Restated) Financial Statements * 2016-FO-0003 Additional Details To Supplement Our Fiscal Years 2015 and 2014 (Restated) U.S. See chapter 10, page 41 11/18/2015 Department of Housing and Urban Development Financial Statement Audit * 2016-FW-0001 HUD Did Not Effectively Negotiate, Execute, or Manage Its Agreements See chapter 10, page 43 03/30/2016 Under the Intergovernmental Personnel Act * 2016-PH-0001 HUD Did Not Always Provide Adequate Oversight of Property Acquisition and See chapter 10, page 44 06/30/2016 Disposition Activities * 2016-FO-0802 Independent Attestation Review: U.S. Department of Housing & Urban Development, See chapter 10, page 45 08/26/2016 DATA Act Implementation Efforts 66 SEMIANNUAL REPORT TO CONGRESS * 2016-PH-0005 HUD Did Not Always Provide Accurate and Supported Certifications of State See chapter 10, page 46 09/29/2016 Disaster Grantee Procurement Processes * 2016-PH-1009 The State of New Jersey Did Not Disburse Disaster Funds to Its Contractor in See chapter 10, page 47 09/30/2016 Accordance With HUD, Federal, and Other Applicable Requirements 67 SEMIANNUAL REPORT TO CONGRESS TABLE B SIGNIFICANT AUDIT REPORTS FOR WHICH FINAL ACTION HAD NOT BEEN COMPLETED WITHIN 12 MONTHS AFTER THE DATE OF THE INSPECTOR GENERAL’S REPORT REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION Corporacion para el Fomento Economico de la Ciudad Capital, San Juan, Puerto 2005-AT-1013 Rico, Did Not Administer Its Independent 09/15/2005 01/11/2006 Note 1 Capital Fund in Accordance with HUD Requirements. The Cathedral Foundation of Jacksonville, 2007-AT-1010 FL, Used More Than $2.65 Million in 08/14/2007 12/03/2007 04/10/2017 Project Funds for Questioned Costs 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 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 Note 2 Contract Regarding Nonprofit Development Activities, Terre Haute, IN 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 Mismanaged Its Operations, Whitesburg, 04/28/2010 08/26/2010 11/29/2035 KY Sasha Bruce Youthwork, Incorporated, 2010-PH-1008 Did Not Support More Than $1.9 Million 05/11/2010 11/03/2010 09/30/2017 in Expenditures, Washington, DC The DuPage Housing Authority Inappropriately Administered Its Section 8 2010-CH-1008 06/15/2010 10/08/2010 10/31/2017 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 68 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION 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 12/27/2010 04/26/2011 Note 1 Dream 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 10/31/2017 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 06/30/2017 Accordance With HUD Requirements, Buffalo, NY The City of Compton Did Not Administer 2011-LA-1016 Its HOME Program in Compliance With 08/18/2011 12/15/2011 08/31/2017 HOME Requirements, Compton, CA The Municipality of San Juan Did Not 2011-AT-1018 Properly Manage Its HOME Investment 09/28/2011 01/12/2012 Note 1 Partnerships Program, San Juan, PR The City of Cleveland Lacked Adequate Controls Over Its HOME Investment 2011-CH-1014 Partnerships Program-Funded Housing 09/29/2011 01/26/2012 Note 2 Trust Fund Program Home-Buyer Activities, Cleveland, OH 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 69 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION HUD Did Not Adequately Support the Reasonableness of the Fee-for-Service 2012-LA-0001 11/16/2011 03/27/2012 12/31/2017 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 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 2012-CH-1012 Housing Choice Voucher Program in 09/27/2012 01/07/2013 01/01/2023 Accordance With HUD’s and Its Own Requirements, Saginaw, MI The Flint Housing Commission Did Not Always Administer Its Grants in 2012-CH-1013 09/27/2012 01/24/2013 01/31/2018 Accordance With Recovery Act, HUD’s, and Its Own Requirements, Flint, MI Luzerne County Did Not Properly 2013-PH-1001 Evaluate, Underwrite, and Monitor a 10/31/2012 01/31/2013 Note 1 High-Risk Loan, Wilkes-Barre, PA Additional Details To Supplement Our 2013-FO-0003 Report on HUD’s Fiscal Years 2012 and 11/15/2012 05/15/2013 Note 2 2011 Financial Statements The City of Albany CDBG Recovery Act 2013-NY-1001 12/06/2012 04/03/2013 Note 1 Program, Albany, NY Bay Vista Methodist Heights Violated Its Agreement With HUD When 2013-LA-1003 03/14/2013 05/15/2013 Note 1 Administering Its Trust Funds, San Diego, CA 70 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION The Municipality of Arecibo Did Not 2013-AT-1003 Always Ensure Compliance With CDBG 03/22/2013 06/14/2013 10/31/2018 Program 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- 2013-LA-1004 Recovery Act Programs in Accordance 04/23/2013 09/06/2013 09/30/2017 With HUD Rules and Regulations, San Bernardino, CA Nassau County Did Not Administer It’s HOME Investment Partnerships Program 2013-NY-1006 05/13/2013 09/06/2013 Note 1 in Accordance With HUD Requirements, Nassau County, NY 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 2013-CH-1003 Its Own Policies Regarding the 07/15/2013 11/12/2013 04/30/2017 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 2013-AT-1006 Authority Did Not Always Comply With 07/23/2013 11/20/2013 Note 1 HOME Requirements, San Juan, PR The City of Hawthorne Inappropriately 2013-LA-1009 Used Nearly $1.6 Million in HOME Funds 09/13/2013 01/06/2014 Note 1 for Section 8 Tenants, Hawthorne, CA The City of Hawthorne Did Not Administer Its CDBG Program Cost 2013-LA-1010 09/20/2013 01/06/2014 Note 1 Allocations in Accordance With HUD Rules and Requirements, Hawthorne, CA 71 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION 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 2013-CH-1009 09/27/2013 01/14/2014 06/17/2017 Accordance 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 Requirements Regarding the 09/30/2013 01/15/2014 07/31/2029 Administration of Its Program, Lansing, MI The Hamtramck Housing Commission Did Not Administer Its Grant in Accordance 2013-CH-1012 09/30/2013 01/21/2014 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 2014-CH-1001 Controls Over Its HOME Investment 11/15/2013 03/13/2014 10/16/2017 Partnerships 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 72 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION 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 2014-FO-0002 Years 2013 and 2012 Financial Statements 12/13/2013 04/14/2014 Note 1 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 1 Justify Its CDBG Activities, Norfolk, VA The State of Mississippi Did Not Ensure That Its Subrecipient and Appraisers Complied With Requirements, and It Did 2014-AT-1004 12/30/2013 04/15/2014 Note 1 Not Fully Implement Adequate Procedures For Its Disaster Infrastructure Program, Jackson, MS The City of Detroit Lacked Adequate Controls Over Its Neighborhood Stabilization Program-Funded Demolition 2014-CH-1002 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 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 12/31/2018 Agencies, Including Reviews Involving Recovery Act Funds HUD Did Not Provide Effective Oversight 2014-NY-0001 of Section 202 Multifamily Project 02/19/2014 06/10/2014 Note 1 Refinances Violations Increased the Cost of Housing’s 2014-AT-0001 Administration of Its Bond Refund 03/14/2014 07/11/2014 Note 1 Program 73 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION Vieques Sports City Complex, Office of the Commissioner for Municipal Affairs, 2014-AT-1801 03/20/2014 07/11/2014 Note 1 Section 108 Loan Guarantee Program, San Juan, PR HUD’s Fiscal Year 2013 Compliance 2014-FO-0004 With the Improper Payments Elimination 04/15/2014 01/07/2015 Note 3 and Recovery Act of 2010 The 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 Improvements Are Needed Over Environmental Reviews of Public Housing 2014-FW-0002 05/12/2014 03/17/2015 12/31/2018 and Recovery Act Funds in the Kansas City Office The City of Huntsville, Community Development Department, Did Not 2014-AT-1005 Adequately Account for and Administer 05/29/2014 09/23/2014 Note 1 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 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 [Credit Alert Verification Reporting System] Did Not 2014-KC-0002 07/02/2014 10/27/2014 Note 1 Agree With the Data in FHA’s Default and Claims Systems The White Mountain Apache Housing Authority Did Not Always Comply With 2014-LA-1004 07/08/2014 10/24/2014 Note 1 Its Indian Housing Block Grant Requirements, White River, AZ 74 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION Palladia, Inc., Did Not Administer Its Supportive Housing Program in 2014-NY-1008 07/25/2014 11/21/2014 Note 1 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 1 Carolina, PR HUD Did Not Always Recover FHA Single-Family Indemnification Losses and 2014-LA-0005 08/08/2014 12/03/2014 Note 3 Ensure That Indemnification Agreements Were Extended The Goshen Housing Authority Failed To Follow HUD’s and Its Own Requirements 2014-CH-1006 08/14/2014 01/21/2015 01/31/2018 Regarding the Administration of Its Program, Goshen, IN The City of Richmond Did Not Administer Its NSP [Neighborhood 2014-LA-1005 08/22/2014 12/19/2014 11/30/2017 Stabilization Program] in Accordance With Requirements, Richmond, CA The State of New Jersey Did Not Fully Comply With Federal Procurement and 2014-PH-1008 Cost Principle Requirements in 08/29/2014 09/02/2015 Note 2 Implementing Its Tourism Marketing Program Asset Repositioning Fees for Public Housing Authorities With Units Approved 2014-NY-0003 09/04/2014 12/29/2014 12/31/2020 for 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 1 Miami, FL The City of Jersey City’s HOME Investment Partnerships Program 2014-NY-1009 Administration Had Financial and 09/18/2014 01/13/2015 Note 1 Administrative Controls Weaknesses, City of Jersey City, NJ 75 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION Improvements Are Needed Over Environmental Reviews of Public Housing 2014-FW-0005 09/24/2014 03/17/2015 12/31/2018 and Recovery Act Funds in the Detroit Office The City of Los Angeles Did Not Always Ensure That CDBG-Funded Projects Met 2014-LA-1007 09/29/2014 01/27/2015 Note 2 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 1 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 1 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 Note 2 User Fee Policy HUD Policies Did Not Always Ensure That HECM [home equity conversion 2014-PH-0001 09/30/2014 01/28/2015 Note 1 mortgage] Borrowers Complied With Residency Requirements Information System Control Weaknesses 2015-DP-0001 Identified in the Single Family Housing 10/21/2014 12/12/2014 Note 1 Enterprise Data Warehouse Audit of the Federal Housing 2015-FO-0001 Administration’s Financial Statements for 11/14/2014 04/14/2015 Note 1 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 1 Accordance With Federal Regulations, New York, NY 76 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION The Office of the Commissioner for Municipal Affairs Needs To Make 2015-AT-1001 Improvements in Administering Its 12/05/2014 04/03/2015 Note 2 Section 108 Loan Guarantee Program, San Juan, PR Interim Report on HUD’s Internal 2015-FO-0002 12/08/2014 09/28/2015 09/30/2017 Controls Over Financial Reporting Office of the Chief Financial Officer Loan 2015-DP-0004 12/09/2014 04/17/2015 Note 2 Accounting System Final Civil Action Court Ordered a Former Executive Director of the Philadelphia 2015-PH-1804 Housing Authority To Pay Civil Penalties 02/19/2015 09/13/2016 Note 2 for Violating Federal Lobbying Disclosure Requirements and Restrictions The Chicago Housing Authority Moving 2015-CH-1001 to Work Housing Choice Voucher 02/24/2015 06/10/2015 04/01/2018 Program, Chicago, IL Fiscal Year 2014 Review of Information 2015-DP-0005 Systems Controls in Support of the 02/24/2015 07/02/2015 04/30/2017 Financial Statements Audit Audit of the Government National 2015-FO-0003 Mortgage Association’s Financial 02/27/2015 06/25/2015 Note 3 Statements for Fiscal Years 2014 and 2013 The State of Rhode Island Did Not Always 2015-BO-1003 Operate Its NSP in Compliance With 03/04/2015 07/01/2015 Note 2 HUD 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 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 77 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION First Niagara Bank, Lockport, NY, Did Not Always Properly Implement HUD’s 2015-NY-1006 05/22/2015 11/19/2015 Note 2 Loss Mitigation Requirements in Servicing FHA-Approved Mortgages The Housing Authority of the County of San Bernardino, San Bernardino, CA, 2015-LA-1004 05/29/2015 09/16/2015 Note 2 Used Shelter Plus Care Program Funds for Ineligible and Unsupported Participants The State of New Jersey Did Not Comply With Federal Procurement and Cost 2015-PH-1003 06/04/2015 10/02/2015 Note 2 Principle Requirements in Implementing Its Disaster Management System HUD Did Not Adequately Implement or Provide Adequate Oversight To Ensure 2015-FW-0001 06/16/2015 10/07/2015 Note 2 Compliance With Environmental Requirements The City of New Orleans, LA, Did Not Always Comply With Requirements When 2015-FW-1002 06/26/2015 09/29/2015 Note 2 Administering Its 2013 Disaster Relief Grant HUD Did Not Provide Adequate 2015-LA-0002 Oversight of the Section 184 Indian Home 07/06/2015 10/28/2015 Note 2 Loan 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 09/13/2017 Control Grants in Compliance With Federal Requirements NOVA Financial & Investment Corporation’s FHA-Insured Loans With 2015-LA-1005 07/09/2015 09/11/2015 05/31/2017 Downpayment Assistance Gifts Did Not Always Meet HUD Requirements The State of Florida, Tallahassee, FL, Did Not Properly Support the Eligibility of 2015-AT-1006 07/27/2015 11/24/2015 Note 2 Some 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 06/30/2017 York Agencies 78 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION HUD Did Not Always Provide Adequate Oversight of Its Section 203(k) 2015-CH-0001 07/31/2015 11/27/2015 11/17/2017 Rehabilitation Loan Mortgage Insurance Program 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 Note 2 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 Broward County, Fort Lauderdale, FL, Did Not Properly Administer One of Its 2015-AT-1008 08/23/2015 10/30/2015 Note 2 Projects and Did Not Comply With Some Match Requirements The Duson Housing Authority, Duson, LA, Failed To Administer Its Public 2015-FW-1808 09/10/2015 11/05/2015 05/03/2017 Housing 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 Note 2 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 Note 2 Recovery Program Funds Were Always Disbursed for Eligible Costs HUD Did Not Have Effective Controls or Clear Guidance in Place for the FHA- 2015-LA-0003 HAMP [Home Affordable Modification 09/18/2015 03/23/2016 Note 2 Program] Partial Claim Loss Mitigation Option The Housing Authority of the City of South Bend, IN, Did Not Always Comply with HUD Requirements and Its Own 2015-CH-1008 09/25/2015 01/22/2016 08/31/2018 Policies Regarding the Administration of Its Section 8 Housing Choice Voucher Program 79 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION The State of Maryland Could Not Show 2015-PH-1005 That Replacement Homes Complied With 09/25/2015 01/19/2016 Note 2 the Green Building Standard The State of Illinois’ Administrator Lacked Adequate Controls Over the 2015-CH-1009 State’s Community Development Block 09/30/2015 01/28/2016 01/30/2018 Grant Disaster Recovery Program-Funded Projects The Cooperative and Management Agent Lacked Adequate Controls Over the 2015-CH-1010 09/30/2015 01/28/2016 04/28/2017 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 Note 2 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 05/31/2017 Always Meet HUD Requirements loanDepot’s FHA-Insured Loans With Golden State Finance Authority 2015-LA-1010 09/30/2015 01/12/2016 05/31/2017 Downpayment Assistance Gifts Did Not Always Meet HUD Requirements The City of Richmond, CA, Did Not Adequately Support Its Use of HUD- 2015-LA-1803 09/30/2015 01/08/2016 12/31/2018 Funded Expenses for Its Filbert Phase 1 and Filbert Phase 2 Activities 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 Note 2 Statements Audit Additional Details To Supplement Our Fiscal Years 2015 and 2014 (Restated) 2016-FO-0003 11/18/2015 03/22/2016 Note 3 U.S. 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 Note 2 Association 80 SEMIANNUAL REPORT TO CONGRESS REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION The Municipality of Toa Alta, PR, Did 2016-AT-1002 Not Properly Administer Its Section 108 12/17/2015 04/12/2016 04/11/2017 Loan Guarantee Program Single Family Insurance System and 2016-DP-0002 Single Family Insurance Claims 12/21/2015 03/31/2016 08/21/2017 Subsystem The City of Rochester, NY Did Not Always Administer Its Community 2016-NY-1003 02/05/2016 06/17/2016 06/16/2017 Development 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 Housing Agencies’ Compliance 2016-CH-0001 02/26/2016 06/20/2016 10/01/2019 With Its Declaration of Trust Requirements Homewood Terrace, Auburn, WA, Did Not Always Conduct Timely 2016-SE-1001 Reexaminations, Properly Request 03/09/2016 07/06/2016 07/06/2017 Assistance Payments, or Verify Income Information The City of Baton Rouge and Parish of East Baton Rouge, LA, Office of Community Development, Did Not 2016-FW-1001 03/21/2016 05/03/2016 06/01/2017 Always Properly 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 05/16/2017 Administrative and Financial Control Weaknesses 81 SEMIANNUAL REPORT TO CONGRESS SIGNIFICANT AUDIT REPORTS ISSUED WITHIN THE PAST 12 MONTHS THAT WERE DESCRIBED IN PREVIOUS SEMIANNUAL REPORTS FOR WHICH FINAL ACTION HAD NOT BEEN COMPLETED AS OF (03/31/2017) Decision Report Number Report Title Issue Date Final Action Date The District of Columbia Housing Authority, Washington, DC, Did Not Always Make 2016-PH-1801 04/04/2016 07/13/2016 07/13/2017 Payments for Outside Legal Services in Compliance With Applicable Requirements The Westmoreland County Housing Authority, Greensburg, PA, Did Not Always Ensure That Its Program Units Met Housing 2016-PH-1002 04/27/2016 07/13/2016 07/13/2017 Quality Standards and That It Accurately Calculated Housing Assistance Payment Abatements The Housing Authority of the City of Durham, NC, Did Not Adequately Enforce 2016-AT-1005 05/10/2016 08/15/2016 05/09/2017 HUD’s and Its Own Housing Quality Control Standards Compliance With the Improper Payments 2016-FO-0005 05/13/2016 10/04/2016 09/30/2018 Elimination and Recovery Act HUD Did Not Enforce and Sufficiently 2016-AT-0001 Revise Its Underwriting Requirements for 05/20/2016 09/16/2016 09/15/2017 Multifamily Accelerated Processing Loans The City of Camden, NJ, Did Not Ensure That Activities Always Complied With 2016-PH-1003 05/24/2016 09/12/2016 07/25/2017 National Objective, Procurement, and Environmental Review Requirements The Richmond Housing Authority, 2016-LA-1006 Richmond, CA, Mismanaged Its Financial 06/03/2016 09/21/2016 05/01/2018 Operations The City of Miami Beach Did Not Always 2016-AT-1006 06/17/2016 10/05/2016 09/29/2017 Properly Administer Its HOME Program The Administration of Accounting, Inventory, and Procurement of the Bridgeport 2016-BO-1002 06/27/2016 10/13/2016 08/30/2017 Housing Authority in Bridgeport, CT, Did Not Always Comply With HUD Regulations 82 SEMIANNUAL REPORT TO CONGRESS Decision Report Number Report Title Issue Date Final Action Date The State of Connecticut Did Not Always Administer Its Neighborhood Stabilization 2016-BO-1003 06/28/2016 10/25/2016 06/27/2017 Program in Compliance With HUD Regulations HUD Did Not Always Provide Adequate 2016-PH-0001 Oversight of Property Acquisition and 06/30/2016 02/16/2017 Note 3 Disposition Activities HUD Did Not Ensure That All Costs for Ginnie Mae’s Contract With Burson- 2016-PH-0002 07/23/2016 11/19/2016 11/30/2018 Marsteller Were Supported, Reasonable, and Necessary HUD Did Not Ensure That Lenders Verified 2016-PH-0003 That FHA-Insured Properties in Flint, MI, 07/29/2016 12/22/2016 12/20/2017 Had Safe Water The Members and Operator Did Not Comply With the Executed Regulatory Agreement 2016-AT-1009 08/02/2016 11/30/2016 11/28/2017 and HUD’s Requirements for Saltillo Assisted Living, Saltillo, MS The Jefferson Metropolitan Housing Authority, Steubenville, OH, Failed To 2016-CH-1005 Manage Its Procurements and Contracts in 08/03/2016 11/17/2016 09/30/2017 Accordance With HUD’s and Its Own Requirements The Mobile Housing Board, Mobile, AL, Did Not Disclose an Apparent Conflict of Interest 2016-AT-1010 08/04/2016 11/18/2016 11/17/2017 and Occupy One-Third of Its Public Housing Units The Georgia Housing and Finance Authority, Atlanta, GA, Did Not Adequately Implement 2016-AT-1011 the Federal Housing Administration’s Home 08/05/2016 01/25/2017 08/05/2017 Affordable Modification Program in Accordance With HUD’s Requirements The State of New York Had Weaknesses in 2016-NY-1009 Its Administration of the Tourism and 08/12/2016 12/09/2016 12/08/2017 Marketing Program HUD Did Not Collect an Estimated 1,361 2016-KC-0001 Partial Claims Upon Termination of Their 08/17/2016 12/09/2016 07/31/2017 Related FHA-Insured Mortgages 83 SEMIANNUAL REPORT TO CONGRESS Decision Report Number Report Title Issue Date Final Action Date The Richmond Redevelopment and Housing Authority, Richmond, VA, Did Not Always 2016-PH-1005 08/17/2016 12/13/2016 09/30/2017 Charge Eligible and Reasonable Central Office Cost Center Fees The Housing Authority of the City of Muncie, Muncie, IN, Did Not Always 2016-CH-1006 Comply With HUD’s Requirements and Its 08/23/2016 12/21/2016 12/31/2017 Own Policies Regarding the Administration of Its Housing Choice Voucher Program The Dolores Frances Affordable Housing Project, Los Angeles, CA, Was Not 2016-LA-1008 Administered in Accordance With Its 08/26/2016 12/12/2016 12/08/2017 Regulatory Agreement and HUD Requirements The City and County of Honolulu, HI, Did Not Administer Its Community Development 2016-LA-1009 08/26/2016 12/12/2016 03/30/2018 Block Grant in Accordance With Requirements The Municipality of Bayamon, PR, Did Not 2016-AT-1012 Always Ensure Compliance With HUD 08/29/2016 12/15/2016 12/09/2017 Program Requirements Additional Review of Information System 2016-DP-0003 08/31/2016 12/22/2016 10/31/2017 Controls Over FHA Information Systems The State of Louisiana’s Subrecipient Did Not Always Comply With Its Agreement and 2016-FW-1006 08/31/2016 12/16/2016 12/16/2017 HUD Requirements When Administering Its Disaster Assistance Programs Evergreen Home Loans, Las Vegas, NV, 2016-LA-1011 Branch Did Not Always Comply With HUD 09/12/2016 01/04/2017 01/03/2018 FHA Origination Regulations Operating Fund Calculations Were Not 2016-NY-0001 09/12/2016 12/22/2016 01/01/2018 Always Adequately Verified The Sanford Housing Authority, Sanford, NC, Did Not Comply With HUD’s and Its 2016-AT-1013 09/13/2016 12/16/2016 12/12/2017 Own Section 8 Housing Choice Voucher Program Requirements 84 SEMIANNUAL REPORT TO CONGRESS Decision Report Number Report Title Issue Date Final Action Date HUD Rushed the Implementation of Phase 1 2016-DP-0004 09/20/2016 01/10/2017 09/20/2017 Release 3 of the New Core Project Ginnie Mae Improperly Allowed Uninsured 2016-KC-0002 Loans To Remain in Mortgage-Backed 09/21/2016 01/04/2017 12/16/2017 Securities Pools The Housing Authority of the City of 2016-PH-1007 Annapolis, MD, Did Not Always Follow 09/27/2016 01/25/2017 01/31/2018 Applicable Procurement Requirements The Wyoming Community Development Authority of Casper, WY, Did Not Always 2016-DE-1005 09/28/2016 01/24/2017 08/12/2017 Spend Its HOME and NSP Funds in Accordance With Program Requirements The City of Joplin, MO, Did Not Always Comply With the Requirements of Section 3 2016-KC-1006 09/28/2016 01/12/2017 01/20/2018 of the Housing and Urban Development Act of 1968 for Its Disaster Recovery Program P.K. Management Group, Inc., Doral, FL, Did Not Always Provide Property 2016-CH-1008 Preservation and Protection Services in 09/29/2016 01/20/2017 08/31/2017 Accordance With Its Contract With HUD and Its Own Requirements HUD Needs To Improve Its Monitoring of 2016-FO-0006 09/29/2016 03/29/2017 12/31/2017 the Travel and Purchase Card Programs Folts, Inc., Herkimer, NY Did Not Administer the Folts Adult Home and Folts 2016-NY-1010 09/29/2016 03/28/2017 12/31/2018 Home Projects In Accordance With Their Regulatory Agreements The Housing Opportunities Commission of Montgomery County, Kensington, MD, Did 2016-PH-1008 09/29/2016 01/12/2017 11/23/2017 Not Always Ensure That Its Program Units Met Housing Quality Standards The Condominium Association and Management Agent Lacked Adequate 2016-CH-1009 09/30/2016 01/25/2017 09/30/2017 Controls Over the Operation of West Park Place Condominium, Chicago, IL 85 SEMIANNUAL REPORT TO CONGRESS Decision Report Number Report Title Issue Date Final Action Date The State of Oklahoma Did Not Obligate and Spend Its Community Development Block 2016-FW-1010 09/30/2016 01/17/2017 11/29/2017 Grant Disaster Recovery Funds in Accordance With Requirements The State of New Jersey Did Not Disburse Disaster Funds to Its Contractor in 2016-PH-1009 09/30/2016 01/27/2017 Note 3 Accordance With HUD, Federal, and Other Applicable Requirements Audits excluded: 89 audits under repayment plans 33 audits under debt claims collection processing, formal judicial review, investigation, or legislative solution Notes: 1 Management did not meet the target date. Target date is more than 1 year old. 2 Management did not meet the target date. Target date is less than 1 year old. 3 No management decision 86 SEMIANNUAL REPORT TO CONGRESS TABLE C INSPECTOR GENERAL-ISSUED REPORTS WITH QUESTIONED AND UNSUPPORTED COSTS AT 03/31/2017 (THOUSANDS) NUMBER OF QUESTIONED UNSUPPORTED AUDIT REPORTS AUDIT COSTS COSTS REPORTS For which no management decision had been made by A1 60 266,140 191,987 the beginning of the reporting period For which litigation, legislation, or investigation was A2 5 27,333 5,170 pending at the beginning of the reporting period For which additional costs were added to reports in A3 - 2,191 560 beginning inventory A4 For which costs were added to noncost reports 0 0 0 B1 Which were issued during the reporting period 28 197,098 90,616 B2 Which were reopened during the reporting period 0 0 0 Subtotals (A+B) 93 492,762 288,333 For which a management decision was made during the C 68 19 249,620 157,728 reporting period (1) Dollar value of disallowed costs: 25 20 83,581 2,716 Due HUD 48 122,818 112,145 Due program participants (2) Dollar value of costs not disallowed 11 21 43,221 42,867 For which a management decision had been made not to D determine costs until completion of litigation, 4 25,542 3,378 legislation, or investigation For which no management decision had made by the end 21 217,600 127,227 E of the reporting period <64> 22 <182,879> <115,039> 19 Twenty-nine audit reports also contain recommendations with funds to be put to better use. 20 Seven audit reports also contain recommendations with funds due program participants. 21 Nine audit reports also contain recommendations with funds agreed to by management. 22 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D. below table D. 87 SEMIANNUAL REPORT TO CONGRESS TABLE D INSPECTOR GENERAL-ISSUED REPORTS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE AT 03/31/2017(THOUSANDS) NUMBER OF AUDIT AUDIT REPORTS DOLLAR VALUE REPORTS For which no management decision had been made by the 36 7,179,659 A1 beginning of the reporting period For which litigation, legislation, or investigation was pending at the 1 1,694 A2 beginning of the reporting period For which additional costs were added to reports in beginning - 17,769 A3 inventory A4 For which costs were added to noncost reports 0 0 B1 Which were issued during the reporting period 14 3,298,561 B2 Which were reopened during the reporting period 0 0 Subtotals (A+B) 51 10,497,683 For which a management decision was made during the reporting 36 23 2,575,278 C period (1) Dollar value of recommendations that were agreed to by management: Due HUD 13 2,340,121 Due program participants 19 127,513 (2) Dollar value of recommendations that were not agreed to by 5 24 107,644 management For which a management decision had been made not to determine 1 1,694 D costs until completion of litigation, legislation, or investigation For which no management decision had made by the end of the 15 7,920,711 E reporting period 25 <20> <5,325,451> 23 Twenty-nine audit reports also contain recommendations with questioned costs. 24 One audit report also contains recommendations with funds agreed to by management. 25 The figures in brackets represent data at the recommendation level as compared to the report level. See the Explanations of Tables C. and D 88 SEMIANNUAL REPORT TO CONGRESS EXPLANATIONS OF TABLES C AND D The Inspector General Act Amendments of 1988 require inspectors general and agency heads to report cost data on management decisions and final actions on audit reports. The current method of reporting at the “report” level rather than at the individual audit “recommendation” level results in misleading reporting of cost data. Under the Act, an audit “report” does not have a management decision or final action until all questioned cost items or other recommendations have a management decision or final action. Under these circumstances, the use of the “report” based rather than the “recommendation” based method of reporting distorts the actual agency efforts to resolve and complete action on audit recommendations. For example, certain cost items or recommendations could have a management decision and repayment (final action) in a short period of time. Other cost items or nonmonetary recommendation issues in the same audit report may be more complex, requiring a longer period of time for management’s decision or final action. Although management may have taken timely action on all but one of many recommendations in an audit report, the current “all or nothing” reporting format does not recognize their efforts. The closing inventory for items with no management decision in tables C and D (line E) reflects figures at the report level as well as the recommendation level. 89 SEMIANNUAL REPORT TO CONGRESS APPENDIX 4 – UNDISCLOSED REPORTS The Inspector General Empowerment Act (IGEA) Section 5(a)(22)(A) and (B), requires reporting within the Semiannual Report to Congress a detailed description of particular circumstances of each (A) inspection, evaluation, and audit conducted by the office that is closed and was not disclosed to the public and (B) investigation conducted by the office involving a senior Government employee that is closed and was not disclosed to the public. The following provides a summary of these items: AUDIT During the current reporting period OIG has three audit reports that were closed but not disclosed to the public. AUDIT REPORTS THAT WERE CLOSED DURING THE PERIOD THAT WERE NOT DISCLOSED TO THE PUBLIC REVIEW OF IMPLEMENTATION OF SECURITY CONTROLS OVER HUD'S BUSINESS PARTNERS, ISSUED JUNE 11, 2009, AND CLOSED MARCH 17, 2017 This was a LIMITED DISTRIBUTION audit report. The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), conducted an audit to determine whether technical, management, and operational controls were in place to ensure adequate protection of HUD’s data and resources at its third-party business partners’ sites that remotely access or physically process and maintain HUD data outside the agency’s secured physical perimeter. Also, OIG wanted to determine whether HUD complied with applicable Federal requirements that apply to planning, establishing, and maintaining interconnections and data sharing among information technology (IT) systems that are owned and operated by the third-party business partners. The audit was conducted as a component of the general and technical controls for information systems in connection with the annual audit of HUD’s consolidated financial statements audit and evaluation of HUD’s information systems security program and practices required by the Federal Information Security Management Act of 2002. OIG found that technical, management, and operational controls were not in place to ensure adequate protection of HUD data and resources at its third-party business partners’ sites. Also, HUD did not comply with applicable Federal laws and guidelines that apply to planning, establishing, and maintaining interconnections and data sharing among IT systems that are owned and operated by the third-party business partners. Specifically, data and personally identifiable information may have been at risk because of (1) a lack of information security guidance at third-party business partners’ sites, (2) security weaknesses at third-party business partners’ sites, (3) HUD’s lack of assurance that adequate security controls had been implemented, and (4) HUD’s failure to monitor its third-party business partners’ sites and lack of knowledge of the risks that existed at those sites. OIG recommended that the Chief Information Officer request that the Deputy Secretary direct system owners to (1) ensure that contracts with third-party business partners include written agreements to implement security controls, (2) direct the system owners to conduct risk assessments that apply to their third-party business partners and systems remotely accessed outside HUD’s physical infrastructure, and (3) update their system security plans to include controls that apply to their third-party business partners. OIG recommended that the Assistant Secretary of Housing - Federal Housing Commissioner and General Deputy Assistant Secretary for Public and Indian Housing require HUD’s system owners to provide periodic specialized security awareness training for its third-party business partners’ system administrators and users and develop and implement a continuous management review process regarding third-party business partners’ internal controls that includes information security controls. (Audit Report: 2009-DP-0005) 90 SEMIANNUAL REPORT TO CONGRESS APPLICATION CONTROL WEAKNESSES IDENTIFIED IN THE ASSET DISPOSITION AND MANAGEMENT SYSTEM, ISSUED JANUARY 14, 2014, AND CLOSED MARCH 15, 2017 This was a LIMITED DISTRIBUTION audit report. HUD OIG audited selected application controls over HUD’s Asset Disposition and Management System (ADAMS) to test for compliance with HUD policies and procedures, Federal requirements, and best practices as applicable. OIG found that financial management system interface reconciliations were not sufficient. Without sufficient monitoring and reconciliation, there is no reasonable assurance that transactions are accurately processed through the interface and that no transactions are added, lost, or altered in processing. Also, passwords for some ADAMS user accounts were not changed every 90 days. If an attacker has compromised a password through guessing, cracking, or capture, the attacker can use that password until it is changed by the user. The web server software in use was outdated. Software that is not promptly updated may leave the system exposed to known vulnerabilities. Security vulnerabilities could result in unauthorized disclosure of information, unauthorized modification, or a disruption of service. Some user accounts were not disabled after 90 days of inactivity. Former system users could potentially access user accounts after the business need for access had expired. They could use the inactive accounts for unauthorized and malicious purposes. External attackers could also discover and exploit legitimate but inactive user accounts. Lastly, the authorization to operate had been expired for nearly a year and was not reauthorized until August 2013 during OIG’s audit. Although the system security documents had been updated to correct inaccurate content during the audit, some discrepancies remained. Without periodically assessing the risk, the organization cannot ensure that all threats and vulnerabilities are identified and considered. OIG recommended that the Office of Single Family Housing (1) improve the monitoring and reconciliation of the financial management system interface, (2) ensure that system user account passwords are changed every 90 days to comply with HUD policy, (3) update the web server software to the current release, (4) take appropriate actions in response to new information system security alerts, (5) ensure that inactive user accounts are disabled in a timely manner that meets HUD requirements, and (6) conduct a risk assessment every 3 years to comply with HUD policy and ensure that the system security documentation is kept current and accurate. (Audit Report: 2014-DP-0002) FISCAL YEAR 2013 REVIEW OF INFORMATION SYSTEMS CONTROLS IN SUPPORT OF THE FINANCIAL STATEMENTS AUDIT, ISSUED APRIL 3, 2014, AND CLOSED JANUARY 18, 2017 This was a LIMITED DISTRIBUTION audit report. HUD OIG reviewed information system controls over HUD’s computing environment as part of OIG’s audit of HUD’s financial statements for fiscal year 2013 under the Chief Financial Officer’s Act of 1990. OIG found that HUD did not ensure that general and application controls over its financial systems and its computing environment fully complied with Federal requirements. The Office of the Chief Information Officer (OCIO) did not perform web application vulnerability scans on the Office of the Chief Financial Officer (OCFO) systems between March 2011 and March 2013 and did not monitor OCFO web applications for vulnerabilities on a recurring schedule. OIG previously reported this weakness in 2009. OCIO addressed the weakness in 2010 but later discontinued monitoring OCFO web applications for vulnerabilities on a recurring schedule. OCIO’s continuous monitoring program needed improvements in its design to strengthen the collecting and reporting of information security data. For instance, information reported on HUD’s security posture may not have been accurate, processes used to quarantine unauthorized software did not address certain unauthorized software, and HUD’s IT security policy did not address key issues. Additionally, OCIO did not include telecommunication links to the U.S. Department of the Treasury in its disaster recovery plans, and there were no contingency plans in place 91 SEMIANNUAL REPORT TO CONGRESS for resuming operation of the telecommunication links to Treasury during a disaster recovery event. Lastly, HUD’s use of the HUD Integrated Acquisition Management System (HIAMS) as part of its integrated financial management system did not provide the agency with the data necessary to automate the performance of the payment management core financial functions. OIG recommended that the OCIO update its policies and procedures to define minimum frequencies and requirements for scanning applications for vulnerabilities, reporting on the security state of HUD’s information systems, and coordinating with Treasury to ensure that telecommunication links are restored during a disaster recovery event. OIG recommended that the Office of the Chief Procurement Officer ensure that all core financial requirements are fully assessed and included in the definition stage and all stages moving forward in the project to replace HIAMS and the HUD Central Accounting and Program System. (Audit Report: 2014-DP-0005) INVESTIGATION During the current reporting period, OIG has four investigation reports that were closed but not disclosed to the public. • It was alleged that a HUD supervisory contract oversight specialist improperly accessed HIAMS and manipulated contract parameters without informing the assigned contract specialists. Additionally, it was alleged that a HUD supervisory IT specialist was responsible for the oversight of a $3.9 million contract awarded to a company, which the complainant alleged was the supervisory contract oversight specialist's former employer. The allegation was not substantiated. • During the selection process for a noncompetitive position, a HUD OIG director became aware that the resume of a potential applicant contained false information. Despite knowing this information, the director selected the candidate for the position. Further, it was determined that a senior HUD OIG executive was advised of the fraudulent resume and failed to take appropriate action against the director and applicant upon receipt of this information. The director was demoted to a GS-14 and received a 14-day suspension. The senior executive received a 15-day suspension. HUD OIG referred the case to the United States Attorney’s Office (USAO) on January 20, 2016. On January 20, 2016, the USAO declined criminal prosecution due to available administrative remedies. • A HUD administrative officer-director admitted that she made an independent decision to hire a new intern based on his gender, a violation of Title 5 U.S.C. (United States Code) 2302 - Prohibited personnel practices. Additionally, the director attempted to influence the statement of events being provided to investigators by witnesses in violation of Title 18 U.S.C. 73 - Obstruction of justice. HUD OIG referred the case to the USAO on August 31, 2016. On August 31, 2016, the USAO declined criminal prosecution due to available 92 SEMIANNUAL REPORT TO CONGRESS administrative remedies. The director received a verbal reprimand for her actions and retired from Federal service. • A HUD attorney admitted that she approved reimbursement for an ineligible legal services invoice. She admitted to this approval despite her direct knowledge of a subordinate employee’s existing conflict of interest in working matters related to a particular housing authority at the time, a violation of 5 CFR (Code of Federal Regulations) Part 2635 - Standards of Ethical Conduct for Employees of the Executive Branch. HUD OIG referred the case to the USAO on May 8, 2014. On May 8, 2014, the USAO declined criminal prosecution. The case was declined based on the facts gathered and the USAO's lack of interest in pursuing charges in this matter. OIG later referred this matter to HUD. HUD advised that additional corrective action was unnecessary as HUD had taken corrective action before receiving OIG’s final report of investigation. EVALUATION During the current reporting period, OIG has one evaluation report that was closed but not disclosed to the public. FEDERAL INFORMATION SECURITY MODERNIZATION ACT REPORT FOR FISCAL YEAR 2016 HUD OIG completed its annual evaluation of HUD’s cybersecurity program, making 14 recommendations for improvement to the Department. HUD had taken actions to strengthen its cybersecurity program by developing more robust and enterprisewide policies and procedures, establishing information security roadmaps, and initiating procurement and implementation of additional tools and processing capabilities. Due to these actions, HUD has satisfied and closed more than 60 OIG IT recommendations from fiscal years 2013 to 2015 Federal Information Security Modernization Act (FISMA) evaluations, enhancing its IT security posture. However, an additional 55 OIG recommendations remain open, to include the 14 fiscal year 2016 recommendations, leaving multiple fundamental components of an effective cybersecurity program deficient. As reported in prior-year FISMA evaluations, HUD has failed to establish adequate governance, risk management, and contractor oversight programs or gain appropriate technical expertise. Significant risk will continue to exist until these key deficiencies are addressed at the executive leadership level and plans, processes, and capabilities are fully funded and implemented. (Evaluation Report: 2016-OE-0006) 93 SEMIANNUAL REPORT TO CONGRESS APPENDIX 5 – OPEN RECOMMENDATIONS OFFICE OF AUDIT ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that you make a determination on collectability of 1995-NY-1001 1/24/1995 001-B past due excess income liability and require the mortgagor to start $2,200,290 correctly completing monthly excess income report. Require that the PHA reimburse $2,568,000, less any restitution, 2000-AT-1003 3/6/2000 003-C $1,114,897 for the fictitious training invoices. Obtain additional supporting documentation or recover from city 2001-AT-1001 10/20/2000 001-A $795,178 paid for police protection, recreation and code $573,658 enforcement activities. Require the authority to repay the Low Rent Program $58,799 from 2001-FW-1003 12/18/2000 001-C nonfederal funds for the ineligible transfers that have not been $58,799 reimbursed by Section 8 Program. We recommend you instruct the Public Housing Authority to 2000-NY-1003 12/30/1999 004-C reimburse from nonfederal funds, the amount of unsupported costs $31,443 determined to be ineligible. Require the Authority to provide support for $13,082 in 2001-FW-1003 12/18/2000 001-D unsupported costs charged to Low Rent Program for audit period $13,082 and any subsequent unsupported costs, etc. Take action to refinance mixed financing developments, recover 2001-PH-1803 8/31/2001 001-A inappropriately expended Annual Contributions Contract funds, $320,000 sanctions for Annual Contributions Contract violations. Require the Authority to seek repayment of the $728,159 owed 2002-AT-1002 7/3/2002 001-A $658,159 from the Tupelo Apartment Homes, L.P. Provide proper support for the $331,665 of expenditures for the 2002-AT-1002 7/3/2002 003-B $331,665 fiscal year 2000 Annual Statement, or reimburse the CGP funds. Provide proper supporting documentation or reimburse the CGP 2002-AT-1002 7/3/2002 003-A $293,544 $293,544 of unsupported expenditures. Support unsupported expenditures of $60,750 that were drawn 2002-PH-1005 9/30/2002 001-C down for the grant. For any unsupported expenditures require $60,750 grantee reimburse HUD. Reimburse HUD for the $23,422 ineligible expenditures charged to 2002-PH-1005 9/30/2002 001-D $23,422 the grant. Remove the refrigerators and ranges from the Ida Street 2002-AT-1002 7/3/2002 005-C $15,086 development or require reimbursement from the partnership. If implementation continues we recommend that HUD complete 2002-NY-0001 2/25/2002 001-B $0 and implement the regulations. 94 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establishes a formal repayment agreement with the Housing Authority that will allow the current debt owed to HUD of $533,432 to be repaid without disrupting the Section 8 Program. The following should be included in the agreement: prior HUD 2003-CH-1019 7/25/2003 001-B $507,290 approval of the Housing Authority's proposed budgets; and a requirement that the Housing Authority revise its funding requisitions when leasing levels materially change so that future overpayments will be avoided. Recover from owner $2,687,822, the difference between 2004-BO-1002 11/4/2003 001-A $3,662,822 owed to HUD by owner and $975,000 proceeds of $333,581 foreclosure sale. Provides documentation to support that it appropriately made $324,364 in Housing Assistance Payments. If adequate 2004-CH-1001 11/26/2003 003-B documentation cannot be provided, then the Authority should $300,327 reimburse its Section 8 Housing Program from non-Federal funds for the appropriate amount. Ensures that the $287,224 of housing work cited in this finding is completed correctly using non-federal funds. If the Authority is unable to ensure the work is completed correctly, then the 2003-CH-1011 3/24/2003 001-A Authority should reimburse its Comprehensive Assistance $287,224 Improvement Program (now the Capital Fund Program) from non- Federal funds the applicable amount of work not completed correctly or not provided. Reimburses its Section 8 Housing Program $150,851 from non- Federal funds for the Section 8 administrative fees collected by the 2004-CH-1001 11/26/2003 002-B Authority ($14,942) and the Housing Assistance Payments $170,051 ($135,909) improperly made for the Section 8 housing units that did not meet HUD's Housing Quality Standards. Provides documentation to support the $72,329 of unsupported salaries and wages cited in this finding. If documentation cannot 2003-CH-1014 3/28/2003 002-A $72,329 be provided, the Authority should reimburse its Public Housing Program the appropriate amount from non-Federal funds. Provides documentation to support the $43,132 of unsupported payments cited in the Indiana State Board of Accounts audit report. 2003-CH-1019 7/25/2003 002-D If documentation cannot be provided, then the Authority should $43,132 reimburse its Section 8 Voucher Program for the amount that cannot be supported from non-Federal funds. Reimburses its Section 8 Voucher Program $42,206 from non- 2003-CH-1019 7/25/2003 002-A $41,146 Federal funds for the ineligible costs cited in this finding. Reimburses its Section 8 Voucher Program $40,708 from non- 2003-CH-1019 7/25/2003 002-C Federal funds for ineligible costs cited in the Indiana State Board of $40,708 Accounts audit report. Reimburses its Comprehensive Assistance Improvement Program 2003-CH-1011 3/24/2003 001-B (now the Capital Fund Program) $36,408 from non-federal funds $36,408 for the inappropriate use. Reimburses its Voucher Program from non-Federal funds $60,399 2003-CH-1019 7/25/2003 003-A for Section 8 subsidy at units it incorrectly certified met Housing $28,248 Quality Standards. 95 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provides documentation to support the $33,284 of unsupported payments cited in this finding. If documentation cannot be 2003-CH-1014 3/28/2003 005-A provided, then the Authority should reimburse its Public Housing $27,097 Program the amount that cannot be supported from non-Federal funds. Repay its program $32,652 that it paid CDG for hiring it 2003-FW-1001 2/21/2003 002-A $18,939 coordinator. Provides documentation to support the annual income used in 26 reexaminations for $112,753 in Housing Assistance Payments. If 2004-CH-1001 11/26/2003 003-D adequate documentation cannot be provided, then the Authority $11,859 should reimburse its Section 8 Housing Program from non-Federal funds for the appropriate amount. Provides documentation to support the $1,672 of unsupported payments cited in this finding. If documentation cannot be 2003-CH-1019 7/25/2003 002-B provided, then the Authority should reimburse its Section 8 $1,672 Voucher Program from non-Federal funds for the amount that cannot be supported. Require the PRPHA to submit all supporting documentation and determine the accuracy of the $4,230,646 owed by PBA and its 2004-AT-1006 4/22/2004 001-B public housing management agents. Any amounts determined $4,230,256 ineligible must be reimbursed to the ACC projects, from non- Federal funds. Require the Authority to repay its programs $6,855,271 spent for ineligible procurements. Repayment should be from non-Federal funds and paid in the following amounts and to the following 2005-AT-1004 11/19/2004 002-E programs: Conventional Public Housing General Fund $2,818,331, $3,516,017 Capital Fund $3,630,215, HOPE VI $259,289, Section 8 $115,128, Drug Elimination $12,048, Economic Development Support Services $13,831, and Turnkey III Program $6,429. Provides documentation to support that $768,517 of Housing Assistance Payment Savings funds benefited very low-income 2004-CH-1006 6/23/2004 001-B persons and families. If the Authority cannot provide the necessary $768,517 documentation, then the Authority should reimburse a control account from non-Federal funds for the applicable amount. Require the Authority to collect the $327,326 due from SCHDC 2004-AT-1001 1/15/2004 001-A $199,851 and discontinue advancing funds. Direct the Authority to provide adequate documentation to support 2004-PH-1011 9/8/2004 002-B $187,743 $1,943,993 or reimburse HUD from nonfederal sources. We recommend that HUD’s Director of Public Housing Hub, Detroit Field Office, assure the Royal Oak Township Housing 2005-CH-1003 11/29/2004 001-A Commission: Reimburse its Public Housing Program $367,516 $91,879 from non-Federal funds for the improper use of HUD operating subsidy funds cited in this finding. We recommend that HUD’s Director of Public Housing Hub, Detroit Field Office, assure the Royal Oak Township Housing 2005-CH-1003 11/29/2004 002-A Commission: Reimburse its Public Housing Program $45,220 from $45,220 non-Federal funds for the operating subsidy that was not used in accordance with HUD's One Strike Policy. 96 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Authority to reimburse HUD $882,916 from nonfederal 2004-PH-1011 9/8/2004 001-B $29,051 sources. We recommend that HUD’s Director of Public Housing Hub, Detroit Field Office, assure the Royal Oak Township Housing 2005-CH-1003 11/29/2004 002-C $3,340 Commission: Reimburse its Public Housing Program $3,340 from non-Federal funds for thee ineligible travel costs. Require the Municipality to obtain and submit all supporting documentation and HUD determine the eligibility and propriety of $1,011,801 in administrative costs the Corporation charged to the 2005-AT-1013 9/15/2005 002-A $1,011,801 Block Grant revolving fund. Any amounts determined ineligible must be reimbursed to the Block Grant program from nonfederal funds. We recommend that the director of HUD’s Public Housing Hub, Cleveland Field Office, require the Authority to provide support or reimburse its Section 8 program $812,967 ($738,708 in housing 2005-CH-1020 9/29/2005 004-A assistance payments plus $74,259 in related administrative fees) $807,977 from nonfederal funds for unsupported housing assistance payments and unearned administrative fees related to the 65 tenants cited in this finding. We recommend that the director of HUD's Public Housing Hub, Cleveland Field Office, require the Authority to reimburse its 2005-CH-1020 9/29/2005 003-A $751,881 Section 8 administrative fees $805,585 from nonfederal funds for inappropriately funding HOPE VI expenses. Require the Municipality to obtain and submit all supporting documentation and HUD determine the eligibility and compliance 2005-AT-1013 9/15/2005 003-A with national objectives of the $631,195 the Corporation disbursed $471,578 for the four loans. Any amounts determined ineligible must be reimbursed to the Block Grant program from nonfederal funds. We recommend that HUD’s Director of Public Housing Hub, Chicago Regional Office, assure that the Authority reduces its 2005-CH-1010 4/8/2005 001-A $105,186 Low-Rent Performance Funding Operating Subsidy by $119,376 for the excessive operating subsidy cited in this finding. For the overpayments of phase-down funding identified in appendix C, recover $20.6 million in ineligible phase-down 2006-BO-0001 7/11/2006 001-C $8,281,766 funding requests from the public housing agencies for fiscal years 2004 and 2005. We recommend that the Director of the HUD Office of Public Housing review the documentation provided by the Authority, determine if the evidence supports that services were provided that 2006-NY-1003 2/14/2006 002-A $3,758,034 exceeded the services that were to be provided in accordance with the cooperation agreements and seek reimbursement of any amounts that are not supported. We recommend that the director of HUD’s Boston Multifamily Housing Hub, in conjunction with the HUD Office of Inspector 2006-BO-1006 3/28/2006 001-C General (OIG), pursue double damages remedies if the owner does $1,421,859 not reimburse HUD for the inappropriate disposition of project assets. 97 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the director of HUD’s Boston Multifamily Housing Hub assure the owner provides documentation to support 2006-BO-1006 3/28/2006 001-B the $992,979 in unsupported payments cited in this audit report. If $992,979 adequate documentation cannot be provided, the owner should reimburse HUD for the appropriate amount. We recommend that the director of HUD’s Boston Multifamily 2006-BO-1006 3/28/2006 001-A Housing Hub assure the owner reimburses HUD $865,121 for the $865,121 inappropriate disposition of project assets. We recommend that the director of HUD’s Detroit Office of Public Housing require the Commission to Reimburse its program 2006-CH-1018 9/28/2006 001-A $535,903 from nonfederal funds ($507,860 for the property $535,903 purchase plus $28,043 for legal costs) for the improper use of program funds to pay for the property’s acquisition costs. We recommend that the director, New Jersey Office of Public Housing, instruct the Authority to recapture or reduce the Section 8 2006-NY-1012 9/22/2006 001-B $452,366 administrative fee reserve account by $590,042 to comply with the requirements of PIH [Public and Indian Housing] Notice 2005-30. We recommend that the director, New Jersey Office of Public Housing, instruct the Authority to reimburse the capital fund from 2006-NY-1012 9/22/2006 001-D $334,205 the Section 8 program the $401,046 in excess/ineligible capital fund transfers. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting documentation or reimburse its program $582,926 ($547,238 in 2006-CH-1020 9/29/2006 001-A housing assistance and utility allowance payments and $35,688 in $293,425 associated administrative fees) from nonfederal funds for the unsupported payments and associated administrative fees related to the 73 household files cited in this finding. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to review the remaining 717 (779 minus 62) zero-income households as of September 23, 2005, 2006-CH-1021 9/30/2006 002-C to determine whether they had unreported income. For households $254,879 that received excessive housing assistance and utility allowance payments, the Authority should pursue collection and/or reimburse its program the applicable amount from nonfederal funds. Obtain and review support (as identified in recommendation 1D) for $15.1 million in unsupported phase-down funding in fiscal 2006-BO-0001 7/11/2006 001-B years 2004 and 2005, determine the correct amount of phase-down $250,282 funding, and require the public housing agencies to reimburse HUD for any ineligible funding received. We recommend that the director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its public 2007-CH-1001 12/13/2006 001-A $181,513 housing operating fund $181,513 from nonfederal funds for the inappropriate disbursements cited in this finding. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to terminate the program 2006-CH-1021 9/30/2006 002-D housing assistance to the applicable households that certified they $162,854 had no income when in fact they had income according to HUD’s system. 98 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Commonwealth to provide documentation to 2006-PH-1013 9/18/2006 001-B substantiate the eligibility of $150,000 provided to Southampton or $125,000 repay the HOME program from nonfederal funds. We recommend that the director of HUD’s Detroit Office of Public Housing require the Commission to provide documentation to 2006-CH-1010 5/18/2006 001-A support the $206,224 in unsupported program disbursements cited $115,149 in this finding or reimburse its program from nonfederal funds for the applicable amount. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $80,776 ($49,034 for the overpayment of housing assistance and 2006-CH-1020 9/29/2006 001-B utility allowance payments for 34 households and $31,742 in $75,817 administrative fees associated with the overpayment and underpayment of housing assistance and utility allowance payments for 48 households) from nonfederal funds. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from the applicable households or reimburse its program $62,365 ($51,244 2006-CH-1021 9/30/2006 002-A $62,365 in housing assistance and $11,121 in utility allowances) from nonfederal funds for the overpayment of housing assistance and utility allowance payments cited in this finding. We recommend that the director, Office of Public Housing, New 2006-NY-1008 6/30/2006 001-C York Hub seek repayment of the $49,483 in ineligible and $48,584 erroneous housing assistance payments., We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting documentation or reimburse its program $47,463 ($43,435 in 2006-CH-1021 9/30/2006 003-A housing assistance payments plus $4,028 in related administrative $47,463 fees) from nonfederal funds for the unsupported housing assistance payments and related administrative fees for the five households cited in this finding. We recommend that the director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its program $236,157 ($31,802 in imputed interest, $28,802 in forgiven interest, 2006-CH-1016 9/26/2006 001-A $27,726 $111,073 for the land purchase, $42,322 in cash, and $22,158 in improper expenses) from nonfederal funds for the inappropriate use of its sales proceeds for the Corporation. We recommend that the director, New Jersey Office of Public Housing, require the Authority to provide additional documentation for the $23,592 in unsupported costs related to managerial services 2006-NY-1010 9/20/2006 002-B $23,592 and legal and auditing costs so that HUD can determine the eligibility of these items. Any amounts determined to be ineligible should be repaid. We recommend that the director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its Coordinators 2007-CH-1001 12/13/2006 002-A $18,757 funds $18,757 from nonfederal funds for the inappropriate payment of salary and benefits cited in this finding. 99 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the director of HUD’s Cleveland Office of Public Housing require the Authority to provide documentation to 2007-CH-1001 12/13/2006 002-B support the use of $25,033 in salary and benefits expenses for its $4,963 former counselor was eligible or reimburse its Coordinators funds from nonfederal funds as appropriate. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2006-CH-1021 9/30/2006 001-A $27,729 ($27,201 in housing assistance and $528 in utility $219 allowances) from nonfederal funds for the overpayment of housing assistance and utility allowance payments cited in this finding. We recommend that the director, Rhode Island Multifamily Program Center pursue the recovery of double the amount of 2006-BO-1004 3/3/2006 001-A $533,954 in ineligible costs to identities-of-interest from the $0 owner/management agent, as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center obtain adequate documentation from the owner/management agent for the cash disbursements for 2006-BO-1004 3/3/2006 001-B $0 unsupported costs of $21,871 costs to identities-of-interest or pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center pursue the recovery of double the amount of 2006-BO-1004 3/3/2006 001-C $426,375 in unnecessary costs to identities-of-interest and non- $0 identities-of-interest from the owner/management agent, as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily 2006-BO-1004 3/3/2006 001-D Program Center pursue the recovery of $397,895 in ineligible costs $0 to non-identities-of-interest. We recommend that the director, Rhode Island Multifamily Program Center obtain justification from the owner/management 2006-BO-1004 3/3/2006 001-E agent supporting the cash disbursements for unsupported costs of $0 $266,574 to non-identities-of-interest or pursue recovery of this amount. We recommend that the director, Rhode Island Multifamily Program Center take appropriate action to prevent payments of ineligible and unnecessary cash disbursements after our audit 2006-BO-1004 3/3/2006 001-F period, including the payment of questionable accrued payables to $0 identities-of-interest of $95,800. If they have been paid, pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center take appropriate action to prevent payments of 2006-BO-1004 3/3/2006 001-G $0 ineligible accrued payables to non-identities-of-interest of $92,299. If they have been paid, pursue the recovery of this amount. We recommend that the director, Rhode Island Multifamily Program Center obtain adequate documentation from the 2006-BO-1004 3/3/2006 001-H $0 owner/management agent for the $4,388 in unsupported accrued payables or pursue recovery of this amount. 100 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the director, Rhode Island Multifamily Program Center obtain adequate documentation from the owner/management agent for cash disbursements of $1,053,550 in 2006-BO-1004 3/3/2006 002-A $0 unsupported partnership management fees paid to the owner or pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center obtain adequate documentation from the owner/management agent for unsupported accrued payables of 2006-BO-1004 3/3/2006 002-B $0 $108,600 payable to the owner or pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center obtain justification from the owner/management agent supporting the cash disbursements for unsupported costs paid 2006-BO-1004 3/3/2006 002-C $0 to the owner/management agent of $1,248,668 or pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director, Rhode Island Multifamily Program Center take appropriate action to prevent unnecessary cash disbursements after our audit period, including the payment of 2006-BO-1004 3/3/2006 002-D questionable accrued payables to the management agent of $0 $40,077. If they have been paid, pursue the recovery of double this amount as stipulated in 12 U.S.C. [United States Code] Sec. 1715z- 4a. We recommend that the director, Rhode Island Multifamily Program Center pursue recovery of double the amount of $112,254 2006-BO-1004 3/3/2006 002-E $0 in questionable salary payments paid to the assistant administrator as stipulated in 12 U.S.C. [United States Code] Sec. 1715z-4a. We recommend that the director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program 2007-CH-1011 7/23/2007 001-A $1,636,075 administrative fee reserve $1,636,075 from the appropriate funds for the excessive administrative expenses cited in this finding. We recommend that the director of HUD’s Cleveland Office of Public Housing require the Authority to provide documentation to support that the $913,365 in refunding savings cited in this finding 2007-CH-1005 3/23/2007 001-A was used to provide affordable, decent, safe, and sanitary housing $913,365 to very low-income households or reimburse from nonfederal funds its refunding savings account(s), as appropriate, to be able to trace its use of the savings. We recommend that the director of HUD’s Office of Public Housing instruct the Authority to reimburse the capital fund 2007-NY-1011 8/17/2007 001-A $818,536 program $818,536 related to the administrative and management improvement costs that exceeded HUD limitations. We recommend that the director of HUD’s Office of Public Housing instruct the Authority to reimburse HUD for the excessive 2007-NY-1006 5/24/2007 001-A $574,416 administrative fee charge of $692,990 in capital funds in accordance with the procedures described in 24 CFR 905.120. 101 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the director of HUD’s Office of Public Housing instruct the Authority to reduce the Authority’s future 2007-NY-1011 8/17/2007 001-C $505,631 capital funds by $632,039 related to the fiscal years 2003 and 2004 capital funds transferred to the low-rent public housing program. Reimburse from nonproject sources $656,536 for salary and benefits that represented Foundation costs. The repayments should 2007-AT-1010 8/14/2007 001-B $462,199 be deposited to the residual receipt account for each affected project. Repay its low-rent public housing program $834,969 from 2007-PH-1013 9/27/2007 001-B nonfederal funds for the ineligible disbursements related to the $384,969 credit union. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its Public 2008-CH-1001 11/19/2007 001-D $292,820 Housing program $337,870 from nonfederal funds for the rental income received by its nonprofit from the Turnkey III properties. Reimburse from nonproject sources $458,101 that the Foundation 2007-AT-1010 8/14/2007 001-C paid itself for excessive janitorial costs. The repayments should be $238,685 deposited to the residual receipt account for each affected project. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting documentation or reimburse its program $140,521 ($126,224 in 2007-CH-1010 7/20/2007 002-C housing assistance and utility allowance payments plus $14,297 in $140,521 related administrative fees) from nonfederal funds for the unsupported payments and associated administrative fees related to the 20 households cited in this finding. Repay from nonfederal sources, the $147,934 improperly spent for 2007-KC-1004 1/12/2007 002-A $124,339 employee leave. Reimburse current tenants for any portion of the $93,677 they paid for prohibited parking fees. Parking fees collected from tenants 2007-AT-1010 8/14/2007 002-A who have moved and for whom it is not feasible to locate them to $93,677 make the payments should be deposited to the projects’ residual receipt accounts. We also recommend that the director, Buffalo Office of Multifamily Housing, determine the disposition of the escrowed funds and bonds (consisting of $50,000 in cash, a $25,000 bond and $10,062 in accrued bond interest) set aside for the developer- 2007-NY-1003 3/12/2007 001-F $85,062 related lawsuit. After determining the proper disposition of these funds HUD should determine whether to remove the funds from the project’s books and records. This would allow $85,062 in encumbered funds to be available for paying operating expenses. We recommend that the director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting 2007-CH-1002 1/25/2007 002-A documentation or reimburse its program $166,782 from nonfederal $80,637 funds for the unsupported operating subsidies related to the 51 household files cited in this finding. 102 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $54,024 from nonfederal funds ($47,295 for housing assistance 2007-CH-1014 9/24/2007 001-B $50,874 payments and $6,729 in associated administrative fees) for the 28 units that materially failed to meet HUD’s housing quality standards. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2007-CH-1010 7/20/2007 002-A $39,428 in housing assistance from nonfederal funds for the $39,428 overpayment of housing assistance and utility allowance payments cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2007-CH-1014 9/24/2007 001-F $52,421 from nonfederal funds in associated administrative fees for $37,831 the 402 units that were more than 30 days late in receiving their annual inspections. Reimburse from nonproject sources any portion of $31,905 in parking fees that it cannot support as representing necessary and 2007-AT-1010 8/14/2007 001-F $31,905 reasonable project costs. The repayments should be deposited to the residual receipt account for each affected project. Reimburse from nonproject sources $26,306 that the Foundation paid itself for excessive retirement plan costs. The repayments 2007-AT-1010 8/14/2007 001-E $26,306 should be deposited to the residual receipt account for each affected project. We recommend that the director of the Buffalo Office of Multifamily Housing instruct the owner and agent to negotiate a management fee that is reasonable and commensurate with the 2007-NY-1003 3/12/2007 002-A $25,974 services that are provided. The management fee should not exceed an amount ordinarily paid for such services, resulting in $25,974 in cost savings. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its program $38,537 2007-CH-1016 9/28/2007 001-B from nonfederal funds ($35,918 for housing assistance payments $7,068 and $2,619 in associated administrative fees) for the 38 units that materially failed to meet HUD’s housing quality standards. Reimburse from nonproject sources $6,352 representing 2007-AT-1010 8/14/2007 001-G Foundation expenses. The repayments should be deposited to the $6,352 residual receipt account for each affected project. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $30,360 from nonfederal funds ($27,944 for housing assistance 2007-CH-1010 7/20/2007 001-A $6,304 payments and $2,416 in associated administrative fees) for the 35 units that materially failed to meet HUD’s housing quality standards. 2007-KC-1004 1/12/2007 003-C Repay $29,095 in unauthorized vehicle allowances. $5,501 103 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the director of HUD’s Detroit Office of Public Housing require the Commission to reimburse the applicable program $27,578 ($9,644 for the overpayment of housing 2007-CH-1012 8/3/2007 001-B assistance and utility allowances and $17,934 in administrative fees $5,160 associated with the overpayment and underpayment of housing assistance and utility allowances for the 48 households) from nonfederal funds. We also recommend that HUD review and approve the negotiated 2007-NY-1003 3/12/2007 002-B management fee to ensure that it is reasonable in relation to the $0 services provided to the project. We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to review the remaining 36 (70 minus 34) zero-income households as of September 11, 2006, 2007-CH-1010 7/20/2007 003-C to determine whether they had unreported income. For households $0 that received excessive housing assistance and utility allowance payments, the Authority should pursue collection and/or reimburse its program the applicable amount from nonfederal funds. Execute loan agreements between the City and its Agency indicating specific loan terms for repayment of the loans totaling 2009-LA-1005 12/30/2008 002-A $139,201,997 ($63,072,960 principal and $76,129,037 interest), $64,039,600 which would result in an estimated additional recovery of $7,269,854 in CDBG program income over the first year. Review all of the remaining 392 grants coded ineligible or lacking 2008-AO-1002 1/30/2008 001-C an eligibility determination and either support or repay $14,697,812 $4,615,112 disbursed for them. We recommend that the Director of HUD's Detroit Office of Public Housing require the Commission to reimburse its Public Housing 2008-CH-1008 4/30/2008 001-D $700,454 program $745,436 from nonfederal funds for the improper use of funds cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to provide supporting 2008-CH-1006 4/15/2008 002-D documentation or reimburse its program $587,022 from nonfederal $587,022 funds for the unsupported payments related to the 59 households cited in this finding. Repay $743,344 disbursed for the 17 ineligible grants to its Road 2008-AO-1002 1/30/2008 001-A $403,904 Home program. Require the Authority to collect $274,914 from the Development 2008-AT-0803 9/30/2008 001-A $274,914 Corporation and reimburse its operating fund. Request from responsible management agents supporting documentation for the $265,412 in unsupported costs charged to the project so that the eligibility of these costs can be determined. 2009-BO-1002 11/6/2008 001-E For any amounts determined to be ineligible, the project owner $265,412 should repay or seek reimbursement from responsible management agent to pay the project from non-project funds or remove payables from the project’s accounting. 104 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provide support for $523,335 in payments made for various purchases or repay any unsupported costs to its public housing 2009-AT-1001 10/20/2008 001-C $210,174 operating and capital improvement programs from nonfederal funds. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program $192,854 ($113,973 for overpaid housing assistance, $17,257 for 2008-CH-1006 4/15/2008 002-A $192,854 overpaid utility allowances, and $61,624 in associated administrative fees) for the 63 households cited in this finding from nonfederal funds. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to provide supporting documentation or reimburse its program $214,157 ($194,694 in 2008-CH-1007 4/18/2008 001-D housing assistance and utility allowances plus $19,463 in related $190,363 administrative fees) from nonfederal funds for the unsupported payments and associated administrative fees related to the 30 households cited in this finding. Repay $185,764 to it public housing operating and capital 2009-AT-1001 10/20/2008 001-A improvement programs for ineligible payments made to or on $185,764 behalf of the former board chairman from nonfederal funds. Provide support for $182,369 in payments made to or on behalf of the former executive director and former lease enforcement officer 2009-AT-1001 10/20/2008 001-B $177,369 or repay any unsupported costs to its public housing operating and capital improvement programs from nonfederal funds. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting documentation or reimburse its Public Housing program $153,223 2008-CH-1003 2/15/2008 001-A $153,223 ($22,092 for household eligibility and $131,131 for continued occupancy) from nonfederal funds for the unsupported operating subsidies related to the 36 household files cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to provide documentation to support its allocation of time spent correctly administering its Family Self-Sufficiency Program or reimburse its program’s 2008-CH-1007 4/18/2008 003-G $151,661 undesignated fund balance for administration account from nonfederal funds the appropriate portion of the $151,661 in Coordinator funds received for fiscal years 2004 and 2005 that were incorrectly administered. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide support that the use of $82,774 ($27,286 to three family members, $23,418 to two independent contractors, $22,150 to CLM Architects, and $9,920 to 2008-CH-1003 2/15/2008 002-B $82,774 Harold Dunne, Attorney at Law) in Public Housing program funds for housing maintenance, cleaning, and professional services were reasonable or reimburse its program from nonfederal funds for the applicable amount. Reimburse or require the responsible management agent(s) to reimburse $64,601 to the project for ineligible project costs of 2009-BO-1002 11/6/2008 001-B $64,601 $15,331 and for ineligible administrative, site supervisor, HUD 202 and site management fees of $49,270. 105 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting 2008-CH-1003 2/15/2008 002-A documentation for the use of $61,202 for work performed under its $61,202 Public Housing Capital Fund program or reimburse its program from nonfederal funds for the applicable amount. Reimburse its program $55,047 from nonfederal funds ($50,356 for housing assistance payments and $4,691 in associated 2008-CH-1016 9/29/2008 001-B $51,815 administrative fees) for the 28 units that materially failed to meet HUD’s housing quality standards. Require the Authority to obtain repayment from Whispering Pines for the expenses paid on Whispering Pines’ behalf, including the $35,521 for direct costs of the assisted living program and 2008-KC-1002 2/20/2008 001-B $51,282 approximately $18,711 for its share of utility expenses that had not been repaid to the Authority as of July 2007. Repayments should be deposited into the Authority’s public housing program account. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2008-CH-1005 4/10/2008 001-A $49,471 $52,737 from nonfederal funds for the overpayment of housing assistance and utility allowances cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program $47,543 ($36,748 for housing assistance payments and $10,795 for 2008-CH-1006 4/15/2008 003-A $47,543 utility allowance payments) from nonfederal funds for the inappropriate housing assistance payments related to the 17 households cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from the 2008-CH-1005 4/10/2008 003-A applicable households or reimburse its program $46,619 from $46,619 nonfederal funds for the overpayment of housing assistance and utility allowances cited in this finding. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its program $46,478 2008-CH-1013 9/24/2008 001-A $46,478 from nonfederal funds for the 34 units cited in this finding that were in material noncompliance. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program $41,094 from nonfederal funds ($37,280 for program housing 2008-CH-1006 4/15/2008 001-A assistance payments and utility allowances plus $3,814 in $41,094 associated administrative fees) for the 38 units that materially failed to meet HUD’s housing quality standards and/or the Corporation’s housing standards. Ensure that $23,499 for unreasonable late charges on fuel bills and sewer lien penalties and $6,779 for unreasonable payments to a 2009-BO-1002 11/6/2008 001-D $30,278 lawn care company be reimbursed to the project from non-project funds. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Public Housing 2008-CH-1003 2/15/2008 001-B program $28,663 ($16,262 plus $12,401) from nonfederal funds for $28,663 the lost total household payments for 23 households cited in this finding. 106 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to pursue collection from the 2008-CH-1007 4/18/2008 002-A applicable households or reimburse its program $28,267 from $28,267 nonfederal funds for the overpayment of housing assistance and utility allowances cited in this finding. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its program $29,148 2008-CH-1013 9/24/2008 002-A from nonfederal funds for the seven long-term vacant units it $26,538 inappropriately included in its program operating subsidy calculations. Require the Authority to collect the correct amount of public housing rents owed by Whispering Pines (including approximately 2008-KC-1002 2/20/2008 002-C $22,050 $25,000 owed as of October 2007). Repayments should be deposited into the Authority’s public housing program account. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to provide documentation to support its allocation of time spent correctly administering the 2008-CH-1005 4/10/2008 002-E Family Self-Sufficiency Program or reimburse its Coordinator $21,965 funds from nonfederal funds the appropriate portion of the $72,235 used when the Authority’s Family Self-Sufficiency Program was incorrectly administered. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its program 2008-CH-1007 4/18/2008 002-C $21,411 from nonfederal funds for the overpayment of housing $21,411 assistance and utility allowances due to not including household reported income. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to provide documentation to support its use of funds for the six Family Self-Sufficiency 2008-CH-1007 4/18/2008 003-C $14,928 Program participants whose contracts were extended contrary to HUD’s requirements or reimburse its program $14,928 from nonfederal funds. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2008-CH-1005 4/10/2008 001-C $14,603 $14,603 from nonfederal funds for the inappropriate administrative fees related to the 32 households in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2008-CH-1005 4/10/2008 002-A $14,576 $14,576 from nonfederal funds for the escrow funds overpaid to the seven participants cited in this finding. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse the appropriate 2008-CH-1003 2/15/2008 001-C $13,070 households $13,070 for the underpayment of housing assistance and utility allowance payments cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to pursue collection from the applicable households or reimburse its program $12,505 from 2008-CH-1007 4/18/2008 002-B $12,505 nonfederal funds for the overpayment of housing assistance and utility allowances cited in this finding related to the underreporting of income. 107 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program 2008-CH-1006 4/15/2008 002-C $9,815 $9,815 from nonfederal funds for the program administrative fees related to the underpaid housing assistance payments. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Public Housing 2008-CH-1003 2/15/2008 001-F $4,532 program $7,932 in operating subsidies from nonfederal funds for the two properties sold by the City. Require the Authority to obtain repayment from Whispering Pines or other nonfederal sources for penalties and finance charges, 2008-KC-1002 2/20/2008 001-C $1,951 including $4,901 identified as of July 2007. Repayments should be deposited into the Authority’s public housing program account. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2008-CH-1005 4/10/2008 003-B $1,668 $11,225 from nonfederal funds for the inappropriate administrative fees related to the 47 households cited in this finding. Ensure that the Authority collects rent retroactively from Whispering Pines for the period from November 2005 to the 2008-KC-1002 2/20/2008 001-E $0 present and in doing so, consider the amount collected for utilities during this same period as recommended in recommendation 1B. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to determine the appropriate administrative fees for the applicable households for which it is 2008-CH-1006 4/15/2008 002-E $0 unable to provide supporting documentation cited in recommendation 2D and reimburse its program the applicable amount from nonfederal funds. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to review the files for the 20 participants whose contracts of participation expired between July 2008-CH-1007 4/18/2008 003-D $0 1, 2005, and June 30, 2007, to support its use of program funds for the escrow accounts, or reimburse its program the applicable amount from nonfederal funds. Take appropriate sanctions against Heartland Funding for violating 2008-KC-1006 9/8/2008 001-A $0 RESPA. Refer Heartland Funding to HUD’s Mortgagee Review Board for 2008-KC-1006 9/8/2008 001-B $0 review and appropriate actions. $0 Require Heartland Funding to adequately train its managers and 2008-KC-1006 9/8/2008 001-D staff on RESPA requirements. 108 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Seek appropriate administrative action for 202 active loans with original mortgage amounts of $27,773,733 if the lenders cannot provide documentation, such as a letter of map amendment/revision, to show that the properties are not located in FEMA’s designated special flood hazard areas or the required elevation certification showing that the properties meet FEMA’s 2008-CH-0002 9/29/2008 001-A elevation requirements and are covered by flood insurance. The $0 unpaid principal balances for the 202 loans as of July 2, 2008, totaled $26,954,812. The estimated risk to HUD is $315,371 based on FHA’s average loss rate of 39 percent based on the 2007 actuarial review of the FHA insurance fund for fiscal year 2007 and the average percentage of loans that resulted in HUD-paid claims for calendar years 2000 through 2007 of 3 percent. Seek reimbursement from the applicable lenders for any future losses from a $109,482 claim paid on loan 292-4652151 as of August 31, 2008, if the lenders fail to provide the elevation 2008-CH-0002 9/29/2008 001-B certifications or letters of map revision/amendment. The projected $0 loss to HUD is $42,698 based on the claims paid and FHA’s average loss rate of 39 percent based on the 2007 actuarial review of the FHA insurance fund for fiscal year 2007. Seek reimbursement of $73,989 ($47,751 plus $26,238) from the lender for the actual loss incurred on one loan 495-7332855 and the 2008-CH-0002 9/29/2008 001-C claim paid due to a preforeclosure sale for loan 221-3794753, $0 respectively, if the lender fails to provide the elevation certification or letter of map revision/amendment. Require the applicable lenders for the 317 loans lacking evidence of flood insurance to provide documentation showing that the 2008-CH-0002 9/29/2008 001-D properties have flood insurance or are no longer located in FEMA’s $0 designated special flood hazard areas or seek appropriate administrative action. Apply appropriate sanctions if the Authority does not comply with 2008-AT-0803 9/30/2008 001-B $0 its payback agreement. Ensure that field offices require participating jurisdictions to close out in a timely manner $62,201,487 in activities reflected in its 2009-AT-0001 9/28/2009 001-A $62,201,487 open activities report that are more than five years old and cancel the fund balances. Require participating jurisdictions to reimburse HUD from nonfederal sources any portion of the $11,634,558 for activities listed in appendix C that HUD determines had been terminated, 2009-AT-0001 9/28/2009 001-B voluntarily or involuntarily. When making this determination, $11,634,558 HUD should consider the participating jurisdictions’ lack of timely physical completion and/or production of affordable housing occupied by HOME income-eligible individuals. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to provide supporting 2009-CH-1002 1/23/2009 003-B documentation or reimburse its program $2,081,512 from $2,081,512 nonfederal funds for the 11 Section 8 project-based projects cited in this finding. 109 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director, Buffalo Office of Community Planning and Development, require the City of Rome to establish a schedule for documenting completion of the General Cable activity 2009-NY-1012 5/20/2009 001-B and the jobs retained and/or created at the site and reimburse HUD $1,100,000 any portion of the $2,953,754 in CDBG funds expended on the activity for costs that do not qualify as meeting the job creation requirement. Provide documentation to support the source and use of $801,000 transferred into and withdrawn from its nonfederal account or 2010-PH-1801 12/17/2009 002-B $458,224 reimburse HUD or the appropriate programs from nonfederal sources for any amounts that it cannot support. Either support or repay $441,027 disbursed for five unsupported 2009-AO-1002 5/5/2009 001-B $441,027 grants. Repay $294,060 disbursed for three ineligible grants to its Road 2009-AO-1002 5/5/2009 001-A $294,060 Home program. Require the Authority to propose a legal solution regarding the ownership structure of the nonprofit organization. If a legal solution is not possible, the Director should require the Authority to 2009-AT-1009 7/20/2009 002-A $256,950 repay its public housing program $221,531 in nonfederal funds or the current amount owed that the Authority advanced to its nonprofit organization. Deposit $254,470 for the ineligible disbursements $236,439 + $12,559 + $5,472. Cited in this report into the project’s reserve for 2009-BO-1009 8/4/2009 001-A $254,470 replacement or a restricted capital account that requires HUD approval for the release of the funds. Provide documentation to support the $282,000 expended to acquire and dispose of the vacant commercial building or reimburse 2010-PH-1801 12/17/2009 001-B $248,160 the applicable program from nonfederal sources for any amounts that it cannot support. Repay $228,930 disbursed for five ineligible grants to its Road 2009-AO-1001 5/5/2009 001-A $228,930 Home program. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Agency to reimburse its program 2009-CH-1002 1/23/2009 003-A $211,680 from nonfederal funds for the Section 8 administrative $211,680 fees received related to its inappropriate program administration cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to review the remaining 284 (333 minus 49) households claiming zero income as of October 2, 2008, to determine whether the households had unreported income. 2009-CH-1007 4/28/2009 002-D $183,889 For households that received excessive housing assistance and utility allowance payments, the Authority should pursue collection and/or reimburse its program the applicable amount from nonfederal funds. Provide documentation to support payments totaling $180,000 for 2010-PH-1801 12/17/2009 001-D insurance or reimburse HUD or the applicable program from $180,000 nonfederal sources for any amounts that it cannot support. 110 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its low-rent 2009-CH-1011 7/31/2009 003-A housing program $136,500 from nonfederal funds for the former $136,500 executive director’s payments as the resident agent of the nonprofits in addition to his salary. Repays the voucher program fund from nonfederal sources $64,528 2009-KC-1005 3/2/2009 001-B $58,059 in improper housing assistance. Reimburse HUD’s Federal Housing Administration insurance fund 2009-LA-1008 3/18/2009 001-A $73,750 less amounts repaid after the completion of the audit $52,875 ($15,000) for the ineligible disbursements cited in this report. We recommend that the Director, Office of Public Housing, New 2009-NY-1011 5/15/2009 002-G York, instruct Authority officials to seek repayment of $50,237 in $50,237 ineligible housing assistance payments Provide documentation to support payments totaling $132,000 for 2010-PH-1801 12/17/2009 001-C vehicle services or reimburse HUD or the applicable program from $29,440 nonfederal sources for any amounts that it cannot support. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from the 2009-CH-1007 4/28/2009 001-C applicable households or reimburse its program $31,668 from $26,044 nonfederal funds for the overpayment of housing assistance due to unreported income. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2009-CH-1007 4/28/2009 001-A $25,074 $25,074 from nonfederal funds for the overpayment of housing assistance cited in this finding. Reimburse HUD’s program $66,934 from nonfederal funds ($60,637 for housing assistance payments and $6,297 in associated 2009-PH-1011 7/30/2009 001-B $25,014 administrative fees) for the 37 units that materially failed to meet HUD’s housing quality standards. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from the 2009-CH-1007 4/28/2009 002-A applicable households or reimburse its program $41,044 ($41,569 $19,583 minus $525) from nonfederal funds for the overpayment of housing assistance cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2009-CH-1007 4/28/2009 001-H $19,071 $19,071 from nonfederal funds for the improper administrative fees related to the households cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to provide support or 2009-CH-1007 4/28/2009 001-D reimburse its program $16,487 from nonfederal funds for the $14,336 unsupported overpayment of housing assistance and utility allowances for the nine households cited in this finding. Pursue double damages remedies against the responsible parties for the ineligible/inappropriate and applicable portion of the 2009-BO-1009 8/4/2009 001-H $0 unsupported disbursements that were used in violation of the project’s regulatory agreement. 111 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Pursue civil money penalties and administrative sanctions, as appropriate, against the owner, operator, and/or their 2009-BO-1009 8/4/2009 001-I $0 principals/owners for their part in the regulatory violations cited in this report. We recommend that the Deputy Assistant Secretary for Single Family Housing instruct the Office of Single Family Asset 2009-NY-0002 9/1/2009 001-A $0 Management to develop and implement controls to ensure that the final Asset Control Area regulations are issued in a timely manner. Revise the PBCA initiative guides (e.g., the monitoring and evaluation guide and the Section 8 guidebook) to clarify 2009-SE-0003 9/1/2009 001-A inconsistencies or unclear guidance for monitoring the PBCAs $0 including clarification of PBCA performance that requires issuing incentive fees or assessment of disincentives. Ensure that HUD staff follow the revised guidance when conducting the annual compliance reviews and monthly remote 2009-SE-0003 9/1/2009 001-B $0 reviews to ensure that it receives quality work and the best value for funds spent on contract administration activities. Reassess the resources allocated to overseeing the PBCAs to ensure 2009-SE-0003 9/1/2009 001-C $0 that the resources are sufficient to monitor their performance. Recapture any shortfalls generated by the closure and deobligation 2009-AT-0001 9/28/2009 001-C $0 of fund balances associated with the open activities. Establish and implement procedures to monitor the accuracy of commitments that participating jurisdictions enter into the information system. These procedures should include expanding 2009-AT-0001 9/28/2009 002-A $0 HUD’s risk rating system to include risk factors for this review area and development of an appropriate monitoring checklist to ensure consistency and thoroughness of coverage among field offices. Review the 510 obligations which were not distributed to the program offices during the open obligations review and deobligate 2011-FO-0003 11/15/2010 002-C $27,500,000 amounts tied to closed or inactive projects, including the $27.5 million we identified during our review as expired or inactive. Determine the eligibility of the $9,027,082 disbursed for projects with signs of slow progress and reevaluate the feasibility of these activities. The Government of Puerto Rico must reimburse HUD 2010-AT-1011 8/25/2010 001-B $9,027,082 from non-Federal funds for activities that HUD determines to have been terminated and reprogram and put to better use any unexpended funds associated with the terminated activities. Require the authority to provide support showing the eligibility and reasonableness of $9,784,157 (Footnote 2: Total disbursements of $13,371,572 were adjusted to consider $3,576,521 questioned in 2010-AT-1009 8/13/2010 001-A recommendation 1B and $10,894 questioned in recommendation $4,892,078 1C.) disbursed for the surveillance system and multifunction printers or reimburse this amount to its operational fund account or HUD, as appropriate, from non-Federal funds. Require the Government of Puerto Rico or its designee to reimburse the HOME program from non-Federal funds $4,428,179 2010-AT-1011 8/25/2010 001-A $4,428,179 for ineligible expenses and activities that defaulted or were terminated without generating the intended benefits. 112 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting documentation or reimburse its program $3,861,652 ($3,483,294 in 2010-CH-1008 6/15/2010 001-A housing assistance payments plus $378,358 in associated program $3,861,652 administrative fees) from non-Federal funds for the housing assistance payments and associated administrative fees for the unsupported program projects cited in this finding. Require the Department to reimburse its HOME treasury account 2010-AT-1006 6/11/2010 001-A from non-Federal funds $2,003,356 for disbursements associated $2,003,356 with terminated activities that did not meet HOME objectives. Require the Authority to reimburse the net restricted assets fund 2010-AT-1010 8/23/2010 001-B account from non-Federal funds the $2,583,244 or the current $1,969,809 amount owed. Require the authority to reimburse its operational fund account or HUD, as appropriate, from non-Federal funds $3,576,521 paid for 2010-AT-1009 8/13/2010 001-B $1,788,260 equipment that did not provide the intended benefits and/or was unaccounted for. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to review the remaining 131 (202 minus 71) activities to determine whether the households were income eligible and/or homes met HUD’s 2011-CH-1003 12/27/2010 001-D $1,580,000 property standards requirements at the time of occupancy. For the activities that received improper assistance, the City should reimburse its Program the applicable amount from non-Federal funds. Repay $1,300,000 in HOME project funds, plus any interest due, to 2010-LA-1013 7/8/2010 001-A $1,300,000 the HOME U.S. Treasury account. Require the Department to collect $1,269,032 associated with the 2010-AT-1006 6/11/2010 003-A 17 overdue loans and put the program income generated to better $1,269,032 use in accordance with HUD requirements. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to provide supporting documentation or reimburse its Program from non- Federal funds, as appropriate, for the $760,000 in Program and/or 2011-CH-1003 12/27/2010 001-B Initiative funds used for the 60 households and/or activities for $720,000 which the City did not have sufficient income documentation to demonstrate that households were income eligible and/or final inspection reports or certifications supporting that activities met HUD’s property standards requirements at the time of occupancy. 113 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act (31 U.S.C 3801-3812) and/or civil money penalties (24 CFR 30.35) against Security Atlantic and/or its principals for incorrectly certifying to the integrity of the data or that due diligence was exercised during the underwriting of six loans that 2010-NY-1806 9/22/2010 001-A $553,730 resulted in actual losses of $452,217 on five loans and the potential loss of $101,513 on one loan, which could result in affirmative civil enforcement action of approximately $1,152,460. Double damages for actual loss amounts related to five loans ($452,217) and the potential loss ($101,513) related to one loan ($553,730 x 2 = $1,107,460) plus $45,000, which is a $7,500 fine for each of the six loans with material underwriting deficiencies. Require the Authority to provide support that $446,918 in contracts 2010-AT-1003 4/28/2010 001-I were fairly and openly competed or reimburse its public housing $446,918 and capital improvement program from nonfederal funds. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $360,864 ($268,795 in housing assistance payments plus $92,069 2010-CH-1008 6/15/2010 002-A $360,864 in program-associated administrative fees) from non-Federal funds for the overpaid housing assistance and associated administrative fees cited in this finding. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to implement adequate procedures and controls to ensure that if the ownership of additional homes acquired under its Afford-A-Home program is transferred through foreclosures, the City recaptures the entire amount of the Program and/or Initiative funds through the 2011-CH-1003 12/27/2010 002-B $300,000 receipt of net proceeds from the sales of the homes and/or reimburses its Program from non-Federal funds for the Program and/or Initiative funds provided to the home buyers, as appropriate. This will ensure that over the next 12 months the City appropriately recaptures Program and/or Initiative funds and/or reimburses its Program from non-Federal funds totaling at least $90,000. Deobligate $279,245 in available funds associated with the 2011-PH-1005 12/23/2010 003-B ineligible CHDO and reprogram the funds for other eligible HOME $279,245 activities, thereby putting the funds to better use. Require the Authority to provide support for the $275,282 in capital 2010-AT-1003 4/28/2010 001-J fund drawdowns or reimburse its capital improvement program $275,282 from nonfederal funds. Require the Authority to provide support for $264,229 in 2010-AT-1003 4/28/2010 001-F disbursements or repay any unsupported costs to its public housing $264,229 operating and capital improvement program from nonfederal funds. 114 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against Mac-Clair and/or its principals for 2010-CH-1808 7/22/2010 001-A $243,000 incorrectly certifying to the integrity of the data or that due diligence was exercised during the underwriting of seven loans that resulted in losses to HUD totaling $562,551 which could result in affirmative civil enforcement action of approximately $1,177,602. Provide documentation to demonstrate that $1,945,050 was used 2010-PH-1008 5/11/2010 001-B for eligible activities that met the criteria of its HUD-approved $227,772 budget line items or repay HUD from non-Federal funds. We recommend that the Director, Office of Public Housing, New York, instruct the Authority to reimburse from non-Federal funds 2010-NY-1011 4/7/2010 001-A $219,715 the $219,715 expended for ineligible costs as follows; $215,402 to HUD, and $4,313 to the 2007 ROSS Family grant. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $211,573 ($188,722 in housing assistance payments plus $22,851 2010-CH-1008 6/15/2010 003-A $211,573 in associated program administrative fees) from non-Federal funds for the housing assistance and associated administrative fees for the 14 households cited in this finding. Require the Authority to account for $134,889 in tenant rent 2010-AT-1003 4/28/2010 001-D receipts or repay any unsupported amounts to its public housing $134,889 operating program from nonfederal funds. We recommend that the Director, Office of Public Housing, New York, instruct the Authority to provide documentation for the unsupported Family Self-Sufficiency and ROSS grant program 2010-NY-1011 4/7/2010 001-B $100,637 costs of $100,637 so that HUD can make an eligibility determination. If adequate documentation cannot be provided, these costs should be repaid from non-Federal funds. Provide documentation to support that payments for goods and services totaling $1,736,962 were fair and reasonable or reimburse 2010-PH-1012 7/27/2010 001-A $82,064 the applicable programs from non-Federal funds for any amounts that it cannot support. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to 2011-CH-1003 12/27/2010 001-A reimburse its Program from non-Federal funds for the $20,000 in $40,000 Program funds inappropriately used to assist activity numbers 10372 and 10793. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $34,650 ($33,632 in housing assistance payments plus $1,018 in 2010-CH-1008 6/15/2010 001-B $34,650 associated program administrative fees) from non-Federal funds for the inappropriate retroactive payments and associated administrative fees for the two projects cited in this finding. 115 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Authority to take appropriate action to determine whether the income discrepancies are valid and if so, 2010-CH-1007 5/14/2010 003-A pursue collection from the applicable households or reimburse its $32,649 program $43,599 ($32,047 in housing assistance payments plus $11,552 in administrative fees) from non-Federal funds for the overpayment of housing assistance cited in this finding. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to 2011-CH-1003 12/27/2010 002-A reimburse its Program $30,000 from non-Federal funds for the $30,000 three homes that had been sold through a sheriff’s sale and ownership of the homes had been transferred. Require the Authority to support the $27,097 in unreasonable costs 2010-AT-1003 4/28/2010 001-H or reimburse its public housing and capital improvement program $27,097 from nonfederal funds. We recommend that the Director, Office of Public Housing, New York, instruct the Authority to reimburse from non-Federal sources 2010-NY-1010 4/7/2010 002-C $13,355 the low-rent program operating account for the ineligible expenditure of $38,355. We recommend that the Director, Office of Public Housing, New York, instruct the Authority to strengthen controls over payroll processing to ensure that employees properly account for time 2010-NY-1010 4/7/2010 002-B $3,398 worked, employee time records are signed, and adequate segregation of duties is established in compliance with OMB Circular 87. Require the Authority to reimburse its public housing program 2010-AT-1003 4/28/2010 001-G $2,250 $2,250 for ineligible costs using non-federal funds. Pursue all administrative and/or civil monetary penalties for the 2010-BO-0001 2/18/2010 001-O $0 regulatory and contract violations disclosed in this finding. Require the Department to review all grant agreements for each activity entered into HUD’s information system and correct any 2010-AT-1006 6/11/2010 004-B $0 inaccurate information, including funding amount, activity status, and fund type classification. Require the Department to develop and implement a financial management system that permits the tracing of HOME funds to a level which ensures that such funds have not been used in violation 2010-AT-1006 6/11/2010 005-F $0 of the restrictions and prohibitions of applicable statutes and funds in the local account have been used before requesting additional grant funds. Recapture any shortfalls generated by the closure and deobligation of funds associated with recommendations 1C and 1D that do not meet statutory requirements for the timely commitment and 2010-AT-1011 8/25/2010 001-E $0 expenditure of funds pursuant to the National Defense Authorization Act of 1991 and/or Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended. Cease the changes being made to IDIS for the HOME program 2011-FO-0003 11/15/2010 001-A related to the FIFO rules until the cumulative effect of using FIFO $0 can be quantified on the financial statements. 116 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Change IDIS so that the budget fiscal year source is identified and 2011-FO-0003 11/15/2010 001-B attached to each activity from the point of obligation to $0 disbursement. Cease the use of FIFO to allocate funds (fund activities) within IDIS and disburse grant payments. Match outlays for activity disbursements to the obligation and budget fiscal source year in 2011-FO-0003 11/15/2010 001-C $0 which the obligation was incurred, and in addition, match the allocation of funds (activity funding) to the budget fiscal year source of the obligation. Include as part of the annual CAPER, a reconciliation of HUD's grant management system, IDIS, to grantee financial accounting 2011-FO-0003 11/15/2010 001-D $0 records on an individual annual grant basis, not cumulatively, for each annual grant awarded to the grantee. Require its subrecipient, Greater Washington Urban League, to implement a system for maintaining time records that track 2011-PH-1005 12/23/2010 004-D $0 employee time charges to the HOME program as required by OMB. Implement an effective communication process with the 2011-PH-1005 12/23/2010 004-E appropriate OCFO staff to ensure compliance with record-keeping $0 requirements for the HOME program. Identify at least annually its universe of HOME program recipients 2011-PH-1005 12/23/2010 004-F and applicable projects to be reviewed and monitor this universe $0 including required onsite visits. Establish a procedure, on an annual basis, on which to base future funds obligated for administrative costs on actual administrative 2011-PH-1005 12/23/2010 004-G expenses. This procedure will ensure that any amount in excess of $0 actual expenditures is recommitted for use on eligible HOME projects. Direct responsible grantees to justify the use of $66,849,658 that it 2012-PH-0001 10/31/2011 001-B disbursed for cancelled Block Grant program activities or repay $66,849,658 HUD from non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to provide documentation to 2011-NY-1010 4/15/2011 002-B justify the $20,143,219 ($4,902,754 + $15,240,465) in unsupported $5,290,982 transactions recorded in the CDBG program income account. Any receipts determined to be unrecorded program income should be returned to the CDBG program, and any expenditures determined to be ineligible should be reimbursed from non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development require the City to suspend incurring costs and/or reimbursing itself for costs paid from the City’s municipal general expense account for economic development activities until HUD determines whether the City has 2011-NY-1010 4/15/2011 002-A the capacity to carry out its CDBG economic development $4,739,829 activities in compliance with HUD regulations. If it is determined that the City lacks the capacity, the $4,739,829 in economic development projects funds remaining for fiscal years 2008, 2009, and 2010 should be reprogrammed so the City can assure HUD that these funds will be put to better use. 117 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Municipality to put to better use $2,854,395 associated 2011-AT-1018 9/28/2011 002-D $2,854,395 with unexpended funds maintained in its local bank account. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $2,828,244 ($2,609,362 in housing assistance payments and 2011-CH-1006 3/23/2011 003-A $2,828,244 $218,882 in associated administrative fees) from non-Federal funds for the housing assistance payments and associated administrative fees for the 146 households cited in this finding. We recommend that HUD’s Acting Deputy Assistant Secretary for Single Family Housing require Ameritrust officials to indemnify HUD against any future losses on the 10 loans with material 2011-NY-1012 8/16/2011 001-A $2,742,810 underwriting deficiencies. The projected loss is $2,742,810 based on HUD’s loss rate of 59 percent of the unpaid principal balance of $4,648,830 Support or repay from non-Federal funds any amounts that it cannot support, including $1,568,245 to its operating fund and 2011-AO-0001 6/22/2011 001-A $973,126 to its capital fund paid for (1) contracts that were $2,541,371 improperly procured, (2) contract overpayments, or (3) contract payments made outside of the contract effective dates. Require the Municipality to reimburse the HOME program from 2011-AT-1018 9/28/2011 002-C $2,449,751 non-Federal funds $2,263,799 paid for ineligible costs. Determine the eligibility of the $2,399,428 disbursed for four projects with signs of slow progress and reevaluate the feasibility of the activities. Total disbursements of $3,483,086 were adjusted 2011-AT-1018 9/28/2011 001-A to consider $713,008 questioned in recommendation 2C and $2,399,428 $370,650 in recommendation 2A. The Municipality must reimburse its HOME program from non-Federal funds for activities that HUD determines to have been terminated. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2011-CH-1006 3/23/2011 002-A $2,303,853 $2,303,853 from non-Federal funds for the unallowable transactions cited in this finding. We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to provide documentation to justify the $1,982,988 in unsupported 2011-NY-1010 4/15/2011 001-C costs associated with street improvement expenditures incurred $1,982,988 between June 2007 and October 2009. Any unsupported costs determined to be ineligible should be reimbursed from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Capital Fund 2011-CH-1012 8/9/2011 002-A $1,539,629 $1,539,629 from non-Federal funds for the ineligible payments cited in this finding. Require the Municipality to submit all supporting documentation showing the eligibility and propriety of $1.5 million charged to the 2011-AT-1006 4/8/2011 002-A $798,000 HOME program for the development of the Villas de Felisa housing project or reimburse the program from non-Federal funds. Require the Municipality to reimburse its HOME program from 2011-AT-1018 9/28/2011 001-C non-Federal funds $766,480 for disbursements associated with $766,480 terminated activities that did not meet HOME objectives. 118 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development require the City to suspend incurring costs and/or reimbursing itself for costs paid from the City’s municipal general expense account for clean and seal activities until HUD determines whether the City has the capacity 2011-NY-1010 4/15/2011 003-A $744,479 to carry out its CDBG clean and seal activities in compliance with HUD regulations. If it is determined that the City lacks the capacity, $744,479 in fiscal year 2010 clean and seal program funds should be reprogrammed so the City can assure HUD that these funds will be put to better use. We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to provide documentation to justify the $716,622 ($545,607 + $24,069 2011-NY-1010 4/15/2011 003-C $716,622 + $146,946) in unsupported clean and seal costs incurred so that HUD can make an eligibility determination. Any costs determined to be ineligible should be reimbursed from non-Federal funds. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to provide supporting documentation or reimburse its Program from non- Federal funds, as appropriate, for the $775,000 in Program funds used for the 41 households and homes for which the City did not have (1) sufficient income documentation to demonstrate that 2011-CH-1014 9/29/2011 001-B households were income eligible and or (2) final inspection reports $655,000 or certifications supporting that homes met HUD’s property standards requirements at the time of occupancy. We did not include $20,000 in Program funds used for activity number 9706 (02) for which the City did not have sufficient income documentation to demonstrate that the household was income eligible since we included it in recommendation 2A of this report. Require the Municipality to submit all supporting documentation showing the allowability and allocability of $1,062,991 disbursed for participant families at the Villas de Felisa housing project or reimburse this amount to its HOME treasury account or HUD, as 2011-AT-1006 4/8/2011 001-C $574,566 appropriate, from non-Federal funds. Footnote 6: Total disbursements of $2,836,000 were adjusted to consider $1,500,000 questioned in recommendation 2A and $273,009ineligible in recommendation 1D. As related to DHAP, support or repay from non-Federal funds any amounts that it cannot support for a total of $435,442 to its operating fund, which includes (1) $140,966 and $96,525 disbursed 2011-AO-0001 6/22/2011 001-J to two DHAP case managers who were paid without an executed $435,442 contract and for unsubstantiated, excessive salary increases; and (2) $197,951 disbursed to the three DHAP case managers for unsubstantiated, excessive salary increases. We recommend that the Director of HUD’s Detroit Office of Public 2011-CH-1012 8/9/2011 002-B Housing require the Commission to return the $411,228 in excess $411,228 capital fund draws cited in this finding. 119 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting 2011-CH-1012 8/9/2011 002-D $394,683 documentation or reimburse its Capital Fund $394,683 from non- Federal funds for the unsupported costs cited in this finding. Review the $756,833 in unsupported costs at the two properties 2011-FW-0002 4/26/2011 001-E identified in this report, determine their validity, and take $386,562 appropriate action. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting 2011-CH-1006 3/23/2011 002-B $330,457 documentation or reimburse its program $330,457 from non- Federal funds for the unsupported transactions cited in this finding. We recommend that the Director of HUD’s New York City Office of Community Planning and Development instruct City officials to provide documentation to justify the $329,937 in unsupported 2012-NY-1002 10/18/2011 001-B $329,937 salary costs incurred between June and September 2010. Any unsupported costs determined to be ineligible should be reimbursed from non-Federal funds We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to 2011-NY-1010 4/15/2011 003-B $304,506 reimburse from non-Federal funds the $304,506 related to ineligible clean and seal code enforcement costs. Require the Municipality to reimburse its HOME treasury account or HUD, as appropriate, from non-Federal funds $273,009 paid for 2011-AT-1006 4/8/2011 001-D $255,989 land acquired for the Villas de Felisa housing project that did not provide the intended benefits. 1A. Require the Municipality to reimburse its HOME treasury account or HUD, as appropriate, from non-Federal funds $4,433,035 for disbursements associated with two activities that did 2011-AT-1006 4/8/2011 001-A $199,037 not meet HOME program objectives. Footnote 5: Total disbursements of $4,444,697 were adjusted to consider $11,662 questioned in recommendation 2B. We recommend that HUD’s Acting Deputy Assistant Secretary for Single Family Housing require Ameritrust officials to reimburse 2011-NY-1012 8/16/2011 001-B HUD for the loss of $183,327 that resulted from the amount of the $183,327 claim and associated fees paid on one loan with material underwriting deficiencies. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its appropriate 2011-CH-1012 8/9/2011 003-A $180,649 programs $180,649 from non-Federal funds for the ineligible payments cited in this finding. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Capital Fund 2011-CH-1012 8/9/2011 004-A $127,050 $127,050 from non-Federal funds for the ineligible payments cited in this finding. We recommend that the Acting Director of the HUD New Jersey Office of Public Housing instruct Authority officials to repay the 2011-NY-1013 9/1/2011 001-A $122,785 $1,052,935 add-on subsidy incentive the Authority received, to which it was not entitled, from 2006 through 2010. 120 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development reimburse from non- 2011-NY-1010 4/15/2011 001-B Federal funds $162,923 ($134,711+$28,212) expended on $120,199 ineligible costs pertaining to street improvement projects not done and a duplicate reimbursement. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its operating fund 2011-CH-1012 8/9/2011 004-B $107,692 $107,692 from non-Federal funds for ineligible payments cited in this finding. We recommend that the Director of HUD’s Chicago Office of Public Housing require the Authority to provide supporting 2011-CH-1006 3/23/2011 003-B documentation or reimburse its program $69,793 from non-Federal $69,793 funds for the O’Hare Modernization Program funds received for the seven households cited in this finding. We recommend that the Director of Public Housing, Detroit Office, require the Commission to reimburse wage restitution of $66,210 to 2011-CH-1018 9/30/2011 003-A $66,210 its force account staff and provide proof that the payments were made to HUD’s Office of Labor Relations. We also recommend that the Director of Public Housing, Detroit Office, to recapture all funds that the Commission obligated for unit turnovers by its force account for transmission to the U.S. Treasury. This amount includes the work item for cycle painting 2011-CH-1018 9/30/2011 003-F $36,231 and carpet removal work by its force account for $24,149 and $12,082 that was inappropriately obligated due to the Commission’s conflict-of-interest relationship that has not been spent. We recommend that the Director of HUD’s New York City Office of Community Planning and Development instruct City officials to reimburse from non-Federal funds $93,436 for ineligible costs 2012-NY-1002 10/18/2011 001-A $34,006 charged to HPRP; specifically, $59,430 related to payments for rental arrears over the 6-month eligibility requirement and $34,006 for payments issued directly to participants. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting 2011-CH-1012 8/9/2011 003-B $29,112 documentation or reimburse its appropriate programs $30,236 from non-Federal funds for the unsupported costs cited in this finding. Return the $81,153 in ineligible draws to HUD subject to the 90 2011-KC-1002 3/1/2011 001-B percent limitation on the obligation period and repay the remaining $26,411 amount to the project from non-Federal funds. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to 2011-CH-1014 9/29/2011 001-A reimburse its Program from non-Federal funds for the $20,000 in $20,000 Program funds inappropriately used to assist activity number (including the OIG-designated household number) 8917 (11). We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to 2011-CH-1014 9/29/2011 002-A reimburse its Program $20,000 from non-Federal funds for the $20,000 home that had been sold through a sheriff’s sale and ownership of the home had been transferred. 121 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse HUD $17,500 from non-Federal funds for contract work involving repairs to the 2011-CH-1018 9/30/2011 002-E $17,500 Commission’s sidewalks and driveways and brickwork that were not completed for HUD to recapture and transmit to the U.S. Treasury. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Capital Fund 2011-CH-1012 8/9/2011 002-F $13,085 $13,085 from non-Federal funds for the inappropriately earned interest cited in this finding. Require the Municipality to submit all supporting documentation 2011-AT-1006 4/8/2011 002-B showing the eligibility and propriety of $23,862 drawn from HUD $12,130 or reimburse the HOME program from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse HUD $11,205 for 2011-CH-1018 9/30/2011 002-F the physical needs assessment paid with its Recovery Act funds for $11,205 HUD to recapture and transmit to the U.S. Treasury. However, the Commission could pay for the activity with its 2010 capital funds. Require the subrecipient to support the $2,269,867 drawn from the 2011-LA-1016 8/18/2011 001-C U.S. Treasury or reimburse its HOME program from non-Federal $10,778 funds. We recommend that the Director of Public Housing, Detroit Office, require the Commission to reimburse HUD $9,322 from non- 2011-CH-1018 9/30/2011 003-C Federal funds, due to the conflict-of-interest relationship, for $9,322 transmission to the U.S. Treasury for the inappropriate use of grant funds. Require the Municipality to submit supporting documentation showing the allocability of $39,338 and any additional payroll costs charged to the HOME program between July 1, 2009, and June 30, 2011-AT-1018 9/28/2011 002-B $6,875 2011, associated with the three employees performing other functions not related to the program, or reimburse the program from non-Federal funds. Provide support for the $90,534 drawn for unsupported costs or return the funds to HUD subject to the 90 percent limitation on the obligation period and repay the remaining amount to the project 2011-KC-1002 3/1/2011 001-A $5,079 from non-Federal funds. This support includes verifying that the Authority appropriately reimbursed the $80,716 via voucher 092- 519938. We also recommend that the Director of Public Housing, Detroit Office to recapture the remaining $3,851 that the Commission 2011-CH-1018 9/30/2011 002-G $3,851 obligated but had not expended for repairs to its sidewalk, driveway, and brickwork for transmission to the U.S Treasury. We recommend that HUD’s Acting Deputy Assistant Secretary for Single Family Housing require Ameritrust officials to ensure that 2011-NY-1012 8/16/2011 001-C $3,843 borrowers have been reimbursed $3,843 for unallowable excessive loan discount and second appraisal fees. Require Prospect to reimburse HUD $344,326 for the actual loss 2011-AT-1011 7/8/2011 001-A $0 sustained on five claim-terminated loans that HUD sold. 122 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require Prospect to reimburse HUD for potential losses on three claim-terminated loans that HUD has not resold. We estimate the losses to be $202,655 (Footnote 6): We calculated the potential loss 2011-AT-1011 7/8/2011 001-B for recommendations 1B and 1C using the 59 percent average loss $0 rate determined by HUD for the 2010 fiscal year for real estate owned properties that it sold. We applied the loss rate to the unpaid principal balances for loans listed in appendices C and D. Require Prospect to indemnify HUD against $1,694,217 in 2011-AT-1011 7/8/2011 001-C $0 potential losses on 17 defaulted loans. Require Prospect to pay down the principal balance by $3,276 for 4 2011-AT-1011 7/8/2011 001-D over-insured loans. If HUD has paid a claim on any of these loans $0 then it should remit the payment to HUD. Determine legal sufficiency, and if legally sufficient, pursue civil action against Prospect and its underwriters for incorrectly certifying to the integrity of the data or that due diligence was 2011-AT-1011 7/8/2011 001-H exercised during the underwriting of 25 loans that placed the FHA $0 insurance fund at risk for $550,257 in questioned costs and potential losses of $1,694,217. The penalty amount will be determined through a separate civil process. Take appropriate administrative action against Prospect and underwriters A, B, C, F, G, and H for not complying with HUD 2011-AT-1011 7/8/2011 001-I $0 requirements. The underwriters were responsible for the violations identified in appendices C and D. Require the Municipality to update its accounting records and ensure that receipts and expenditures are properly accounted for, 2011-AT-1018 9/28/2011 002-F $0 are reconciled with HUD’s information system, and comply with HUD requirements. Require the Municipality to develop and implement a financial management system in accordance with HUD requirements, including that HOME funds can be traced to a level which ensures 2011-AT-1018 9/28/2011 002-G $0 that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes and that funds are disbursed in a timely manner. We recommend that the Director of HUD’s Chicago Office of Public Housing, in conjunction with the Director of HUD’s Departmental Enforcement Center take administrative action 2011-CH-1006 3/23/2011 001-A $0 against the executive director and board of commissioners for failing to administer the Authority according to HUD’s and its own requirements. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to implement adequate procedures and controls to ensure that if the ownership of additional homes acquired under its Housing Trust 2011-CH-1014 9/29/2011 002-B Fund program is transferred through foreclosures, the City $0 recaptures the entire amount of the Program funds through the receipt of net proceeds from the sales of the homes or reimburses its Program from non-Federal funds for the Program funds provided to the home buyers as appropriate. 123 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of Public Housing, Detroit Office, require the Commission to identify the specific units assigned to each maintenance staff member for phase II unit turnover work and to the contractor for phase III unit turnover work and provide support to show when each unit was assigned, what work was to be 2011-CH-1018 9/30/2011 003-B done, who worked in the units, and when the work was performed, $0 showing the days and hours spent in each unit until it was approved as completed. If the Commission cannot provide satisfactory records to support unit turnover costs and that duplicate unit turnover work was not performed, HUD should require that these costs be returned to HUD. Refer the lender to the Mortgagee Review Board to take appropriate administrative action, such as imposing civil money 2011-LA-1017 9/21/2011 001-A penalties for the 15 loans due to the lender’s failure to underwrite $0 loans in compliance with HUD regulations and the unallowable restrictive covenants. We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to 2011-NY-1010 4/15/2011 002-C certify and provide support that the proper amount of CDBG assets $0 was returned to the City from the subrecipient by performing an audit of the accounts that the Corporation maintained. We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to establish and implement controls that will ensure adequate 2011-NY-1010 4/15/2011 002-D monitoring of subrecipient-administered activities, that CDBG $0 funds are properly safeguarded, the achievement of performance goals in subrecipient supported activities, and that corrective actions are taken for nonperforming subrecipients. We further recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct the City to develop administrative control procedures that will ensure 2011-NY-1010 4/15/2011 003-D $0 compliance with CDBG program requirements, including ensuring that costs are eligible and necessary before being charged to the program. We recommend that HUD’s Acting Deputy Assistant Secretary for Single Family Housing require Ameritrust officials to establish procedures to ensure that their quality control plan is implemented in accordance with HUD requirements, including but not limited to 2011-NY-1012 8/16/2011 002-A $0 revising the plan to ensure that it includes all basic and specific requirements and ensuring that all required documentation supporting the performance of quality control reviews is retained in the quality control files. We also recommend that HUD’s Associate Deputy Assistant Secretary for Single Family Housing verify the lender’s 2011-NY-1012 8/16/2011 002-B $0 implementation of corrective actions taken with regard to its quality control plan. We also recommend that HUD’s Associate Deputy Assistant Secretary for Single Family Housing due to the materiality of the quality control violations, several of which were previously cited 2011-NY-1012 8/16/2011 002-C $0 during a HUD review, consider referring the lender to the Mortgagee Review Board for an assessment of civil money penalties. 124 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establish and implement procedures to reassess the safe harbor percentage and rates periodically to ensure that they are reasonable. HUD should retain the documentation justifying the calculation of 2012-LA-0001 11/16/2011 001-A those percentages and rates. In addition, HUD should assess the $0 feasibility of requiring the agencies to periodically justify and retain documentation showing the reasonableness of using the maximum rates, or lower them as appropriate. Implement policies and procedures requiring HUD to periodically 2012-PH-0001 10/31/2011 001-A use the data contained in its System to provide improved oversight $0 of cancelled Block Grant program activities. Implement policies and procedures requiring HUD to periodically 2012-PH-0001 10/31/2011 001-C use the data contained in its System to provide improved oversight $0 of long-standing open Block Grant program activities. Implement policies and procedures requiring HUD to periodically 2012-PH-0001 10/31/2011 001-D use the data contained in its System to provide improved oversight $0 of revised Block Grant program activities. Periodically evaluate the adequacy of actions grantees take 2012-PH-0001 10/31/2011 001-E regarding cancelled and long-standing open or revised activities $0 shown in its System. Reimburse its business development loan program $5,999,894 from 2013-PH-1001 10/31/2012 001-A non-Federal funds for the ineligible expenditures related to the $5,999,894 Hotel Sterling project. Require the Municipality to develop and implement a financial management system in accordance with HUD requirements and ensure that $3,213,572 in HOME funds drawn from HUD between July 1, 2009, and December 31, 2011, can be traced to a level which ensures that such funds have not been used in violation of 2012-AT-1009 5/23/2012 001-A the restrictions and prohibitions of applicable statutes or reimburse $3,213,572 the HOME program from non-Federal funds.(Footnote 2) Total disbursements of $3,523,723 were adjusted to consider $173,978 questioned in recommendation 1B, $86,567 questioned in recommendation 1D, and $49,606 questioned in recommendation 2B. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse HUD $3,120,000 from non-Federal funds for transmission to the U.S. Treasury for its 2012-CH-1013 9/27/2012 001-A $3,120,000 four Recovery Act grant funds for category 4, option 2 of HUD’s Notice of Funding Availability, dated June 3, 2009, whose activities were not contracted using full and open competition. Support or repay $2,048,750 for the CDBG-purchased land sold or 2012-FW-1803 4/10/2012 001-E $2,048,750 donated for the minor league baseball park. Provide adequate documentation to show that affordability 2012-PH-1011 8/3/2012 001-F requirements were met for three rental projects or repay the $1,272,325 Program $1,272,325 from non-Federal funds. Repay the Program $1,235,940 from non-Federal funds for funds 2012-PH-1011 8/3/2012 001-C $1,235,940 disbursed for a project that was acquired but not completed. Repay the Program the $1,025,654 it was previously asked to repay 2012-PH-1011 8/3/2012 001-B $1,025,654 for funds disbursed to an ineligible development organization. 125 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Use its resources available of approximately $615,703 in 2012-PH-1011 8/3/2012 001-L administrative funds to strengthen its administration of the $615,703 Program. Determine the eligibility of the $537,773 disbursed for the Ciudad de Ensueño project and reevaluate the feasibility of the activity. (Footnote 9) Total disbursements of $538,973 were adjusted to 2012-AT-1009 5/23/2012 002-B $537,773 consider $1,200 questioned in recommendation 1F. The Municipality must reimburse its HOME program from non-Federal funds if HUD determines the activity to have been terminated. Reprogram $464,060 in committed set-aside funds for other 2012-PH-1011 8/3/2012 001-D $464,060 eligible activities, thereby putting the funds to better use. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City Officials to reimburse the City’s CDBG line of credit $ $475,339 from non- 2012-NY-1011 8/15/2012 002-A Federal funds for the unreported ($267,141) and unremitted $456,869 ($208,198) in program income from the sale of the theater and four properties; and record these reimbursements in HUD’s Integrated Disbursement and Information System as CDBG program income. Require the Authority to reimburse its public housing operating 2012-AT-1012 6/1/2012 001-A $443,807 fund $522,125 using non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Public Housing determine the amount of the $573,170 of coordinator grant 2012-CH-1012 9/27/2012 001-K funds that were actually earned by the Commission for meeting the $299,750 program’s requirements. The funds that are determined to be unearned should be reimbursed to HUD from non-Federal funds. We recommend that the Program Center Coordinator of the Hartford Office of Public Housing support that $2,506,434 in 2012-BO-1002 3/14/2012 001-J contract costs charged to Federal programs was reasonable and $269,023 supportable, and repay any amounts it cannot support with non- Federal funds. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City Officials to 2012-NY-1011 8/15/2012 002-B provide documentation to enable HUD to determine whether the $263,938 City is entitled to additional program income of $263,938 from the disposition of the Church property. Reimburse $897,821 from non-Federal funds for using Brownfields 2012-LA-1005 3/13/2012 001-E grant funds after the grant agreement expenditure deadline, plus $249,058 any interest due, to HUD’s Brownfields account. Support that $304,780 in Recovery Act change orders was provided 2012-KC-1002 3/2/2012 002-B at a reasonable cost and repay any amount determined to be $216,529 unreasonable from non-Federal funds to the U.S. Treasury. Require the Municipality to submit supporting documentation evidencing the income eligibility of the participants assisted with 2012-AT-1009 5/23/2012 001-B $173,978 $173,978 in HOME funds or reimburse the program from non- Federal funds. Repay the Program $150,000 from non-Federal funds for operating 2012-PH-1011 8/3/2012 001-A $150,000 funds it disbursed to two ineligible development organizations. Require the project’s cooperative ownership to support $133,904 in 2012-LA-1006 5/21/2012 002-B $133,904 unsupported costs or repay the project from non-Federal funds. 126 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establish and implement sufficient written procedures and controls for documenting shareholder interest and the funding and 2012-LA-1006 5/21/2012 003-A $127,303 maintenance of the general operating reserve account, which would ensure that $127,303 in funds can be put to better use. Require the Municipality to submit supporting documentation showing the allocability and eligibility of $114,139 charged to the 2012-AT-1009 5/23/2012 001-C $114,139 HOME program for project delivery costs or reimburse the program from non-Federal funds. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City Officials to 2012-NY-1011 8/15/2012 001-B $93,500 reimburse the City’s CDBG line of credit from non-Federal funds for the $150,000 ineligible loan. Provide adequate documentation for $86,575 in salaries and office 2012-PH-1011 8/3/2012 001-G expenses related to down payment assistance activities or repay the $86,575 Program from non-Federal funds. Require Amar Plaza to seek indemnification of $75,038 in paid legal costs, $72,246 in outstanding costs, and future legal costs from the two shareholders who improperly executed the deed and 2012-LA-1006 5/21/2012 001-C $73,964 note and named Rampart as the beneficiary and retain the two shareholders’ subscription price for liquidated damages incurred for the unauthorized encumbrance on the project. Review the 270 obligations with remaining balances totaling 2013-FO-0003 11/15/2012 006-B $432,147 and close out and deobligate amounts tied to obligations $64,088 that are no longer valid or needed. Reimburse $625,000 from non-Federal funds for using Brownfields 2012-LA-1005 3/13/2012 001-C grant funds for an ineligible project after the grant agreement $58,922 deadline, plus any interest due, to HUD’s Brownfields account. We recommend that the program center coordinator of HUD’s Office of Public and Indian Housing require the Authority to provide documentation to support HUD’s approval of its waiver 2012-CH-1009 8/3/2012 003-A $46,782 requests or reimburse HUD $46,828 from non-Federal funds for transmission to the U.S. Treasury for the Recovery Act grant funds used to purchase materials manufactured outside the United States. Repay from non-Federal funds the $91,218 paid to Diversified 2012-AO-1002 7/30/2012 004-A $46,417 Ventures, which created a conflict of interest. Repay $3,817,000 from non-Federal funds for the use of Section 2012-LA-1005 3/13/2012 001-A 108 loan funds for an ineligible project, plus any interest due, to $29,650 HUD’s Section 108 loan account. We recommend that the program center coordinator of HUD’s Office of Public and Indian Housing require the Authority to 2012-CH-1009 8/3/2012 001-B provide documentation to show that the contract costs for the $26,875 testing of asbestos were reasonable or reimburse HUD $26,875 from non-Federal funds for transmission to the U.S. Treasury. Provide supporting documentation showing that income eligibility requirements were met for the rehabilitation assistance case, and to 2012-PH-1011 8/3/2012 001-H support the excess rehabilitation funds spent or reimburse the $26,645 Program $26,645 in assistance funds provided from non-Federal funds. 127 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its program $21,650 2012-CH-1012 9/27/2012 001-A $19,719 from non-Federal funds for the overpayment of escrow funds to the participants cited in this finding. Support that $1,570,038 in Recovery Act contracts awarded was 2012-KC-1002 3/2/2012 001-A granted at a reasonable cost and repay the U.S. Treasury from non- $19,575 Federal funds any amount determined to be unreasonable. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse $22,430 ($16,335 + 2012-CH-1002 1/26/2012 003-B $6,095) from non-Federal funds to HUD for transmission to the $17,946 U.S. Treasury for the projects that had Section 3 funds included but not remitted to the Commission’s Section 3 training fund. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide supporting 2012-CH-1012 9/27/2012 001-H $16,335 documentation or reimburse its program $17,008 from non-Federal funds for the unsupported payments cited in this finding. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse $11,289 (the difference between the contract paid price of $33,638 and the lesser 2012-CH-1002 1/26/2012 006-A $10,573 calculated cost of $ 22,349) from non-Federal funds to HUD for transmission to the U.S. Treasury for the cost savings cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to obtain documentation to 2012-CH-1011 9/27/2012 001-A support that employees were paid in accordance with the Davis- $6,820 Bacon Act, or reimburse the employees $6,820 from non-Federal funds for the unsupported wages cited in this report. Require the project’s cooperative ownership to repay the operating 2012-LA-1006 5/21/2012 002-A account the $4,921 in ineligible or unreasonable expenses from $4,921 non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to repay from non-Federal funds the ineligible costs of $5,291. The ineligible costs include a double payment of $3,554 for electrical work related to the 34 Morton Avenue rehabilitation activity, a 2013-NY-1001 12/6/2012 001-A $3,554 payment of $1,033 for a former City employee’s unused vacation time that was accrued before the award of the CDBG-R grant and charged to the Albany Community Development Agency’s rehabilitation administration activity, and $704 charged to the Agency’s rehabilitation administration activity. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse $680 to HUD 2012-CH-1011 9/27/2012 002-A $680 from non-Federal funds for transmission to the U.S. Treasury for the one range and one refrigerator that were improperly replaced. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to pursue collections from the 2012-CH-1011 9/27/2012 001-B subcontractor and provide support for corrective payments made to $537 its employee or reimburse the contractor’s employee $537 from non-Federal funds. 128 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Take appropriate administrative sanctions against the executive director, including but not limited to debarment from HUD 2012-AO-1002 7/30/2012 002-I $0 programs, for the disbursement of Federal funds prohibited by HUD requirements. Take appropriate administrative sanctions against the executive 2012-AO-1002 7/30/2012 003-D director and board members, up to and including debarment, for the $0 disbursement of Federal funds prohibited by HUD requirements. Take appropriate administrative sanctions against the executive 2012-AO-1002 7/30/2012 004-D director, up to and including debarment, for the disbursement of $0 Federal funds prohibited by HUD requirements. Require the Municipality to review all grant agreements for each activity entered into HUD’s information system and correct any 2012-AT-1009 5/23/2012 003-C inaccurate information, including the address of HOME-funded $0 activities, project completion date, fund type classification, activity type and description, funding amount, and activity status. Take appropriate administrative action, including possible 2012-FW-1008 6/1/2012 001-H $0 debarment, against the executive director and commissioners Repay HUD the higher of the cost or market value of the properties 2012-FW-1803 4/10/2012 001-B purchased with CDBG funds that the Authority still owns (book $0 value is $3,122,900). Support or repay the higher of the cost or market value of the 2012-FW-1803 4/10/2012 001-F property identified as Block 78 (property north of Hartford $0 building). Ensure that HUD receives repayment for routine inspections that were not conducted by field service managers between June 2011 2012-LA-0003 9/18/2012 001-G and February 2012 and ensure that repayment is received for $0 inspections that were not provided by asset managers between June 2011 and March 2012. Identify at least annually its universe of program subrecipients, 2012-PH-1011 8/3/2012 001-J development organizations, and applicable projects to be reviewed $0 and perform monitoring according to Program requirements. Develop and implement a financial management system in 2013-AT-1001 11/30/2012 001-A $0 accordance with HUD requirements. Develop and implement formal financial management policies and procedures to require an annual evaluation by OCFO and 2013-FO-0003 11/15/2012 003-C $0 applicable program offices of all allowance for loss rates and other significant estimates currently in use to ensure appropriateness. Develop internal controls to review field office compliance more frequent than every 4 years, especially when findings have been identified in the past, and to ensure that action plans operate 2013-FO-0003 11/15/2012 004-B $0 effectively and have addressed the deficiencies noted so that noncompliance is not repeated during the next quality management review. 129 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to establish and implement controls to ensure that CDBG-R activities 2013-NY-1001 12/6/2012 001-C are administered efficiently and effectively, funds have been used $0 only for eligible activities, costs incurred are necessary and reasonable, national objectives have been attained, and performance goals are being achieved. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2013-NY-1001 12/6/2012 001-D establish and implement controls to ensure that grant- and subgrant- $0 supported activities are adequately monitored and administered to ensure compliance with program regulations. Transition the PHA NRA excess funds, which are as much as 2014-FO-0003 12/16/2013 002-A $643.6 million as of June 30, 2013, to HUD’s control as soon as $248,239,577 possible to safeguard the program resources. Indemnify HUD against losses for the 725 FHA-insured loans with an unallowable gift in the amount of $97.3 million, thereby putting 2013-LA-1008 8/20/2013 001-B $55,439,896 an estimated loss to HUD of $55.4 million to better use. See appendixes D and E. Review and de-obligate, as appropriate, the $43 million in expired 2014-FO-0002 12/13/2013 001-C property-related contracts once they have been closed out by the $43,000,000 contracts office. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to ensure that 2013-CH-1011 9/30/2013 001-A $31,148,477 in residual receipts for the 15 projects as of May 31, $31,148,477 2013, is used to reduce or offset housing assistance payments in accordance with HUD’s requirements. Review and deobligate at least $26 million tied to 215 inactive 2014-FO-0003 12/16/2013 008-F $26,000,000 and/or expired Section 8 obligations. Deobligate $12,755,325 tied to 165 administrative obligations and $2,734,967 tied to 25 program obligations marked for deobligation during the department-wide unliquidated obligations review. Additionally, the Office of Housing should review the 429 2014-FO-0003 12/16/2013 008-D obligations with remaining balances totaling $5,764,905 and close $21,255,197 out and deobligate amounts tied to obligations that are no longer valid, either based on the criteria defining the availability of appropriations at 31 U.S.C. 1301 or the criteria for recording obligations at 31 U.S.C. 1501. Research and deobligate at least $9.3 million tied to the 115 2014-FO-0003 12/16/2013 008-E $9,300,000 inactive and/or expired Section 202/811 funding lines. Deobligate $7,263,662 tied to 178 administrative obligations 2014-FO-0003 12/16/2013 008-O marked for deobligation during the department-wide unliquidated $7,263,662 obligations review. 130 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Ensure that the Authority recovers from non-Federal sources $5,496,367 in disposition sales proceeds that was not received from 2013-DE-1005 9/30/2013 001-A the sale of its 65 low-income public housing units and use the $5,496,367 recovered funds for their intended purposes or return those funds to HUD within a reasonable period. Repay the $5,178,293, transferred without proper HUD approval 2013-LA-1003 3/14/2013 001-A and used for ineligible expenses, to the trust fund from non-Federal $5,178,293 funds. Provide for HUD review documentation to support $5,014,403 2014-PH-1001 12/17/2013 001-C $5,014,403 drawn for the additional 15 activities. Provide to HUD a remediation plan for the 10 delayed activities 2014-PH-1001 12/17/2013 001-B and demonstrate that national objectives have been met as required $4,078,941 to support $4,078,941 in program funds drawn for the activities. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to provide supporting documentation or reimburse its operating reserve fund $4,003,683 ($3,610,666 + $227,500 + $111,856 + $39,189 + $14,472) from 2013-CH-1003 7/15/2013 001-D $4,003,683 non-Federal funds for the unsupported salary and benefit payments; operating contribution payments; and lawn maintenance, snow removal, utility, and training costs for the developments and program cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its capital fund 2013-CH-1003 7/15/2013 001-A $3,569,942 $3,569,942 ($3,319,942 + $250,000) from non-Federal funds for the ineligible drawdowns and disbursements cited in this finding. Deobligate the $1,419 tied to three administrative obligations marked for deobligation during the department-wide unliquidated obligations review. Additionally, OCFO should review the 42 obligations with remaining balances totaling $3,115,954 and close 2014-FO-0003 12/16/2013 008-K $3,117,373 out and deobligate amounts tied to obligations that are no longer valid, either based on the criteria defining the availability of appropriations at 31 U.S.C. 1301 or the criteria for recording obligations at 31 U.S.C. 1501 Determine how much of the $7,010,079 in unreimbursed expenditures for damage assessment was paid with Federal funds and repay that amount to the appropriate program. If the Authority 2013-FW-1006 6/19/2013 002-E $2,971,168 is unable to accurately determine the amount due to-due from each program and support that funds charged to Federal programs were appropriate, the full $7,010,079 should be repaid to HUD. Repay from non-Federal funds the $3,811,279 it owes HUD for 2013-FW-1006 6/19/2013 002-C $2,888,889 ineligible expenditures from DHAP-Ike funds. Determine how much of the $2,827,829 in unreimbursed expenditures for Cypresswood Estates was made with Federal funds and repay that amount to the appropriate program. If the 2013-FW-1006 6/19/2013 002-D Authority is unable to accurately determine the amount due to-due $2,827,829 from each program and support that funds charged to Federal programs were appropriate, the full $2,827,829 should be repaid to HUD. 131 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its operating 2013-CH-1003 7/15/2013 001-B reserve fund $2,773,976 ($2,583,429 + $190,547) from non- $2,773,976 Federal funds for the inappropriate transfers to its cost center and salary and benefit payments cited in this finding. Provide documentation to support the $2,455,162 in unsupported 2014-PH-1001 12/17/2013 001-A funds drawn for 12 activities or repay the amount to its program $2,455,162 from non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to expend or reprogram to other eligible program activities the 2013-NY-1010 9/26/2013 001-A $2,451,645 $2,451,645 in CDBG program income maintained in the City’s community development bank accounts as of June 30, 2013, so the City can assure HUD that these funds have been put to better use. Repay $2,678,698 in 2009 Recovery Act funds to HUD, which will return the funds to the U. S. Treasury, or provide eligible costs that it obligated and expensed before the deadlines. HUD should take care to ensure that other expended funds are not improperly shifted 2013-FW-1004 4/12/2013 001-A $2,282,508 to Recovery Act funds, as HUD’s policy stated that public housing agencies must use the funds provided in this grant to supplement expenditures, not to supplant expenditures from other Federal, State or local sources or funds independently generated. Submit supporting documentation showing the eligibility, reasonableness, and allocability of $1,829,165 charged to the Block Grant program for payroll expenses that were not properly accounted for in the Municipality’s accounting records and for $422,393-Footnote 2: Amount includes $385,164 of rent charges 2013-AT-1003 3/22/2013 001-B between July 2009 and June 2012, and $37,228 charged to the $2,251,558 Block Grant program, associated with administrative and other activity related expenses paid between July 2009 and August 2011. in administrative expenses and other activity-related costs that were not properly supported or reimburse the program from non-federal funds. Require the State to provide supporting documentation for the 2014-AT-1004 12/30/2013 001-B $2,158,715 acquisition of property for projects W19, S21, and S20 $2,158,715 or reimburse the program from non-Federal funds. Provide support for $6,637,341 in unsupported costs or repay the 2013-LA-1004 4/23/2013 001-B $1,895,482 CDBG program from non-Federal funds. Provide adequate supporting documentation for the $1,628,130 in 2013-LA-1010 9/20/2013 001-A unsupported salary and benefit costs or repay the CDBG program $1,628,130 from non-Federal funds. Reimburse its HOME program $1,595,113 from non-Federal funds 2013-LA-1009 9/13/2013 001-A for HOME funds that were inappropriately used on Section 8 $1,595,113 housing assistance payments. Provide supporting documentation or reimburse its program 2013-AT-1008 9/30/2013 002-A $1,081,092 in unsupported expenditures related to activities 429, $1,081,092 526, 637, and 672 from non-Federal funds. 132 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Municipality to provide support showing the allocability and eligibility of $1,077,577 spent on salaries and fringe benefits for employees who performed local government 2013-AT-1003 3/22/2013 002-B duties and multiple federally funded activities without properly $1,077,577 allocating the costs directly related to carrying out each activity. Any amounts determined ineligible must be reimbursed to the Block Grant program from non-federal funds. Provide support showing the eligibility and reasonableness of the 2013-LA-1003 3/14/2013 001-B $1,056,252 in trust funds disbursed or repay the trust fund from $1,056,252 non-Federal funds. Reprogram $988,272 committed for canceled activities and make 2013-AT-1008 9/30/2013 001-C $988,272 funds available for other eligible HOME activities. Require the Authority to repay from non-Federal sources $975,146 in disposition sales proceeds used in violation of its disposition 2013-DE-1005 9/30/2013 001-B $975,146 agreement and use the recovered funds for their intended purposes or return those funds to HUD within a reasonable period. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide sufficient 2013-CH-1009 9/27/2013 001-A $935,412 documentation to support the reasonableness of $960,904 in expenses or reimburse HUD $935,412. Require the owner to provide documentation to support the $709,753 in unsupported disbursements identified by the audit or 2013-PH-1804 7/22/2013 001-B $709,753 reimburse the project’s reserve for replacement account from non- Federal funds for any disbursements that it cannot support. Provide support showing that the $2,466,779 in unsupported expenses were paid from non-Federal funds or provide support showing the expenses were an eligible use of Federal funds. Any 2013-FW-1006 6/19/2013 001-A unsupported expenditures from Federal funds should be repaid to $679,174 the Authority’s Housing Choice Voucher program or to HUD if the Authority is unable to determine the source of funds used to pay the expenses. Any repayments must be from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse 2013-CH-1011 9/30/2013 002-A $608,337 the U.S. Treasury $608,337 ($77,856+ 436,759 + $93,722) for the three projects with terminated program contracts. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to obtain 2013-CH-1011 9/30/2013 002-B approval from HUD to apply the project’s replacement reserves to $604,949 the defaulted mortgage for contract number MI28H150191 or reimburse the U.S. Treasury $604,949. Support or repay the $1,270,423 in questionable contract and 2013-FW-1006 6/19/2013 003-C $604,193 procurement payments to its appropriate program or HUD. 133 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Determine whether it received the services for which it paid $582,595 under two contracts that violated conflict-of-interest prohibitions and that those services cost the same or less than comparable services from a source without a conflict-of-interest 2013-FW-1006 6/19/2013 003-B relationship with the Authority. If it used Federal funds to pay for $574,143 the services and it either did not receive the services or paid more for them than it would have paid from a source without a conflict- of-interest relationship, it should repay the funds to its appropriate program or HUD. Require the Municipality to reimburse from non-federal funds $552,658 in unallowable and unallocated costs associated with the 2013-AT-1003 3/22/2013 002-A disbursement of salaries and fringe benefits of employees who did $552,658 not perform duties directly related to carrying out activities charged with the program delivery costs. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to support or reimburse its program $425,193 ($19,924 + $384,755 in housing assistance payments + $46 in utility allowances + $20,468 in associated 2013-CH-1004 8/1/2013 001-C $425,193 administrative fees) from non-Federal funds for the unsupported overpayment of housing assistance and utility allowances due to unsupported calculations, missing eligibility documentations, and discrepancies in the housing assistance payments register. Reimburse the FHA insurance fund for the $421,630 in actual 2013-LA-1008 8/20/2013 002-B losses resulting from the amount of claims and associated expenses $421,630 paid on five loans with material underwriting deficiencies. Require the Municipality to submit supporting documentation evidencing how Block Grant funds in the amount of $410,221 2013-AT-1003 3/22/2013 003-B disbursed for street improvements benefited low- and moderate- $410,221 income persons in accordance with HUD requirements or reimburse the Block Grant program from non-Federal funds. Return the $401,705 in ineligible disbursements to the project 2013-KC-1003 8/8/2013 001-A $401,705 operating account. Correct all deficiencies identified from non-Federal funds or reimburse $160,051 in CDBG funds and $221,804 in HOME funds, 2014-AT-1003 12/30/2013 001-B $381,855 totaling $381,855, to program line of credit accounts from non- Federal funds. Support the $316,883 disbursed for unsupported costs or return the 2013-KC-1003 8/8/2013 001-B $316,883 funds to the project operating account. Require the Municipality to submit all supporting documentation showing that 21 home-buyer activities met the principal residency 2014-AT-1001 12/3/2013 001-B requirement for the duration of the period of affordability or $307,537 reimburse the HOME program from non-Federal funds the $307,537 disbursed. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse 2013-CH-1011 9/30/2013 003-A $290,437 $290,437 to the appropriate project escrows from non-Federal funds for the inappropriate disbursement of replacement reserves. 134 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Repay $287,655 paid to the executive director’s and another Authority employee’s family members to its public housing program. However, if the Authority made any of the expenditures 2013-FW-1805 9/26/2013 001-A from its 2008 capital fund grant, or if the Authority is unable to $287,655 determine the source of funds used to pay expenditures, the Authority should repay HUD. Any repayments must be from non- Federal funds. Reimburse the FHA insurance fund for the $284,412 in actual 2013-LA-1008 8/20/2013 001-C losses resulting from the amount of claims and associated expenses $284,412 paid on seven loans that contained an unallowable gift. Require the Municipality to submit all supporting documentation showing the current status of the repair work and the eligibility and propriety of $817,310. (Questioned amount consists of $882,909 in housing rehabilitation awards made by the Municipality minus 2013-AT-1003 3/22/2013 003-A $240,046 $65,599 in disbursements associated with 28 housing units that were found to have been completed during field inspections for housing rehabilitation activities or reimburse the Block Grant program from non-federal funds). Reimburse $225,235 in ineligible costs related to activities 476, 2013-AT-1008 9/30/2013 002-B $225,235 524, 526, 546, 637, and 699 from non-Federal funds. Require the owner of Lighthouse Inn to provide documentation to support the $208,154 in unsupported disbursements cited in this 2013-AT-1007 9/13/2013 001-B $208,154 report or reimburse HUD’s Federal Housing Administration insurance fund for the applicable portion. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to provide documentation to justify the $189,322 in unsupported 2013-NY-1006 5/13/2013 001-A $189,322 administrative and planning costs that was disbursed for employee salaries and fringe benefits. Any unsupported costs determined to be ineligible should be reimbursed from non-Federal funds. Support or repay its public housing programs $180,379 for HUD 2013-FW-1802 6/21/2013 001-D funds inappropriately used for Sunnybrook. Repayment should be $180,379 from non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to Provide documentation to justify the $177,923 unsupported 2013-NY-1010 9/26/2013 001-D difference between the City’s CDBG program income balance in $177,923 IDIS and its bank account balances as of June 30, 2013. Any portion of the unsupported difference determined to be ineligible should be reimbursed from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse 2013-CH-1011 9/30/2013 003-B $175,434 appropriate escrow accounts $175,434 from non-Federal funds for the lost interest cited in this finding. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to provide supporting 2013-CH-1003 7/15/2013 001-E documentation or reimburse its capital fund $162,156 from non- $162,156 Federal funds for the Centre’s operating expenses cited in this finding. 135 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to provide sufficient supporting documentation or reimburse its Program from 2013-CH-1001 2/12/2013 002-A non-Federal funds, as appropriate, for the $193,000 in Program $155,668 funds used for the four projects for which the City did not have sufficient documentation to demonstrate that households were income eligible. Provide supporting documentation for activities 675, 697, 701, and 2013-AT-1008 9/30/2013 002-I 702 to show whether they were eligible HOME activities or $153,950 reimburse its program $153,950 from non-Federal funds. Require the owner of Lighthouse Inn to reimburse HUD’s Federal 2013-AT-1007 9/13/2013 001-A Housing Administration insurance fund $146,983 for the ineligible $146,983 disbursements cited in this report. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to reimburse its Program $140,000 from non-Federal funds for the 2013-CH-1001 2/12/2013 003-A $140,000 homes that were sold through a sheriff’s sale and ownership of the homes had been transferred within 5 years of the execution of the mortgages and promissory notes Require the owner to deposit $138,862 from non-Federal funds into 2013-PH-1804 7/22/2013 001-A the project’s reserve for replacement account for the ineligible costs $138,862 identified by the audit. Support or repay $135,995 for unsupported procurement expenditures. The funds should be repaid to the Authority’s public housing program. However, if the Authority made any of the 2013-FW-1805 9/26/2013 001-G expenditures from its 2008 capital fund grant, or if the Authority is $135,995 unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. Any repayments must be from non-Federal funds. Support $131,787 in unsupported contracts and procurement 2014-AT-1002 12/5/2013 002-A payments or repay the appropriate program from non-Federal $131,787 funds. Remit to its treasury account and put to better use repayment funds 2013-AT-1006 7/23/2013 001-C $130,915 totaling $130,915 in accordance with HUD requirements. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse from non-Federal funds, for repayment to the U.S. Treasury, $121,830 for ineligible 2013-CH-1012 9/30/2013 001-A $121,830 expenses, including duplicate profit and overhead paid on labor and trucking rates and duplicate payments made for kitchen cabinet installations and canopy and lobby renovations. Determine whether any portion of the $119,218 of improperly disbursed management agent fees are ineligible. For any portion 2013-DE-1003 9/10/2013 001-B $119,218 determined to be ineligible, require the owner to repay the fees from non-project funds. 136 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide documentation for the three contracts to support that the costs paid for the contract 2013-CH-1012 9/30/2013 001-B modifications totaling $108,766 ($230,596 less the ineligible use of $108,766 funds from recommendation 1A) were reasonable. Any amounts that cannot be shown to be reasonable should be repaid to the U.S. Treasury from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its program $136,012 ($78,727 in housing assistance payments + $57,285 in 2013-CH-1004 8/1/2013 001-A $95,017 associated administrative fees) from non-Federal funds for the overpayment of housing assistance due to inappropriate calculations of housing assistance payments. Submit all supporting documentation showing the eligibility and propriety of $89,331 in unaccounted for program income and 2013-AT-1006 7/23/2013 001-D $89,331 recaptured funds or reimburse the HOME program from non- Federal funds. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to 2013-NY-1006 5/13/2013 001-B reimburse from non-Federal funds $78,530 for ineligible home- $78,530 buyer rehabilitation and demolition costs charged to the HOME program. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to reimburse its Program $78,528 from non-Federal funds for the (1) 2013-CH-1001 2/12/2013 001-A more than $21,000 in Program funds used for 4 projects not $78,528 covered by written agreements and (2) more than $57,000 in Program funds for housing rehabilitation services for 13 projects that was not reasonable. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to provide sufficient supporting documentation or reimburse its Program from 2013-CH-1001 2/12/2013 001-B non-Federal funds, as appropriate, for the $86,797 in Program $70,364 funds used for 15 projects for which the City did not have sufficient documentation to demonstrate that the cost of additional housing rehabilitation services was reasonable. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse the appropriate 2013-CH-1004 8/1/2013 001-H households $65,874 from non-Federal funds for the rent amounts $65,874 paid in excess of 40 percent of their adjusted monthly income for units that were not affordable. Repay $65,360 paid from Recovery Act funds to the executive director’s and another Authority employee’s family members to 2013-FW-1805 9/26/2013 001-B $65,360 HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to deobligate the $57,410 in 2013-CH-1003 7/15/2013 001-F $57,410 capital funds cited in this finding and ensure that the Authority uses the funds for eligible purposes. 137 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to support or reimburse HUD $46,504 from non-Federal funds for transmission to the U.S. Treasury for the Recovery Act Block 2013-CH-1010 9/30/2013 001-B Grant funds used for project numbers 3439 ($6,963), 3449 $46,504 ($7,500), 3502 ($7,300), 3819 ($4,995), 3873 ($7,500), 3884 ($7,300), and 3922 ($4,946) for which the City did not maintain sufficient documentation to determine whether the assisted households were income eligible. Support or repay $42,150 in unsupported additional compensation paid to Authority staff. The funds should be repaid to the Authority’s public housing program. However, if the Authority 2013-FW-1805 9/26/2013 001-D made any of the expenditures from its 2008 capital fund grant, or if $42,150 the Authority is unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. Any repayments must be from non-Federal funds. Support or repay $31,513 in unsupported equipment and supplies costs. The funds should be repaid to the Authority’s public housing program. However, if the Authority made any of the expenditures 2013-FW-1805 9/26/2013 001-C from its 2008 capital fund grant, or if the Authority is unable to $31,513 determine the source of funds used to pay expenditures, the Authority should repay HUD. Any repayments must be from non- Federal funds. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to terminate the contract between the County and the Village of 2013-NY-1006 5/13/2013 001-C Freeport to rehabilitate and construct single-family public housing $31,470 units to be sold to low-income residents. The remaining contract balance of $31,470 should be put to better use by reprogramming it for other eligible purposes. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its program $30,524 from non-Federal funds ($26,299 for program housing 2013-CH-1005 8/30/2013 001-B $30,524 assistance plus $4,225 in associated administrative fees) for the 25 units that materially failed to meet HUD’s housing quality standards. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to pursue collection from the 2013-CH-1004 8/1/2013 001-E applicable households or reimburse its program $27,987 from non- $26,760 Federal funds for the overpayment of housing assistance due to unreported income. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to provide documentation supporting that the use of the $22,730 in Urban Development Action Grant miscellaneous revenues for activity 2013-CH-1001 2/12/2013 003-B $22,730 numbers 11379 and 12177 was an eligible initial use of miscellaneous revenues or a reuse of the revenues or reimburse its miscellaneous revenues from non-Federal funds for the $22,730 in miscellaneous revenues used. 138 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Support or repay to HUD $437,710 in capital funds spent for any amounts that it cannot support for contracts that did not have procurement records, contracts, cost or price analyses, or independent cost estimates. Should the Authority provide sufficient procurement documentation, require the Authority to provide 2014-FW-1801 11/8/2013 001-F $21,400 invoice documentation to support $21,686 paid to James Decker Builders, $1,049 paid to Pan American Engineers, and $49,695 paid to KDC Construction Company, or repay HUD any amounts that it cannot support. Any repayments must be from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development require the City to support 2014-CH-1001 11/15/2013 001-B or reimburse its Program from non-Federal funds $90,205, as $17,770 appropriate, for the City’s use of Program funds, which it lacked sufficient documentation to support. We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to reimburse its operating 2013-CH-1003 7/15/2013 001-C $15,754 reserve fund $15,754 from non-Federal funds for the ineligible deposit of funds in a non-interest-bearing account. Repay $14,250 in ineligible expenses to the trust fund from non- 2013-LA-1003 3/14/2013 001-C $14,250 Federal funds. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to 2013-CH-1010 9/30/2013 001-A reimburse HUD $14,145 from non-Federal funds for transmission $14,145 to the U.S. Treasury for the Recovery Act Block Grant funds inappropriately used to assist project numbers 3427 and 3624. Support or repay $124,009 to its operating funds any amounts that it cannot support for contracts that did not have procurement records, contracts, cost or price analyses, or independent cost estimates. Should the Authority provide sufficient procurement documentation, require the Authority to provide invoice 2014-FW-1801 11/8/2013 001-G $13,452 documentation to support $225 paid to Van’s Plumbing Repairs & Construction and $30 paid to Mike Estes, PC, or repay to its operating fund any amount it cannot support, as questioned under recommendation 1A. Any repayments must be from non-Federal funds. We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse 2013-CH-1011 9/30/2013 002-C $12,830 the U.S. Treasury $12,830 from non-Federal funds for the lost interest. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide documentation or reimburse HUD $12,165 for transmission to the U.S. Treasury for 2013-CH-1009 9/27/2013 002-A $12,165 the materials and supplies for its force account labor unit renovations due to missing or inadequate purchase orders, invoices, receipts, or inventory records cited in this finding. Require the owner of Lighthouse Inn to reimburse the 22 tenants 2013-AT-1007 9/13/2013 001-C for ineligible fees collected totaling $10,950, from non-project $10,950 funds. 139 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to support or reimburse HUD from non-Federal funds $8,635 for transmission to the U.S. Treasury for the Recovery Act Block Grant funds used for the 24 projects for which the City could not provide adequate support to show whether the services were provided at a reasonable cost. We did not include $1,602 in Recovery Act Block Grant funds 2013-CH-1010 9/30/2013 002-A used for four projects for which the City could not provide $8,635 adequate support to show whether the services were provided at a reasonable cost since we included it in recommendation 1B ($625 for project 3884 and $326 for project 3922) and recommendation 2D ($572 for project 3478 and $79 for project 3647) of this report. However, the number of projects included in this recommendation was reduced from 26 to 24 since a portion of the costs for projects 3478 and 3647 is included in the recommendation. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide documentation or reimburse HUD $8,554 from the appropriate fund for transmission 2013-CH-1009 9/27/2013 002-B $8,554 to the U.S. Treasury for its force account labor employees due to missing labor logs or labor logs that indicated work on projects other than the Recovery Act formula grant work. Support that it properly used $7,796 in cash from salvaged 2014-FW-1801 11/8/2013 001-E appliances and equipment or repay the money from non-Federal $7,796 sources to its low-rent program. Require the State to provide supporting documentation for the 2014-AT-1004 12/30/2013 001-A $7,200 in appraisal fees or reimburse the Program from non- $7,200 Federal funds. We also recommend that HUD’s Associate General Counsel for Program Enforcement pursue the appropriate administrative actions 2014-CH-1001 11/15/2013 001-E against the contractor’s vice president and architectural firm’s $7,000 architect for inappropriately certifying that the contractor had completed its housing rehabilitation work on the project. Determine whether $11,728 drawn down for canceled activities 2013-AT-1008 9/30/2013 001-D $6,688 was for supported and eligible expenditures. Support or repay the FHA insurance fund $5,450 for the loss 2013-LA-1008 8/20/2013 001-D mitigation claims paid as of April 30, 2013, on seven loans that $5,450 contained an unallowable gift. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to reimburse HUD, for transmission to the U.S. Treasury, $4,166 from 2013-CH-1001 2/12/2013 004-A $4,166 non-Federal funds for the unnecessary interest the U.S. Department of the Treasury paid on the Program funds that the City drew down from its treasury account when Program income was available. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to support, pursue collection from 2013-CH-1004 8/1/2013 001-G the applicable landlords, or reimburse its program $10,243 from $3,156 non-Federal funds for the overpayment of housing assistance due to discrepancies in the housing assistance payments register. 140 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Support or repay $129,840, which includes $15,156 to its operating fund, $2,237 to HUD for its transmission to the U.S. Treasury, and 2014-FW-1801 11/8/2013 001-A $2,818 $112,447 to its Capital Fund program, in unsupported disbursements. Repayment must be from non-Federal funds. Repay its operating fund $2,733 for funds paid to the previous 2014-FW-1801 11/8/2013 001-C executive director’s wife when she was not an employee. $2,733 Repayment must be from non-Federal funds. Support or repay to its operating fund $33,081 in disbursements to employees for bonuses that were improperly awarded, duplicated 2014-FW-1801 11/8/2013 001-B $2,175 pay periods, and unidentified purposes under the applicable years. Repayment must be from non-Federal funds. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to support or reimburse HUD $2,060 from non-Federal funds for transmission 2013-CH-1010 9/30/2013 002-C to the U.S. Treasury for the Recovery Act Block Grant funds used $2,060 for project numbers 3503 ($490), 3515 ($320), 3687 ($900), and 3792 ($350) that lacked support that an independent cost estimate was performed for change order items. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to support or reimburse HUD $1,759 from non-Federal funds for transmission 2013-CH-1010 9/30/2013 002-B to the U.S. Treasury for the Recovery Act Block Grant funds used $1,759 for project number 3477 for which the City lacked documentation to support that it performed an independent estimate for the costs of the services. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to 2013-NY-1006 5/13/2013 001-D provide documentation to justify the $1,264 in unsupported project $1,264 delivery costs. Any unsupported costs determined to be ineligible should be reimbursed from non-Federal funds. Pay down the principal balance by $1,101 for the one over-insured 2013-LA-1008 8/20/2013 002-C $1,101 loan as a result of an excessive seller contribution. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to reimburse HUD $915 from non-Federal funds for transmission to 2013-CH-1010 9/30/2013 002-D the U.S. Treasury for the Recovery Act Block Grant funds used for $915 project numbers 3478 ($572) and 3647 ($79) that exceeded the City’s estimate by more than 15 percent and project number 3876 ($264) that were excessive. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to provide sufficient 2013-CH-1009 9/27/2013 002-E documentation to support that the appliance was installed in a unit $429 renovated under the Recovery Act formula grant or reimburse HUD $429 from its capital funds for transmission to the U.S. Treasury. Require the Municipality to determine the amount expended for the 2013-AT-1003 3/22/2013 003-C resurfacing of all private properties and reimburse the Block Grant $0 program from non-federal funds. 141 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Develop and implement comprehensive procedures to assess the 2013-BO-0001 2/12/2013 001-A effectiveness and completeness of monitoring efforts using metric $0 or query data in the GMP database as detailed in this finding. Develop and implement procedures to evaluate the field office testing of non-high-risk grantees to ensure the soundness of risk 2013-BO-0001 2/12/2013 001-B $0 assessments and obtain early warning of potential deficiencies as provided for in HUD CPD Notice 12-02 Develop and implement a quality control system to validate HOME program data recorded in the Integrated Disbursement and 2013-BO-0001 2/12/2013 002-A Information System by using field office monitoring data in the $0 GMP database or some other auditable method, such as statistical sampling and testing of key program data. Develop and implement formal procedures to continually assess the effectiveness and completeness of field office data monitoring efforts using GMP monitoring data to include (1) verifying that HOME data are tested, (2) analyzing results to determine whether 2013-BO-0001 2/12/2013 002-B $0 program data as a whole are reliable and to identify systemic data issues or issues that should be addressed, and (3) verifying that findings are corrected in a timely manner and monitoring is complete. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to implement adequate procedures and controls to ensure that if the ownership of additional homes acquired through its Housing Trust 2013-CH-1001 2/12/2013 003-C Fund and Afford-A-Home programs is transferred through $0 foreclosures, the City recaptures the entire amount of the Program funds through the receipt of net proceeds from the sales of the homes or reimburses its Program from non-Federal funds for the Program funds provided to the home buyers as appropriate. We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to review and provide the results to HUD for the remaining 98 Recovery Act Block Grant-funded roof and other exterior repair project files that were not part of our sample to ensure that the households were 2013-CH-1010 9/30/2013 001-C $0 income eligible and that it maintained adequate and sufficient documentation to support that households were income eligible. For any household determined to be ineligible or if the City’s files lack documentation to support a household’s eligibility, the related amount will be added to 1A or 1B as appropriate. 142 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Columbus Office of Community Planning and Development require the City to review and provide the results to HUD for the remaining 98 Recovery Act Block Grant-funded roof and other exterior repair project files that were not part of our sample to ensure that the City maintained 2013-CH-1010 9/30/2013 002-E $0 adequate support to show whether the services were provided at a reasonable cost. For any project for which a price quote was not obtained from at least three contractors and the contract cost exceeded the City’s independent estimate, the project and the overage amount will be added to recommendation 2A. Require the owner to complete and submit a current version of the required certification to HUD for approval. If the owner does not 2013-DE-1003 9/10/2013 001-A $0 submit the required certification for HUD approval, consider seeking administrative sanctions. Require the owner to establish and implement comprehensive 2013-DE-1003 9/10/2013 002-A financial policies and procedures including the proper maintenance $0 of the books of account. Provide the necessary technical assistance and confirm that the 2013-DE-1003 9/10/2013 002-B $0 procedures have been implemented. Require the Authority to submit financial statements that show how 2013-DE-1005 9/30/2013 001-E $0 its disposition funds were expended by item and dollar amount. Work with the Office of the Chief Information Officer to improve the deposit module’s reporting capabilities so that Labor Relations 2013-HA-0001 4/16/2013 002-C $0 staff is able to report and analyze the deposit account transactions and taxes or replace the system. Resolve issues with the Office of Community Planning and 2013-KC-0002 6/26/2013 001-D Development and complete the process to publish final regulations $0 for 24 CFR Part 135. Develop and implement additional system error checks to identify 2013-KC-0003 9/10/2013 001-C $0 potential reporting issues. Enhance data collection to begin collecting information on whether 2013-KC-0004 9/18/2013 001-B each co-borrower will occupy the subject property as well as the $0 addresses and phone numbers of each co-borrower. Replace GMP Development Group as Bay Vista’s management 2013-LA-1003 3/14/2013 001-D $0 agent with a non-identity-of-interest agent. Implement proper policies, procedures, and controls to restrict the use of trust funds to only allowable non-operating-type expenses 2013-LA-1003 3/14/2013 001-E $0 and ensure that the trust funds are not commingled with Bay Vista’s and its properties’ operating funds. 143 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies (31 U.S.C. 3801-3812, 3729, or both), civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against The Lending Company, its principals, or both for incorrectly certifying to the integrity of the data, the 2013-LA-1008 8/20/2013 001-A mortgage eligibility for FHA mortgage insurance, or that due $0 diligence was exercised during the origination of 732 loans that resulted in actual losses of $284,412 on 7 loans and potential losses of $55.4 million on 725 loans for a total loss of $55.7 million, which could result in affirmative civil enforcement action of approximately $116.9 million. Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies (31 U.S.C. 3801-3812, 3729, or both), civil money penalties (24 CFR 30.35), or both against The Lending Company, its principals, or both for incorrectly certifying to the 2013-LA-1008 8/20/2013 002-A $0 integrity of the data or that due diligence was exercised during the origination of five loans that resulted in actual losses of $421,630, which could result in affirmative civil enforcement action of approximately $880,760. Fully implement its quality control plan and provide HUD with periodic reports for 12 months to ensure that its quality control 2013-LA-1008 8/20/2013 003-A $0 reviews, to include early payment defaults, are conducted in accordance with HUD requirements. Provide training to ensure that its quality control staff is aware of 2013-LA-1008 8/20/2013 003-B $0 HUD’s quality control program requirements. Develop and implement written policies and procedures for its 2013-LA-1009 9/13/2013 001-B $0 HOME program. Implement adequate written policies and procedures for its salary 2013-LA-1010 9/20/2013 001-D and administrative allocations to meet applicable HUD rules and $0 requirements. Provide adequate training to CDBG employees so that the employees have a better understanding and knowledge of 2013-LA-1010 9/20/2013 001-E $0 administering the CDBG program in accordance with HUD rules and requirements. We recommend that the Deputy Assistant Secretary for Grant Programs strengthen controls over the existing procedures relating to the HUD Entitlement Communities Division monthly timeliness report. Procedures should require the timeliness report to be sent to the local HUD field offices by a specific date each month. If our 2013-NY-0003 7/19/2013 001-A $0 recommendations to improve procedures are implemented and grantees’ subsequent years’ funding is reduced, following a decision made by HUD officials after an informal consultation with the grantees, $5,658,648 in questioned CDBG entitlement funds from the four untimely grantees can be put to better use. We recommend that the Deputy Assistant Secretary for Grant Programs strengthen the existing CDBG timeliness spending grantee notification procedures to ensure that the notification of 2013-NY-0003 7/19/2013 001-B $0 new untimely grantees becomes a higher priority and explain to staff the importance of the notification process in the sanctioning policy. 144 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Deputy Assistant Secretary for Grant Programs document its rationale for not subjecting the six untimely grantees to its sanctioning policy, which could have required that 2013-NY-0003 7/19/2013 001-C $2,720,364 in CDBG entitlement funds from these six untimely $0 grantees subsequent years grant funding be reduced. If OIG recommendations to improve procedures are implemented, these funds can be put to better use. We recommend that the Deputy Assistant Secretary for Grant Programs establish procedures requiring documentation of its 2013-NY-0003 7/19/2013 001-D $0 rationale for not sanctioning grantees not complying with the CDBG timeliness spending requirement. We recommend that the Deputy Assistant Secretary for Grant 2013-NY-0003 7/19/2013 001-E Programs establish procedures on how to handle grantees that are $0 minimally noncompliant with the timeliness spending requirement. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to document their application review committee membership and 2013-NY-1006 5/13/2013 002-A $0 provide evidence of the committee meetings and their evaluation and rating of subrecipients to fully support their funding recommendations. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to 2013-NY-1006 5/13/2013 002-D develop controls to ensure that the County’s recently established $0 debarment verification procedures are implemented for all future procurement activity. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct County officials to 2013-NY-1006 5/13/2013 003-C develop controls that will ensure that the County’s decentralized $0 record-keeping system is centralized for ready access to HOME documents. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to develop a comprehensive overall CDBG policies and procedures 2013-NY-1010 9/26/2013 001-E manual to ensure that City officials adequately administer the $0 City’s CDBG program in accordance with HUD regulations. Specifically, the City should ensure that program income is accurately accounted for and reported to HUD in a timely manner. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2013-NY-1010 9/26/2013 002-B develop procedures to ensure that funded activities comply with $0 program objectives and that the activities are sufficiently monitored. Require the owner to calculate and support the amount of funds required to be on deposit in the tenant security deposit account and 2013-PH-1804 7/22/2013 001-C deposit funds into the account, if needed, so that the balance in the $0 account is equal to or exceeds the amount of funds required to be in the account. Declare the project in default of its regulatory agreement and apply 2013-PH-1804 7/22/2013 001-D remedies available under the regulatory agreement up to and $0 including foreclosure. 145 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Adjust program participants’ lien amounts for items not completed 2014-AT-1003 12/30/2013 001-C $0 or corrected in recommendations 001-A and 001-B. Review the remaining 88 HARP contracts that were not part of our sample to ensure that the City paid contractors for contracted repairs according to HUD and City regulations. For any contract 2014-AT-1003 12/30/2013 001-D $0 with ineligible or unsupported costs, the City should include the contract amounts in recommendation 001-A or 001-B for reimbursement. Refrain from awarding any future HARP contracts until it has 2014-AT-1003 12/30/2013 001-F adequate personnel to monitor rehabilitation work and ensure that $0 federal funds are properly expended. Re-inspect the homes to ensure that identified deficiencies have 2014-AT-1003 12/30/2013 001-G $0 been properly corrected. Obtain a corrective action plan from BAC with critical milestones 2014-FO-0001 12/6/2013 001-A to document how all information is to be provided, supported, and $0 reconciled to the appropriate underlying information system. Review the projected workload requirements with BAC, evaluate the remaining impact of ongoing delays in recording servicing 2014-FO-0001 12/6/2013 001-B $0 activity, and document the anticipated effort on future financial reporting. Continue efforts to confirm the insured status of loans not yet 2014-FO-0001 12/6/2013 001-C $0 matched with data from the insuring agencies. Develop and implement a detailed remediation action plan to ensure that grant management systems eliminate the FIFO methodology in its entirety. The plan should (1) explain how the budget fiscal year-TAFS for each accounting transaction (project 2014-FO-0003 12/16/2013 001-A and activity setup, commitment, disbursement, etc.) will be $0 recorded, remain constant, and be maintained, (2) reference Federal system requirements and criteria, and (3) include resources, specific remedies, and intermediate target dates necessary to bring the financial management system into substantial compliance. Establish controls within the system, which provide an audit trail of 2014-FO-0003 12/16/2013 001-B $0 the use of the funds by the budget fiscal year-TAFS. Provide oversight of CPD’s system implementation or modification to ensure that Federal financial management accounting standards are embedded into the system so that the information transferred from grant management systems to HUD’s core financial systems 2014-FO-0003 12/16/2013 001-C $0 comply with these standards, are recorded in HUD’s consolidated financial statements in accordance with Federal GAAP, and ensure that compliant administrative control of funds for its formula grant programs is established. Implement a cost-effective method for automating the cash 2014-FO-0003 12/16/2013 002-C management process to include an electronic interface of $0 transactions to the standard general ledger. Review the cash management process to identify all financial events to be recognized in accordance with GAAP. Establish 2014-FO-0003 12/16/2013 002-E $0 procedures to account for the cash management activity in a timely manner in compliance with GAAP. 146 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Ensure that PIH’s automation of its cash management process 2014-FO-0003 12/16/2013 002-G $0 complies with Federal financial management requirements. Design and Implement a loan guarantee system that complies with the Guaranteed Loan System Requirements. Ensure that the 2014-FO-0003 12/16/2013 003-A implemented loan guarantee system should be integrated with $0 HUD’s financial management systems and be included in its financial management system plans. Establish an appropriate accounting and financial reporting governance structure within OCFO with the appropriate level of 2014-FO-0003 12/16/2013 004-G accounting, experience, and training to support the size and $0 complexity of HUD’s and its component entities’ financial reporting requirements. Enforce already existing internal control procedures to ensure 2014-FO-0003 12/16/2013 006-C $0 proper supervision over accounting for Section 8 FAF receivables. Perform a thorough analysis of outstanding FAF receivables and fiscal year 2013 collections to ensure that the receivables accurately 2014-FO-0003 12/16/2013 006-D represent the amounts owed to HUD, including but not limited to $0 positive confirmations of outstanding receivable balances with the trustees. Complete the closeout of any remaining CDBG-R and HPRP grants 2014-FO-0003 12/16/2013 008-B and forward all grant closeout agreement certifications to OCFO $0 for recapture. Deobligate $14,425,629 tied to 238 program obligations marked for deobligation during the department-wide unliquidated obligations review. Additionally, OCFO should review the 93 obligations with 2014-FO-0003 12/16/2013 008-C remaining balances totaling $316,935 and close out and deobligate $0 amounts tied to obligations that are no longer valid, either based on the criteria defining the availability of appropriations at 31 U.S.C. 1301 or the criteria for recording obligations at 31 U.S.C. 1501. Design and implement a policy to ensure that reconciliations between the subsidiary ledgers (supporting records) and the obligation balances in the general ledger (controlling accounts) are 2014-FO-0003 12/16/2013 008-M $0 periodically performed for all HUD appropriations. The policy should also address the follow-up and clearance of identified differences and the responsibilities for the preparers and reviewers. Develop and implement procedures to routinely evaluate the assistance and administrative obligation balances for the HUD- 2014-FO-0003 12/16/2013 011-E $0 administered and SSS subcategories of EHLP to determine whether a valid need still exists and if not, deobligate those balances. Make changes to IDIS Online, which will require grantees to specifically identify the grant allocation year to which the commitment should be assigned and include the commitment dates. 2014-FO-0003 12/16/2013 015-A $0 The system should also allow HUD to ensure that commitments made during overlapping allocations and periods are counted toward only 1 year’s compliance requirements. 147 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Stop using the cumulative method and the deadline compliance report for determining compliance with the 24-month commitment 2014-FO-0003 12/16/2013 015-B requirement in the HOME Investment Partnership Act and use only $0 the commitments made within the 24-month period to determine compliance. In accordance, with the GAO legal decision and opinion, take steps to identify and recapture funds that remain uncommitted after the 2014-FO-0003 12/16/2013 015-C $0 statutory commitment deadline and reallocate such funds in accordance with the Act. Recapture funds from allocations during the 24-month overlapping 2014-FO-0003 12/16/2013 015-D period only for grantees that do not comply with the 24-month $0 commitment requirement. Initiate the billing process for the claims paid, plus incentive, where 2015-FO-0001 11/14/2014 001-F the lender has not provided the original of the note and security $1,486,544,478 instrument within the prescribed deadlines for the $1.5 billion. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct City officials to provide documentation to justify the $183 million in unsupported salary and fringe benefits and 2015-NY-1001 11/24/2014 001-A $183,000,000 associated expenses charged to the CDBG-DR program. If documentation provided does not support the costs, this amount should be repaid from non-Federal funds. HUD should remove the provision that allows public housing authorities to charge asset management fees, which would ensure 2014-LA-0004 6/30/2014 001-B $81,613,671 that at least $81.6 million in operating funds could be put to better use in meeting HUD program objectives. The Boston Housing Authority and the City of Boston to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-A the Authority’s Recovery Act grant or require the housing agency $33,329,733 to repay $33,329,733 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. Deobligate all obligations marked for deobligation during the departmentwide open obligations review, including as much as $4,988,326 in 613 administrative obligations and $6,395,922 in 79 2015-FO-0002 12/8/2014 006-E program obligations marked for deobligation as of September 29, $31,008,694 2014. Additionally, review the 269 obligations with remaining balances totaling $19,624,446 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Initiate the billing process, including determining lender status, for the 237 loans that were part of the ACD program for which the 2014-LA-0005 8/8/2014 001-A $21,698,472 lenders were not billed. HUD incurred losses of nearly $22.4 million for these loans. The Boston Housing Authority and the City of Boston to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-B the Authority’s 2011 Capital Fund grant or require the housing $21,478,604 agency to repay $21,478,604 to HUD. Repayment must be from non-Federal funds. 148 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS The Detroit Housing Commission and the City of Detroit to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-E requirements for the Commission’s Recovery Act grant or require $17,275,908 the Commission to repay $17,275,908 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. The Boston Housing Authority and the City of Boston to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-C the Authority’s 2012 Capital Fund grant or require the housing $17,058,105 agency to reimburse $17,058,105 to the Authority’s 2012 Capital Fund grant from non-Federal funds. Deobligate all obligations marked for deobligation during the departmentwide open obligations review, including as much as $3,561,042 in 64 administrative obligations marked for 2015-FO-0002 12/8/2014 006-J deobligation as of September 29, 2014. Additionally, review the $13,188,250 171 obligations with remaining balances totaling $19,730,791 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Initiate the billing process, including determining lender status, for the 217 loans that went into default before the indemnification 2014-LA-0005 8/8/2014 001-C $12,490,032 agreement expired for which the lenders were not billed. HUD incurred losses of nearly $12.5 million for these loans. Provide all supporting documentation associated with the $10,838,880 (Total disbursements of $10,876,095 were adjusted to consider $37,215 questioned in State CDBG, Section 108, and program income proceeds disbursed for the development of the 2014-AT-1801 3/20/2014 001-B $10,838,880 sports complex, if HUD determines the plan to be feasible ). HUD must determine the eligibility, reasonableness, and allocability of the funds disbursed. OCMA must reimburse its State CDBG program from non-Federal funds any amount determined ineligible. Update selection rules for CAIVRS to provide for complete 2014-KC-0002 7/2/2014 001-B reporting of all ineligible borrowers to put $9.5 million to better $9,501,619 use. The Detroit Housing Commission and the City of Detroit to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-F requirements for the Commission’s 2011 Capital Fund grant or $7,756,710 require the Commission to repay $7,756,710 to HUD from non- Federal funds. Submit a plan for how it will proceed with respect to the Municipality of Dorado hotel project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility of the 2015-AT-1001 12/5/2014 001-B $7,369,000 $7,369,000 already invested. If HUD determines that the activity has been canceled or is not feasible, Municipal Affairs must mitigate activity losses by committing any unused loan proceeds for future loan repayments. The Detroit Housing Commission and the City of Detroit to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-G requirements for the Commission’s 2012 Capital Fund grant or $7,275,028 require the Commission to reimburse $7,275,028 to its 2012 Capital Fund grant from non-Federal funds. 149 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Reevaluate the feasibility of the activities and determine the eligibility of the $7,136,298 disbursed for the three projects with signs of slow progress. The Municipality must reimburse its 2014-AT-1007 8/8/2014 001-A $7,136,298 HOME program from non-Federal funds if HUD determines the activities to have been terminated and reprogram and put to better use any unexpended funds associated with the terminated activities. Submit a plan for how it will proceed with respect to the Municipality of San Lorenzo activity center project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility 2015-AT-1001 12/5/2014 001-A $7,010,276 of the $7,010,276 already invested. If HUD determines that the activity has been canceled or is not feasible, Municipal Affairs must mitigate activity losses by committing any unused loan proceeds for future loan repayments. We recommend that the Director of the Public Housing Financial 2014-NY-0003 9/4/2014 001-A Management Division recapture the $6,206,924 in operating $6,206,924 subsidies that was erroneously awarded to seven PHAs. Submit a plan for how it will proceed with respect to the Municipality of Camuy hotel project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility of the 2015-AT-1001 12/5/2014 001-C $5,474,376 $5,474,376 already invested. If HUD determines that the activity has been canceled or is not feasible, Municipal Affairs must mitigate activity losses by committing any unused loan proceeds for future loan repayments. The New Bedford Housing Authority to repay $4,860,197 in 2014-FW-0001 2/7/2014 001-G Recovery Act grant funds to HUD for its transmission to the U.S. $4,860,197 Treasury. Repayment must be from non-Federal funds. The Kansas City, MO, Housing Authority and the City of Kansas City, MO, to provide support that they complied with 24 CFR Part 58 requirements for the Authority’s Recovery Act grant or require 2014-FW-0002 5/12/2014 001-E $4,517,915 the housing agency to repay $4,517,915 to HUD for its transmission to the U.S. Treasury. Repayment must be from non- Federal funds. Deobligate $89,237 in 46 administrative obligations marked for deobligation during the departmentwide open obligations review. 2015-FO-0002 12/8/2014 006-O Additionally, review the 199 obligations with remaining balances $4,235,471 totaling $4,146,234 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Determine whether the documentation the State provided is adequate to support $3,487,461 disbursed for wages and salaries 2014-PH-1008 8/29/2014 001-C charged to the program by the contractors’ employees and if not, $3,487,461 direct the State to repay HUD from non-Federal funds for any amount that it cannot support. Deobligate the 76 expired or inactive Sections 202 and 811 and 2015-FO-0002 12/8/2014 006-F $3,458,166 project-based Section 8 projects totaling $3,458,166. 150 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS The Kansas City, KS, Housing Authority and the Unified Government of Wyandotte County-Kansas City, KS, to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0002 5/12/2014 001-B $3,438,953 the Authority’s Recovery Act grant or require the housing agency to repay $3,438,953 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. Direct the applicable servicing lenders to verify and provide documentation of the borrowers’ compliance with the residency 2014-PH-0001 9/30/2014 001-A requirement for each of the 121 cases or for each noncompliant $3,362,055 borrower, declare the loan in default and due and payable, thereby putting approximately $3,362,055 to better use. The New Bedford Housing Authority and the City of New Bedford to provide support that they complied with 24 CFR Part 58 2014-FW-0001 2/7/2014 001-H requirements for the Authority’s 2011 Capital Fund grant or require $3,154,021 the housing agency to repay $3,154,021 to HUD. Repayment must be from non-Federal funds. The New Bedford Housing Authority and the City of New Bedford to provide support that they complied with 24 CFR Part 58 2014-FW-0001 2/7/2014 001-J requirements for the Authority’s 2012 Capital Fund grant or require $2,966,280 the housing agency to reimburse $2,966,280 to the Authority’s 2012 Capital Fund grant from non-Federal funds. The Kansas City, MO, Housing Authority and the City of Kansas City, MO, to provide support that they complied with 24 CFR Part 2014-FW-0002 5/12/2014 001-F 58 requirements for the Authority’s 2011 Capital Fund grant or $2,920,093 require the housing agency to repay $2,920,093 to HUD from non- Federal funds. The Kansas City, KS, Housing Authority and the Unified Government of Wyandotte County-Kansas City, KS, to provide 2014-FW-0002 5/12/2014 001-C support that they complied with 24 CFR Part 58 requirements for $2,827,316 the Authority’s 2011 Capital Fund grant or require the housing agency to repay $2,827,316 to HUD from non-Federal funds. The Kansas City, MO, Housing Authority and the City of Kansas City, MO, to provide support that they complied with 24 CFR Part 2014-FW-0002 5/12/2014 001-G 58 requirements for the Authority’s 2012 Capital Fund grant or $2,710,079 require the housing agency to reimburse $2,710,079 to the Authority’s 2012 Capital Fund grant from non-Federal funds. Reassess the $2,621,624 unjustified write off for FAF 210 and 2014-AT-0001 3/14/2014 001-E reinstate and pursue collection of all or any portion of the amount $2,621,624 determined to have been written off without proper justification. The Kansas City, KS, Housing Authority and the Unified Government of Wyandotte County-Kansas City, KS, to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0002 5/12/2014 001-D $2,555,880 the Authority’s 2012 Capital Fund grant or require the housing agency to reimburse $2,555,880 to the Authority’s 2012 Capital Fund grant from non-Federal funds. Initiate the billing process, including determining lender status, for the 32 loans that were part of the CWCOT program for which the 2014-LA-0005 8/8/2014 001-B $2,234,925 lenders were not billed. HUD incurred losses of approximately $2.2 million for these loans. 151 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Authority to take action to reclaim its properties valued 2015-FW-1801 10/2/2014 001-C at $2,032,266 to improve its financial position, decrease its reliance $2,032,266 on HUD program funding, and address its comingling issues. Deobligate $174,168 in 5 administrative obligations and $9,920,926 in 308 program obligations marked for deobligation during the department-wide open obligations review. Additionally, 2015-FO-0002 12/8/2014 006-B $1,956,447 review the 72 obligations with remaining balances totaling $313,419 and close out and deobligate amounts tied to obligations that are no longer valid or needed. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to provide documentation to justify that the $1,615,057 in 2014-NY-1008 7/25/2014 001-A $1,615,057 unsupported costs is associated with eligible program activities. Any unsupported costs determined to be ineligible should be reimbursed from non-Federal funds. We recommend that the Director of the Public Housing Financial 2014-NY-0003 9/4/2014 001-B Management Division reimburse the 5 PHAs that were $1,516,882 underfunded $1,516,882 in ARF funding. We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing to require the lenders to indemnify HUD for any 2014-CH-0001 9/30/2014 001-B future losses on the 16 loans24 with an estimated loss of $1,487,921 $1,487,921,25 based on the loss severity rate of 54 percent of the total unpaid principal balance of $2,755,409 as of June 1, 2014. Recalculate the commitment requirement as a result of the County’s improperly committing $1,478,250 The County improperly committed $1,478, 250, composed of activity 5109 and 2014-AT-1010 9/11/2014 001-G project 61 with commitments of $500,000 and $978,250, $1,478,250 respectively. in HOME funds for project 61 and activity 5109 and determine the cumulative effect on the County’s commitment requirement. Reimburse its IHBG from non-Federal funds or reduce undisbursed 2014-LA-1004 7/8/2014 001-A $1,385,687 grant funds by $1,508,602 for ineligible duplicate charges. We recommend that the Director of HUD’s New York Office of Public and Indian Housing require Authority officials to provide supporting documents for the proper use of $1,250,417 in sale 2015-NY-1002 12/1/2014 002-C $1,250,417 proceeds from the scattered-site properties. Any amounts not supported or found to be improperly used should be repaid to the homeownership program from non-Federal funds. Reimburse $1,183,642 in HOME and CHDO funds to the HOME 2014-AT-1005 5/29/2014 001-A $1,183,642 Investment Trust Fund treasury account from non-Federal funds. The Nashua Housing Authority and the City of Nashua to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-D the Authority’s Recovery Act grant or require the housing agency $1,169,494 to repay $1,169,494 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. 152 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of the HUD Newark Office of Public and Indian Housing instruct Authority officials to provide documentation to support that the 252 units for which the Authority’s records did not document that an annual inspection was performed during program year 2012 comply with housing quality 2014-NY-1001 1/15/2014 001-A $1,139,664 standards. If such documentation cannot be provided, the $3.89 million (consisting of $3,768,868 in housing assistance payments and $122,977 of the Authority’s administrative fee paid related to those units) should be reimbursed to the program from non-federal funds. Recover from the borrowers and reimburse $1,080,242 to the applicable loan guarantee account from non-Federal funds for 2015-AT-1001 12/5/2014 002-A $1,080,242 ineligible disbursements that were not related to the approved projects and used to finance local government operations. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2014-NY-1009 9/18/2014 001-B repay the $1,060,529 not expended within the required timeframe $1,060,529 so that these funds can be recaptured in accordance with Federal regulations. Extend the indemnification agreement for the 15 active loans and 1 claim loan that were streamline refinanced. The 15 active loans 2014-LA-0005 8/8/2014 002-B had an unpaid balance of nearly $1.9 million with a potential loss to $1,040,145 HUD of $965,306 if the loans go into claim status. The one claim loan had an estimated loss of $74,839. The Kansas City, KS, Housing Authority to repay $1,039,797 in Recovery Act grant funds to HUD for its transmission to the U.S. 2014-FW-0002 5/12/2014 001-A Treasury for contract obligations that occurred before the $1,039,797 environmental review was completed by the responsible entity. Repayment must be from non-Federal funds. Provide documentation to support the $1,031,000 in CDBG loans 2014-AT-1005 5/29/2014 001-B $1,031,000 or reimburse the CDBG program from non-Federal funds. The Nashua Housing Authority and the City of Nashua to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-E the Authority’s 2011 Capital Fund grant or require the housing $874,261 agency to repay $874,261 to HUD. Repayment must be from non- Federal funds. We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Commission to support the use of the 2014-CH-1003 4/30/2014 001-D sole-sourcing procurement method for its Recovery Act-funded $785,159 competitive grant or reimburse HUD $785,159 from non-Federal funds for transmission to the U.S. Treasury. Reimburse $772,000 in HOME funds used to pay ineligible 2014-AT-1005 5/29/2014 002-A expenses to the HOME Investment Trust Fund treasury account $772,000 from non-Federal funds. 153 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing to require the lenders to support that the loans cited for post-endorsement technical reviews by HUD were eligible 2014-CH-0001 9/30/2014 001-A for FHA insurance or require the lenders to indemnify HUD for any $759,042 future losses on the 12 loans22 with an estimated loss of $1, 047, 314.23 based on the loss severity rate of 54 percent of the total unpaid principal balance of $1,939,471 as of June 1, 2014. We recommend that the Director of the Newark, NJ, Office of Community Planning and Development instruct County officials to provide documentation supporting that $745,606, drawn down for 2014-NY-1005 6/10/2014 001-B activities without evidence of executed agreements, was committed $745,606 in a timely manner as required. If supporting documentation cannot be provided, the amount should be recaptured in accordance with regulations at 24 CFR 92.500(d)(1)(B). The Nashua Housing Authority and the City of Nashua to provide support that they complied with 24 CFR Part 58 requirements for 2014-FW-0001 2/7/2014 001-F the Authority’s 2012 Capital Fund grant or require the housing $728,596 agency to reimburse $728,596 to the Authority’s 2012 Capital Fund grant from non-Federal funds. Submit all supporting documentation showing the eligibility and propriety of $726,738 in unaccounted for drawdowns from its 2014-AT-1007 8/8/2014 002-A $726,738 treasury account or reimburse the HOME program from non- Federal funds. Require the Municipality to submit all supporting documentation showing that the 35 home buyers met the principal residency 2014-AT-1007 8/8/2014 001-B requirement for the duration of the period of affordability or $675,194 reimburse the HOME program from non-Federal funds the $675,194 in HOME assistance provided. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to establish and maintain a separate net restricted assets 2014-CH-1006 8/14/2014 001-A $640,283 account and reimburse the net restricted assets fund from non- Federal funds $640,283 or the current amount owed and provide the results to HUD for verification. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to provide documentation to support the reasonableness and eligibility of the administrative program delivery costs charged to the CDBG 2014-NY-1004 5/20/2014 001-G $597,048 program, including $597,048 in program delivery costs that could have been allocated to the State program, and repay the CDBG program from non-Federal funds any amounts determined to be unreasonable or ineligible. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to 2014-NY-1008 7/25/2014 001-E provide source documentation to substantiate that the $584,579 in $584,579 required non-Federal cash matching funds for five of the six program projects reviewed were met. Support or reimburse its program $570,834 from non-Federal funds 2014-FW-1003 7/2/2014 001-C $570,834 for payments that lacked supporting documentation. Reimburse the Authority’s programs from non-Federal funds for 2014-BO-1002 4/30/2014 002-A $512,516 more than $697,471 in unreasonable salary expenditures. 154 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS The Dearborn Housing Commission and the City of Dearborn to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-B requirements for the Commission’s Recovery Act grant or require $501,015 the Commission to repay $501,015 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2014-NY-1009 9/18/2014 001-A repay the $464,663 not committed within the required timeframe so $464,663 that these funds can be recaptured in accordance with Federal regulations. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support compliance with the maximum 2014-NY-1009 9/18/2014 002-C HOME subsidy limits, the environmental review process, and the $459,991 use and application of program income for the unsupported housing activity or repay $459,991 from non-Federal funds to the City’s HOME program line of credit. The Pontiac Housing Commission to repay $457,861 in 2011 capital funds to HUD for its statutory violation of the requirement 2014-FW-0005 9/24/2014 001-J that the responsible entity, not the Commission, sign as certifying $457,861 officer on the request for release of funds and certification. Repayment must be from non-Federal funds. Require the City to repay HUD, using non-Federal funds, $449,598 2014-LA-1005 8/22/2014 001-B paid to secondary lien holders, developers, and contractors for $449,598 rehabilitation work not performed. Repay the Authority’s asset management projects from non-Federal funds $582,562 related to the ineligible cost deficiencies identified in this finding; specifically, charges of $240,321 for central 2014-BO-1001 1/23/2014 001-A maintenance employees; $281,611 for asset management, property $413,493 management, and bookkeeping fees; $26,434 for insurance; $10,000 for auditing; $20,000 for consulting; and $4,196 for legal expenses. Deobligate, reprogram, and put to better use $387,449 in overstated 2014-AT-1007 8/8/2014 003-A $387,449 commitments. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to implement adequate procedures and controls to ensure that all units meet HUD’s housing quality standards and its own requirements to prevent $373,661 in program funds from being 2014-CH-1006 8/14/2014 002-C spent on units that do not comply with HUD’s requirements over $373,661 the next year. The procedures and controls should include but not be limited to providing feedback to the inspectors to correct recurring inspection deficiencies, inspectors are properly trained and familiar with HUD’s and its own requirements, and inspectors consistently conduct accurate and complete inspections. Initiate the billing process for the five loans with losses to HUD 2014-LA-0005 8/8/2014 002-D that were streamline refinanced. HUD incurred losses of $373,228 $373,228 for these loans. 155 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Obtain and submit supporting documentation showing the 2015-AT-1001 12/5/2014 002-C eligibility and propriety of $367,840 in disbursements or reimburse $367,840 the loan guarantee account from non-Federal funds. The Dearborn Housing Commission and the City of Dearborn to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-C requirements for the Commission’s 2011 Capital Fund grant or $366,971 require the Commission to repay $366,971 to HUD from non- Federal funds. The Dearborn Housing Commission and the City of Dearborn to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-D requirements for the Commission’s 2012 Capital Fund grant or $337,776 require the housing commission to reimburse $337,776 to its 2012 Capital Fund grant from non-Federal funds. Deobligate $785 in one administrative obligation marked for deobligation during the department-wide open obligations review. 2015-FO-0002 12/8/2014 006-S Additionally, review the six obligations with remaining balances $333,673 totaling $332,888 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Seek recovery of the $323,720 in CDBG funds from the bank with interest from March 14, 2002, to the present. Reimburse $323,720 2014-AT-1005 5/29/2014 002-B $323,720 in CDBG funds to the CDBG program from non-federal funds and reimburse the interest to the U.S. Treasury. The Pontiac Housing Commission and the City of Pontiac to provide support that they complied with 24 CFR Part 58 2014-FW-0005 9/24/2014 001-I requirements for the Commission’s Recovery Act grant or require $315,831 the Commission to repay $315,831 to HUD for its transmission to the U.S. Treasury. Repayment must be from non-Federal funds. Reimburse the grantee’s program $312,077 from non-Federal funds 2014-PH-1007 7/15/2014 001-A $312,077 for the ineligible disbursements. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City Officials to 2014-NY-1009 9/18/2014 004-D record the receipt and use of $289,858 in program income in IDIS, $289,858 thus ensuring that $289,858 in program income is properly accounted for and put to better use. Require contract administrators that did not apply the back-out requirements to recalculate all FAF projects with Section 8 rent increases that occurred from January 2004 to the present and adjust 2014-AT-0001 3/14/2014 001-B $279,639 current and future rents to the amounts supported by the calculations. We estimate annual savings of $279,639 through the implementation of this recommendation for the projects reviewed. The Pontiac Housing Commission to repay $273,774 in Recovery Act grant funds to HUD for its transmission to the U.S. Treasury 2014-FW-0005 9/24/2014 001-H for contract obligations that occurred before the environmental $273,774 review was completed by the responsible entity. Repayment must be from non-Federal funds. 156 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2014-NY-1009 9/18/2014 002-A reimburse the City’s HOME program line of credit $250,410 from $250,410 non-Federal funds for HOME assistance expended on housing units acquired by two ineligible home buyers. Provide supporting documentation for activity 5134 or reimburse 2014-AT-1010 9/11/2014 001-B its program $45,600 from non-Federal funds and put to better use $250,000 $204,400 in HOME funds. Allow HUD OIG to record the $250,000 judgement in HUD's 2014-CF-1809 9/25/2014 001-A Audit Resolution and Corrective Actions Tracking System as an $250,000 ineligible cost. We recommend that the Director of HUD’s Chicago Office of Community Planning and Development require the City to ensure that for the two Program-assisted units in project number 8806 in which the owner is involved in ongoing eviction proceedings with the households, (1) the leases between the owner and the 2014-CH-1011 9/30/2014 001-B households are amended to remove the prohibited language if the $245,698 households are not evicted, (2) the owner executes leases that do not include prohibited language with new households if the households are evicted, or (3) reimburse its Program from non- Federal funds for the $245,698 ($4,913,961 / 40 units * two units) in Program funds drawn down for the two units as appropriate. Require the Authority to determine how much of the $243,442 in salaries for individuals assigned to work at multiple properties was improperly paid with Federal funds and repay the amounts to the appropriate programs from non-Federal funds. If the Authority is 2015-FW-1801 10/2/2014 001-D $243,442 unable to accurately determine the amount due to and due from each program or support that the funds charged to the Federal programs were appropriate, the full $243,422 should be repaid to HUD. We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Commission to support the reasonableness or reimburse HUD $239,033 from non-Federal 2014-CH-1003 4/30/2014 001-C $239,033 funds, for transmission to the U.S. Treasury, for the amount of the Commission’s Recovery Act-funded contract that exceeded the independent estimate. Provide documentation to support its use of $308,797 in program 2014-PH-1007 7/15/2014 001-B funds or reimburse the grantee’s program from non-Federal funds $226,664 for any amount that it cannot support. Require the City to return to HUD, using non-Federal funds, the actual amount of administrative costs charged to the grant related to 2014-LA-1005 8/22/2014 001-A $223,085 the three developers or $223,085 because the City mismanaged its NSP1. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development require the City to use for eligible Program costs, before drawing down additional Program 2014-CH-1002 1/6/2014 001-C funds, $203,802 in (1) the remaining fire insurance funds for which $203,802 it inappropriately drew down Program funds when it had fire insurance funds available (nearly $132,000) and (2) Program funds drawn down for duplicate demolition costs (nearly $72,000). 157 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to submit documentation to justify the unsupported costs of $200,000 2014-NY-1004 5/20/2014 001-A incurred for an economic development loan so that HUD can make $200,000 an eligibility determination. For any costs determined to be ineligible, HUD should require the City to reimburse the CDBG program from non-Federal funds. Provide documentation to support that the $200,000 transferred to the agent’s revolving fund account was expended for eligible 2015-BO-1001 12/16/2014 001-B $200,000 project costs and if such support cannot be provided, repay the project this amount from non-Federal funds. Discontinue using its low-rent public housing fund as a general 2014-FW-1002 5/27/2014 001-B fund to pay costs associated with its business activities until it has $178,893 established appropriate controls. Develop and implement procedures and controls to ensure compliance with requirements, to include but not be limited to procedures and controls to ensure that (1) housing assistance payments are eligible and supported, (2) appropriate documentation 2014-AT-1011 9/22/2014 001-C $174,995 is obtained and maintained, and (3) property managers are adequately trained on the program requirements. By doing so, we estimate an annual savings of $174,995 in housing assistance payments. Determine the loss amounts for the three loans (412-4767940, 442- 2014-LA-0005 8/8/2014 001-D 2462614, and 561-8450712) that were part of the ACD program, $147,467 which OIG was unable to determine the loss. above. Support or repay from non-Federal funds $144,263 to its Operating 2014-FW-1806 8/19/2014 001-E Fund program for credit card purchases that did not have receipts or $144,263 other support. Deobligate $5,210 in two administrative obligations and $109,500 in one program obligation marked for deobligation during the department-wide open obligations review. Additionally, review the 2015-FO-0002 12/8/2014 006-U $141,421 17 obligations with remaining balances totaling $26,711 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Require the City to repay HUD, using non-Federal funds, $137,601 2014-LA-1005 8/22/2014 001-D $137,601 for the unreasonable costs identified in the report. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to support the time spent correctly administering its Family Self-Sufficiency program or reimburse 2014-CH-1009 9/12/2014 001-F $137,347 HUD from non-Federal funds the appropriate portion of the $137,347 in coordinator grant funds received for fiscal years 2012 and 2013 that was incorrectly paid. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to support that program funds were not used for the 2014-CH-1006 8/14/2014 001-C $132,974 ($68,369 in personal and inappropriate expenditures + $132,974 $64,605 in unsupported expenditures) or reimburse its program from non-Federal funds for the unsupported credit card expenditures cited in this finding. 158 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2014-NY-1009 9/18/2014 001-L reconcile the $118,561 ($16,192 + 102,369) discrepancy between $118,561 the City’s accounting records and financial information reported in IDIS to ensure that these funds have been put to their intended use. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to support or reimburse its program $118,079 ($112,571 2014-CH-1006 8/14/2014 003-F $118,079 in housing assistance payments + $5,508 in associated administrative fees) from non-Federal funds for the unsupported overpayment of housing assistance cited in this finding. Require the Authority to support or repay its various program accounts $109,861 from nonfederal funds for unsupported payroll, 2014-FW-1802 3/31/2014 001-B $109,861 other compensation, bonuses, travel, supplies, contractor payments and petty cash disbursements. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Housing Choice 2014-CH-1009 9/12/2014 001-A Voucher program $106,924 from non-Federal funds for the $106,924 overpayment of its Family Self-Sufficiency program graduates’ escrow disbursements cited in this finding. Require the City to repay HUD, using non-Federal funds, $103,806 2014-LA-1005 8/22/2014 001-C $103,806 for all other ineligible costs identified in the report. Reimburse $100,000 in HOME funds to the HOME Investment 2014-AT-1005 5/29/2014 002-C $100,000 Trust Fund Treasury account from non-Federal funds. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to support or reimburse its program $220,704 ($70 + $197,906 in housing assistance payments + $26 in utility allowances + $22,702 in associated administrative 2014-CH-1004 7/14/2014 001-F $91,226 fees) from non-Federal funds for the unsupported overpayment of housing assistance due to unsupported calculations, missing eligibility documentation, and discrepancies in the housing assistance payments register. The Pontiac Housing Commission to reimburse $82,470 to the Commissions’ 2012 Capital Fund grant for operation expenditures 2014-FW-0005 9/24/2014 001-K $82,470 that occurred before the environmental review was completed by the responsible entity. Repayment must be from non-Federal funds. We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Commission to 2014-CH-1003 4/30/2014 001-A reimburse HUD $79,975 from non-Federal funds, for transmission $79,975 to the U.S. Treasury, for the work items that were not allocable to the Recovery Act competitive grant-funded contract. Reassess the $72,969 unsupported write-off for FAF 393 and 2014-AT-0001 3/14/2014 001-F reinstate and pursue collection of all or any portion of the amount $72,969 determined to have been written off without proper justification. 159 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of the HUD Newark Office of Public and Indian Housing instruct Authority officials to provide adequate documentation of a valid Social Security number for the three tenants without valid Social Security numbers on whose 2014-NY-1001 1/15/2014 002-C $70,111 behalf $116,761 in housing assistance payments was disbursed. Any amount not supported should be repaid from non-Federal funds, and the status of any tenant deemed ineligible should be determined in accordance with the Authority’s administrative plan. Submit all supporting documentation showing the eligibility and propriety of $68,322 charged to the HOME program for project and 2014-AT-1007 8/8/2014 002-B $68,322 administrative costs or reimburse the program from non-Federal funds. Reassess the $67,000 unsupported write-off for FAF 184 and 2014-AT-0001 3/14/2014 001-G reinstate and pursue collection of all or any portion of the amount $67,000 determined to have been written off without proper justification. The Dearborn Housing Commission to repay $63,255 in Recovery Act grant funds to HUD for its transmission to the U.S. Treasury 2014-FW-0005 9/24/2014 001-A for architect and engineering fees and contract obligations that $63,255 occurred before the environmental review was completed by the responsible entity. Repayment must be from non-Federal funds. Reimburse from non-Federal funds $62,204 in ineligible project 2014-AT-1007 8/8/2014 002-C $62,204 costs. Provide documentation to support that the expenditure of $57,110 in 2011 was for eligible project salaries and if such support cannot 2015-BO-1001 12/16/2014 001-D $57,110 be provided, repay the amount to the project from non-Federal funds. Remit to its treasury account and put to better use the reimbursed 2014-AT-1007 8/8/2014 002-D $56,102 HOME funds totaling $56,102. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse its Housing Choice 2014-CH-1009 9/12/2014 001-B $53,559 Voucher program $53,559 for the overfunding of its Family Self- Sufficiency program participants’ escrow accounts. Agree to allow HUD OIG to record the $57,500 settlement in 2014-CF-1805 8/11/2014 001-A HUD’s Audit Resolution and Corrective Actions Tracking System $52,500 as an ineligible cost. Require the Authority to determine whether the Authority improperly used Federal funds totaling $50,000 which were used to pay unnecessary severance contract costs. If Federal funds were improperly used, the Authority should repay $50,000 to its Federal 2015-FW-1801 10/2/2014 001-J program accounts from non-Federal funds. If the Authority is $50,000 unable to accurately determine the amount due to and due from each program or support that the funds charged to the Federal program were appropriate, the full $50,000 should be repaid to HUD. We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to support its waiver request and 2014-CH-1009 9/12/2014 002-A the applicable approval from HUD to waive its conflict of interest $47,353 requirements or reimburse HUD $47,353 for the housing assistance payments disbursed while the conflicts of interest existed. 160 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director, Office of Public Housing, Fort Worth, TX, require the Authority to either support or repay to HUD 2015-FW-1802 10/31/2014 001-D for its transmission to the U.S. Treasury $43,300 in unsupported $43,300 asbestos abatement expenses. Repayment must be from non- Federal funds. Require the Authority to determine whether the Authority improperly used Federal funds totaling $40,600 to make lease payments on the parking lot it already owned. If Federal funds were improperly used, the Authority should repay $40,600 from 2015-FW-1801 10/2/2014 001-F non-Federal funds to its Federal program accounts. If the Authority $40,600 is unable to accurately determine the amount due to and due from each program or support that the funds charged to the Federal program were appropriate, the full $40,600 should be repaid to HUD. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program $39,605 ($21,546 in housing assistance payments + $18,059 in 2014-CH-1004 7/14/2014 001-A $39,605 associated administrative fees) from non-Federal funds for the overpayment of housing assistance due to inappropriate calculations of housing assistance payments. Submit supporting documentation showing the eligibility and 2014-AT-1801 3/20/2014 001-D propriety of $37,215 drawn from HUD or reimburse the State $37,215 CDBG program from non-Federal funds. We recommend that the Director, Office of Public Housing, Fort Worth, TX, require the Authority to resolve its unpaid payroll taxes 2015-FW-1802 10/31/2014 001-B and retirement liabilities and ensure that the Authority only uses $36,882 non-federal or non-HUD funds to pay the unpaid interest or penalties. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to reimburse its program $35,545 from non-Federal 2014-CH-1006 8/14/2014 002-B $35,545 funds ($32,769 for program housing assistance + $2,776 in associated administrative fees) for the 19 units that materially failed to meet HUD’s housing quality standards and its own requirements. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program 2014-CH-1004 7/14/2014 002-A $31,204 $31,204 from non-Federal funds for the ineligible expenditures cited in this finding. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to implement procedures and controls to ensure that housing assistance is correctly calculated and repayment 2014-CH-1006 8/14/2014 003-K agreements are created to recover overpaid housing assistance $30,764 when unreported income is discovered during the examination process to ensure that $30,764 ($27,211 in overpayments + $3,553 in underpayments) in program funds is appropriately used for future payments. 161 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse the 2014-CH-1004 7/14/2014 001-G appropriate households $25,767 from non-Federal funds for the $25,767 rent amounts paid in excess of 40 percent of their adjusted monthly income for units that were not affordable. Require the Authority to repay $23,546 to its Section 8 Homeownership Voucher program from non-Federal funds for the 2015-FW-1801 10/2/2014 001-M $17,124 in ineligible owner housing assistance payments to the $23,546 former Section 8 program manager and the $6,422 in ineligible owner housing assistance payments to the son of director 1. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to support that program funds used were not used to pay 2014-CH-1006 8/14/2014 001-E $23,353 the $23,353 in employee loans or reimburse its program from non- Federal funds for the unsupported employee loans cited in this finding. The New Bedford Housing Authority to repay $22,786 from non- Federal funds to its 2012 Capital Fund grant for salaries and 2014-FW-0001 2/7/2014 001-I $22,786 benefits that were released before the responsible entity documented that activities met exemption requirements. We recommend that the Director, Office of Public Housing, Fort Worth, TX, Require the Authority to support or repay $46,097 in unsupported expenditures. The funds should be repaid to the Authority’s public housing program. However, if the Authority 2015-FW-1802 10/31/2014 001-C $21,767 made any of the expenditures from its 2010 or earlier capital fund grants, or if the Authority is unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. Any repayments must be from non-Federal funds. We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Commission to reimburse HUD 2014-CH-1003 4/30/2014 001-B $20,833 from non-Federal funds, for transmission to the U.S. $20,833 Treasury, for the Recovery Act-funded work items that were not included in the Commission’s annual or 5-year plan. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to reimburse its program $20,001 ($12,221 in housing 2014-CH-1006 8/14/2014 003-A $20,001 assistance payments + $7,780 in associated administrative fees) from non-Federal funds for the overpayment of housing assistance due to inappropriate calculations of housing assistance payments. We recommend that the Director of the HUD Newark Office of Public and Indian Housing instruct Authority officials to reimburse 2014-NY-1001 1/15/2014 001-C from non-federal funds the $62,789 in housing assistance disbursed $19,407 for the nine units that materially failed housing quality standards inspection. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2014-NY-1004 5/20/2014 001-C repay from non-Federal funds the ineligible costs of $18,027 that $18,027 were paid to a subrecipeint, which did not benefit the CDBG program. 162 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Reimburse its program $18,391 from non-Federal funds for the 12 2014-FW-1003 7/2/2014 002-B units that materially failed to meet HUD’s housing quality $16,391 standards. Reimburse its program $16,350 from non-Federal funds for the 2014-FW-1003 7/2/2014 001-A overpayment of housing assistance and utility reimbursement $16,350 payments. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development support that the more than $14,000 in refunded gas cut and cap fees that was inappropriately transferred into its Program account and used for Program costs 2014-CH-1002 1/6/2014 001-H $14,250 was an eligible Program use under the Recovery Act or reimburse its Program under the Recovery Act $14,250 from non-Federal funds and use the funds for eligible Program costs under the Recovery Act. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 001-F Authority to reimburse its program $12,654 from non-Federal $12,654 funds for the ineligible overdraft, nonsufficient fund checks, and service charges. Require the Authority to determine whether the Authority improperly used Federal funds totaling $11,833 which were used to cancel an existing phone system and purchase a new one. If Federal funds were improperly used, the Authority should repay 2015-FW-1801 10/2/2014 001-H $11,833 to its Federal program accounts from non-Federal funds. $11,833 If the Authority is unable to accurately determine the amount due to and due from each program or support that the funds charged to the Federal program were appropriate, the full $11,833 should be repaid to HUD. Support the income eligibility for the two families identified in the report in accordance with program and HUD regulations or reimburse its IHBG $11,578 from non-Federal funds for the 2014-LA-1004 7/8/2014 002-B $11,578 subsidies used to house the tenants. HUD should determine the actual IHBG subsidy received for the affected properties and adjust the unsupported or ineligible amount accordingly. Support or reimburse its project $218,676 from non-project funds 2014-AT-1011 9/22/2014 001-B for housing assistance payments that lacked supporting $11,175 documentation. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 003-C Authority to pursue collection from the applicable households or $10,369 reimburse its program $10,369 from non-Federal funds for the overpayment of housing assistance due to unreported income. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to reimburse its program $9,420 from non-Federal funds 2014-CH-1006 8/14/2014 003-E $9,420 for the overpayment of housing assistance due to allowing households a one-bedroom payment standard each for a shared- housing unit. 163 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Public Housing require the Commission to support the escrow account balances for its current program participants totaling $9,040 or reimburse its Housing Choice Voucher program for the 2014-CH-1009 9/12/2014 001-E $9,040 unsupported escrow credits cited in this finding. The actual unsupported escrow balance was $39,178. However, $30,138 of that amount was included in recommendation 1B as an ineligible cost, thus reducing the amount in recommendation 1E to $9,040. Support or repay from non-Federal funds $8,721 in unsupported 2014-FW-1804 8/1/2014 001-J $8,721 vacation payments. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to provide documentation regarding the repayment of the $7,035 that 2014-NY-1004 5/20/2014 001-D $7,035 was paid an architecture firm related to a State grant to ensure that it was properly repaid to the CDBG program from non-Federal funds. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from 2014-CH-1004 7/14/2014 001-C the applicable households or reimburse its program $5,599 from $5,599 non-Federal funds for the overpayment of housing assistance due to unreported income. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 003-B Authority to reimburse the appropriate households $3,973 from $3,973 program funds for the underpayment of housing assistance due to inappropriate calculations of housing assistance payments. Repay $3,840 from non-Federal funds to its Operating Fund 2014-FW-1806 8/19/2014 001-D program for amounts paid for ineligible credit card purchases and $3,840 transactions. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development require the City to support that the more than $7,000 in fire insurance funds transferred into its 2014-CH-1002 1/6/2014 001-F Block Grant program account in May 2012 for an address was $3,833 appropriate or reimburse its Program $3,833 from non-Federal funds, as appropriate, for the nearly $4,000 in Program funds that it drew down for the address. Provide documentation to support the $3,242 in total development 2014-LA-1006 9/25/2014 001-E $3,242 costs identified in this report or reimburse the homeowner. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 001-D $3,036 Authority to reimburse its program $3,036 from non-Federal funds for the ineligible credit card late fees and finance charges. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 003-G Authority to reimburse the appropriate household $3,006 from non- $3,006 Federal funds for the rent amount paid in excess of 40 percent of its adjusted monthly income for the unit that was not affordable. 164 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 003-D Authority to reimburse its program $2,558 from non-Federal funds $2,558 for the overpayment of housing assistance due to not capturing income increases reported by the households. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to pursue collection from the applicable landlords or reimburse its program $2,095 in housing 2014-CH-1004 7/14/2014 001-D $2,095 assistance from non-Federal funds for the overpayment of housing assistance due to discrepancies in the housing assistance payments register. Support or repay from non-Federal funds $2,070 to its Capital or 2014-FW-1806 8/19/2014 001-F $2,070 Operating Fund program as appropriate for the missing appliances. Repay from non-Federal funds $1,724 paid for unnecessary costs 2014-FW-1804 8/1/2014 001-M $1,724 paid for mileage. Support or repay from non-Federal funds $1,682 paid to its 2014-FW-1804 8/1/2014 001-N $1,682 executive director for unsupported costs. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse the 2014-CH-1004 7/14/2014 001-B appropriate households $5,308 from program funds for the $1,394 underpayment of housing assistance due to inappropriate calculations. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to reimburse the 2014-CH-1004 7/14/2014 001-E appropriate landlords $1,143 in housing assistance from program $1,070 funds for the underpayment of housing assistance due to discrepancies in the housing assistance payments register. Require the Authority to determine whether the Authority improperly used Federal funds totaling $657 which were used to purchase ineligible meals and other personal items. If Federal funds were improperly used, the Authority should repay $657 to its 2015-FW-1801 10/2/2014 001-I $657 Federal program accounts from non-Federal funds. If the Authority is unable to accurately determine the amount due to and due from each program or support that the funds charged to the Federal program were appropriate, the full $657 should be repaid to HUD. Repay from non-Federal funds $620 paid to the executive director 2014-FW-1804 8/1/2014 001-O $620 for ineligible costs. Develop and implement controls and procedures to monitor the application of required rent adjustments to Section 8 FAF projects 2014-AT-0001 3/14/2014 001-A which should include adding a section to Housing’s monitoring $0 review checklist to address the backing out of trustee sweep payments. Renew Housing Notices 97-49 and 3-28 and include appropriate example calculations to guide contract administrators and HUD 2014-AT-0001 3/14/2014 001-C $0 staff on how to calculate annual adjustment factor rents for bond- refunded projects and for use in enforcing the requirements. 165 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Develop and implement controls to ensure requests made by Housing for adjustments to bond receivables are properly assessed 2014-AT-0001 3/14/2014 001-D $0 and supported in accordance with provisions in Housing Notice 3- 28. Develop and implement controls and procedures to monitor the remitting of trust fund balances to ensure that funds due to HUD 2014-AT-0001 3/14/2014 001-H upon prepayments or normal payoff of bonds are not released to $0 other parties unless conditions established by headquarters are met and documented. Establish and implement procedures to review and oversee the 2014-AT-1005 5/29/2014 002-E agreements of its Community Development Department and $0 recover CDBG and HOME funds when required. Ensure that its annual inspections are properly performed and thoroughly documented so the inspection reports provide a clear 2014-AT-1005 5/29/2014 003-A trail of necessary repairs to ensure that the deficiencies are $0 corrected and those corrections can be verified against the identified deficiencies. Inspect the project, identify the deficiencies, and require the owner 2014-AT-1005 5/29/2014 003-B $0 to correct all deficiencies identified. Review all of the Department’s participation agreements to ensure 2014-AT-1005 5/29/2014 004-A $0 compliance with HUD and HOME requirements. Ensure that the Department obtains all of the project costs from the 2014-AT-1005 5/29/2014 005-A developer to determine the applicable costs and properly prepare a $0 cost allocation plan. 2014-AT-1005 5/29/2014 005-B Provide the cost allocation plan for review. $0 Recapture any shortfalls generated by the closure and deobligation of funds associated with recommendations 1A to 1B that do not meet statutory requirements for the timely commitment and 2014-AT-1007 8/8/2014 001-C $0 expenditure of funds pursuant to the National Defense Authorization Act of 1991 and/or Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended. Correct any inaccurate information in HUD’s information system, including but not limited to the receipt of $233,137 associated with 2014-AT-1007 8/8/2014 003-B $0 program income and recaptured funds not reported and inaccurate commitment amounts and dates. Establish and implement policies and procedures to ensure that 2014-AT-1010 9/11/2014 001-A commitments are entered into IDIS after the County has a valid $0 written agreement that has been signed and dated by all parties. Provide the revised HOME agreement templates for the various types of awardees, which must include the HOME provisions and 2014-AT-1010 9/11/2014 001-D date line for signatures. The home buyer assistance agreements $0 template should also include a signature and date line for the County. Establish and implement policies and procedures to ensure that 2014-AT-1010 9/11/2014 001-E $0 amendments are executed on a timely basis. Reimburse its project $216,749 from non-project funds for the 2014-AT-1011 9/22/2014 001-A $0 ineligible housing assistance payments. 166 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Develop and implement policies to monitor its property managers 2014-AT-1011 9/22/2014 001-D $0 to ensure adequate administration of the program. Refer Prudential Huntoon Paige Associates, LTD to the Mortgagee 2014-AT-1015 9/30/2014 001-A Review Board for appropriate action for violations that caused a $0 more than $20 million loss to HUD’s FHA insurance fund. Take appropriate enforcement actions against the responsible parties and pursue civil remedies under the False Claims Act, if legally sufficient, against responsible parties for incorrectly 2014-AT-1015 9/30/2014 001-B $0 certifying to the integrity of the data or that due diligence was exercised by the underwriting of the loan that resulted in a loss to HUD totaling $20,157,329. Pursue administrative actions, as appropriate, against the 2014-AT-1015 9/30/2014 001-C responsible party for the material underwriting deficiencies cited in $0 this report. Ensure that the Municipality maintains adequate documentation related to the Vieques sports complex project in accordance with 2014-AT-1801 3/20/2014 001-C $0 HUD requirements and that these demonstrate the allowability, necessity, and reasonableness of the costs incurred. Correct any inaccurate information in HUD’s information system 2014-AT-1801 3/20/2014 001-E related to the sports complex, including but not limited to the $0 drawdowns of $216,630 associated with the loan repayment. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development determine whether the U.S. Treasury paid unnecessary interest on the Program funds associated with the more than $604,000 in fire insurance funds the City transferred into its Program account in July 2013. If the U.S. 2014-CH-1002 1/6/2014 001-B Treasury paid unnecessary interest, the City should reimburse $0 HUD, for transmission to the U.S. Treasury, from non-Federal funds for the unnecessary interest the U.S. Treasury paid on the Program funds that the City inappropriately drew down for activities when it had fire insurance funds for the properties associated with the activities. We recommend that the Director of HUD’s Detroit Office of Community Planning and Development require the City to determine whether the $872,140 in fire insurance funds that it inappropriately transferred into its Program account are associated with demolition costs paid with other Federal program funds. If the 2014-CH-1002 1/6/2014 001-E $0 fire insurance funds are associated with demolition costs paid with other program funds, the City should transfer the fire insurance funds into the applicable program account and use the funds for eligible program costs before drawing down additional program funds. 167 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Detroit Office of Community Planning and Development require the City to determine for the remaining 177 addresses in its report whether fire insurance funds were available when it drew down Program funds for the demolition costs. If fire insurance funds were available, the 2014-CH-1002 1/6/2014 001-G City should (1) use the fire insurance funds for eligible Program $0 costs before drawing down additional Program funds and (2) reimburse HUD, for transmission to the U.S. Treasury, from non- Federal funds any unnecessary interest the U.S. Treasury paid on the Program funds that it drew down for activities when it had fire insurance funds for the properties associated with the activities. We recommend that the Acting Director of HUD’s Chicago Office of Public Housing require the Authority to for households currently 2014-CH-1004 7/14/2014 001-I residing in units that are not affordable, renegotiate the rents to $0 owner or require the households to move to units that are affordable. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 001-B $0 Authority to reconcile its books and accounting records to determine the sources and use of funds in its operating account. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the 2014-CH-1006 8/14/2014 003-H Authority to review the remaining household files to ensure that $0 additional households are not residing in units that are not affordable. We recommend that the program center coordinator of HUD’s Indianapolis Office of Public and Indian Housing require the Authority to implement procedures and controls to ensure that 2014-CH-1006 8/14/2014 003-L $0 required eligibility documentation is obtained and maintained to support households’ admission to and continued assistance on the program. Report on Multifamily, Public Housing, and Section 8 program 2014-FO-0004 4/15/2014 001-G $0 improper payment rates separately in the agency financial reports. Coordinate with all appropriate program officials when responding to OCFO’s information requests to ensure that all statements are 2014-FO-0004 4/15/2014 001-L accurate for the current fiscal year, to include but not be limited to $0 updates to corrective action plans, internal controls in place, and information on any barriers the agency is experiencing. Develop and execute formal plans to hold accountable program 2014-FO-0004 4/15/2014 001-M officials and processing entities (owners or administrators) $0 responsible for improper payments. Reassess existing supplemental measures and corrective actions, and enhance or develop new supplemental measures and corrective 2014-FO-0004 4/15/2014 002-A $0 actions to ensure that they target the root causes of error identified in the improper payment studies. Reassess existing supplemental measures and corrective actions, and enhance or develop new supplemental measures and corrective 2014-FO-0004 4/15/2014 002-D $0 actions to ensure that they target the root causes of error identified in the improper payment studies. 168 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Periodically reevaluate the supplemental measures and corrective 2014-FO-0004 4/15/2014 002-E actions so that new and innovative ways to reduce improper $0 payments are identified and implemented. Work with REAC to develop management-level reports in EIV that will allow Multifamily Housing management to efficiently and 2014-FO-0004 4/15/2014 002-F effectively identify processing entities that are responsible for $0 improper payments and develop policies and procedures to hold owners/administrators identified accountable. Work with PIH and Multifamily Housing management to develop management-level reports in EIV that will allow PIH and 2014-FO-0004 4/15/2014 002-G Multifamily Housing management to efficiently and effectively $0 identify processing entities that are responsible for improper payments. Work with PIH and Multifamily Housing to determine annual 2014-FO-0004 4/15/2014 002-H improper payments HUD made to deceased tenants, and report this $0 amount as an additional source of improper payments in its AFR. The housing agencies to work with their respective responsible entities and local HUD environmental officer to show that no harm 2014-FW-0001 2/7/2014 001-K $0 occurred from completion of all of the projects or mitigate any harm that occurred. The housing agencies to work with their respective responsible entities and local HUD environmental officer to show that no harm 2014-FW-0002 5/12/2014 001-H $0 occurred from completion of all the projects or mitigate any harm that did occur. The housing commissions to work with their respective responsible entities and local HUD environmental officer to show that no harm 2014-FW-0005 9/24/2014 001-L $0 occurred from completion of all of the projects or mitigate any harm that occurred. Require the Authority to repay its various program accounts $6,480 2014-FW-1802 3/31/2014 001-A from nonfederal funds for ineligible vacation payments made to its $0 executive director. Support or repay from non-Federal funds $6,895 in unsupported 2014-FW-1804 8/1/2014 001-K $0 pay increases. Document the selection rules used for feeding data to CAIVRS to 2014-KC-0002 7/2/2014 001-A $0 explain in detail the flow of information from HUD’s systems. Develop and implement system error checks to identify potential 2014-KC-0002 7/2/2014 001-C $0 reporting issues. Update CAIVRS’ selection rules to report delinquent Federal debt 2014-KC-0002 7/2/2014 002-A beyond the 3-year claim period or obtain an exemption from the $0 Secretary of the Treasury to exempt FHA loans after 3 years. Implement HUD CFO Handbook 1830.6, REV-1, in HUD’s next 2014-KC-0006 9/30/2014 001-A $0 budget process. Identify all user fees and publish a user fee schedule for use by 2014-KC-0006 9/30/2014 001-B $0 OCFO, other Government users, customers, and the public. 2014-KC-0006 9/30/2014 001-C Address HUD’s user fees in HUD’s Agency Financial Report. $0 169 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Revise HUD’s asset management fee policy to re-federalize the 2014-LA-0004 6/30/2014 001-A Operating Fund program’s management and bookkeeping fees and $0 the Capital Fund program’s management fees. Establish and implement procedures to reassess the management and bookkeeping fees periodically to ensure that they are 2014-LA-0004 6/30/2014 001-C $0 reasonable. HUD should retain the documentation justifying the calculation of the rates. Develop, document, and implement written procedures to ensure that fees charged to the asset management projects and Capital 2014-LA-0004 6/30/2014 001-H $0 Fund program and expenses from the central office cost center are used to support HUD’s mission. Develop and implement post indemnification and billing policies 2014-LA-0005 8/8/2014 001-E and procedures to ensure that lenders are billed for loans that are $0 part of the ACD and CWCOT programs. Develop and implement post indemnification and billing policies 2014-LA-0005 8/8/2014 001-F and procedures to ensure that lenders are billed for loans that went $0 into default during indemnification agreement period. Develop and implement policies and procedures to ensure that it notifies the Financial Operations Center of any program changes 2014-LA-0005 8/8/2014 001-G $0 that could impact the billing of FHA single-family lenders for losses related to enforceable indemnification agreements. Extend the indemnification agreement for the five loans (see 2014-LA-0005 8/8/2014 002-A $0 appendix G) with a loss to HUD that were streamline refinanced. Develop and maintain a process for grant reimbursement that 2014-LA-1004 7/8/2014 001-B readily identifies the specific charges represented by the total $0 requested and ensures that charges are reimbursed only once. Implement policies and procedures that would allow the grantee to 2014-LA-1004 7/8/2014 001-L $0 identify IHBG subsidies for each of its projects by unit at any time. Continue submitting the LOCCS Payment Voucher, form HUD- 50080-IHBG, with supporting documentation, and obtain the Southwest Office of Native American Programs’ approval before 2014-LA-1004 7/8/2014 001-R requesting funds from LOCCS until the Authority implements the $0 recommendations in this audit report and the Authority has demonstrated that it has sufficient capacity and financial controls in place. Review the rest of its active CDBG-funded projects in its portfolio managed by its former redevelopment agency to ensure that all required executed agreements are in place with the relevant parties, 2014-LA-1007 9/29/2014 001-B $0 guaranteeing the City’s vested interest within one year of this report or take appropriate action against the City for those that did not have the applicable required agreements. Review the rest of its active CDBG-funded projects in its portfolio that were managed by its former redevelopment agency to ensure that all projects meet a national objective. For those that did not 2014-LA-1007 9/29/2014 001-C $0 meet program national objectives, provide and implement a plan of action to meet the specific national objective within one year of this report or reimburse HUD from non-Federal funds. 170 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director, Office of Multifamily Asset Management, require that each Hub or field office review its refinanced Section 202/223(f) projects for debt service savings amounts, utilizing data provided from this audit for possible 2014-NY-0001 2/19/2014 001-B $0 additional debt service savings. Where legally possible each Hub or field office should identify, account for by project, and use these amounts for current and future opportunities benefiting tenants or to fund reductions in housing assistance payments. We recommend that the Director, Office of Multifamily Asset Management, implement procedures to ensure that all future 2014-NY-0001 2/19/2014 001-C Section 202 refinancings comply with the requirement to generate $0 positive debt service savings or the limited exception to this requirement related to 6 percent or lower interest rates. We recommend that the Director of the Public Housing Financial Management Division ensure that the 2014 ARF funding 2014-NY-0003 9/4/2014 001-C calculation for the 10 PHAs includes the corrections needed as a $0 result of this finding, thus ensuring that the ARF funding provided will represent funds to be put to better use. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to require the subrecipient to request a waiver related to the apparent 2014-NY-1004 5/20/2014 001-B conflict of interest and implement standards of conduct procedures $0 that prohibit participation in the selection, award, or administration of a contract involving Federal funds if there is a real or apparent conflict of interest. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to establish controls to ensure that grant- and subgrant-supported 2014-NY-1004 5/20/2014 001-E activities are adequately monitored and administered to provide $0 assurance that funds have been used only for eligible activities, costs incurred are necessary and reasonable, and national objectives have been attained. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2014-NY-1004 5/20/2014 001-F $0 establish controls to ensure that CDBG funds are not used to pay for costs related to other funding sources or programs. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2014-NY-1004 5/20/2014 001-H establish procedures to ensure that the costs of administering the $0 State-funded rehabilitation program are no longer charged to the CDBG program. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to 2014-NY-1004 5/20/2014 001-I $0 Establish controls to ensure that assets are adequately safeguarded and duties are adequately segregated. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to 2014-NY-1008 7/25/2014 001-B strengthen oversight controls over disbursements to ensure that $0 adequate supporting documentation is maintained and complies with applicable regulations. 171 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to 2014-NY-1008 7/25/2014 001-C follow its policies and procedures for record-keeping to maintain $0 records that adequately identify the source and application of funds provided for financially assisted activities. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to 2014-NY-1008 7/25/2014 001-D $0 provide records detailing the funding sources of the non-Federal cash match for the six grant activities reviewed. We recommend that the Director of HUD’s New York Office of Community Planning and Development instruct Palladia officials to reconcile its accounting records to ensure that total revenues and 2014-NY-1008 7/25/2014 001-F $0 expenditures in its general ledgers reconcile to the revenues and expenditures reported in its annual performance reports and LOCCS. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2014-NY-1009 9/18/2014 002-N provide documentation to support compliance with HOME $0 program rent limit and income eligibility requirements for the three tenants who occupy HOME-assisted units. Based on the outcome of the State’s investigation and criminal trial, make a referral to HUD recommending administrative sanctions, as 2014-PH-1007 7/15/2014 001-D appropriate, up to and including debarment of the Authority’s $0 former rehabilitation specialist, the Planning District Commission’s former deputy director, and the involved contractors. Conduct monitoring of the Section 108 activities with signs of slow 2015-AT-1001 12/5/2014 001-D progress to ensure that program objectives are met and provide the $0 intended benefits. Ensure that borrowers did not use Section 108 funds to finance 2015-AT-1001 12/5/2014 002-B local government operations and verify the return of any ineligible $0 disbursement. Ensure that the borrowers either transfer the unexpended Section 2015-AT-1001 12/5/2014 002-D 108 loan proceeds to the repayment account or submit a request for $0 extension to HUD. Ensure that the borrowers provide HUD the additional security 2015-AT-1001 12/5/2014 002-E $0 requirements according to the loan agreement. Ensure that borrowers develop and implement a financial management system in accordance with HUD requirements to 2015-AT-1001 12/5/2014 002-F ensure that program funds can be traced to a level that ensures that $0 such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. Ensure that all Section 108 loan proceeds deposited at commercial 2015-AT-1001 12/5/2014 002-G $0 banks are properly collateralized with Government obligations. Conduct monitoring reviews of all Section 108 projects and ensure 2015-AT-1001 12/5/2014 002-H that borrowers comply with all loan agreement provisions and $0 HUD regulations. 172 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Increase monitoring of Municipal Affairs’ performance in the administration of its Section 108 loan program. Consider imposing 2015-AT-1001 12/5/2014 002-I $0 sanctions if Municipal Affairs does not demonstrate program progress. 2015-DP-0001 10/21/2014 002-A Not released to public. $0 2015-DP-0001 10/21/2014 002-B Not released to public. $0 2015-DP-0004 12/9/2014 001-B Not released to public. $0 2015-DP-0004 12/9/2014 001-C Not released to public. $0 2015-DP-0004 12/9/2014 001-D Not released to public. $0 2015-DP-0004 12/9/2014 001-E Not released to public. $0 Continue to work with CPD’s information technology services contractor and OCFO to ensure that all three phases of the plan to 2015-FO-0002 12/8/2014 001-A $0 bring IDIS into compliance with GAAP and applicable Federal system requirements are completed as scheduled Validate grants payable estimates and any assumptions used to 2015-FO-0002 12/8/2014 003-F $0 produce the estimates against subsequent grantee reporting. Incorporate into their grants payable accrual estimation methodologies steps to appropriately validate grant accrual 2015-FO-0002 12/8/2014 003-G $0 estimates and assumptions used to produce the estimates against subsequent grantee reporting. Work with the Office of Multifamily Housing Programs to evaluate its obligation process for the Section 8 project-based program to 2015-FO-0002 12/8/2014 005-C $0 ensure that it complies with HUD, OMB, and GAO legal requirements to have a legal point of obligation. Work with OCFO to revise the funds control plans for the Section 8 project-based programs to ensure that the obligation process in 2015-FO-0002 12/8/2014 005-E $0 place is sufficient to support a legally binding point of obligation and is reviewed and authorized by designated officials. Periodically reconcile balances with OCIO subsidiary records and 2015-FO-0002 12/8/2014 007-D $0 research and resolve any identified differences. Increase efforts to quickly complete outstanding front-end risk assessments and coordinate with OCFO to finalize the review and 2015-FO-0002 12/8/2014 007-F $0 approval process even in the absence of policies and procedures with specific deadlines in this area. Develop a subsidiary system to accumulate the capitalized cost and 2015-FO-0002 12/8/2014 007-I related depreciation expense for each software project under $0 development or placed into production. Complete any outstanding validation reviews and transition back as 2016-FO-0003 11/18/2015 013-A much as $466.5 million in Housing Choice Voucher program $507,500,000 funding from MTW PHAs and $41 million from non-MTW PHAs. Start the billing process for the claims paid, plus incentive, in 2016-FO-0002 11/16/2015 001-C which the lender has not provided the original note and security $291,489,605 instrument within the prescribed deadlines for the $291 million. 173 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to require recipients to provide receipts that support completed reconstruction and repair work to provide 2015-NY-1011 9/17/2015 002-F $241,292,921 greater assurance that assistance is for eligible, reasonable, and necessary costs, thus ensuring that $241,292,921, which has not been disbursed, will be put to its intended use. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to provide documentation showing that the $127.2 million budgeted for inspection-related construction 2015-NY-1011 9/17/2015 003-A $127,200,000 management and environmental review services is fair and reasonable in accordance with a cost or price analysis as required by regulations at 24 CFR 85.36. Close out and deobligate the remaining balances on 2,308 expired homeless assistance contracts of $104,347,996. HUD should also deobligate $3,602,342 in 102 program obligations marked for 2016-FO-0003 11/18/2015 008-A deobligation during the departmentwide open obligations review. $108,138,514 Lastly, HUD should review the 57 obligations with remaining balances of $188,176 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Review and if necessary deobligate the 228, 477, and 29 expired or inactive project-based Section 8, Section 235-236, and Section 202- 2016-FO-0003 11/18/2015 008-F $90,000,000 811 projects totaling $52.5 million, $36.2 million, and $1.3 million, respectively. Develop and implement written policies and procedures with an emphasis on increased controls toward the monitoring, tracking, underwriting, and evaluating of the Section 184 program. 2015-LA-0002 7/6/2015 001-A $76,967,618 Implementing these controls would reduce the current high level of risk in the program and result in potentially $76,967,618 in funds to be put to better use (see appendix A). We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to provide adequate documentation 2015-NY-1011 9/17/2015 001-F for the reasonableness of the cost figure used to disburse $55,672,982 $55,672,982 for reconstruction costs. Any amount not adequately supported should be repaid to the State’s line of credit. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to provide adequate documentation 2015-NY-1011 9/17/2015 001-G for the reasonableness of the cost figure used for reconstruction $31,831,316 costs, thus ensuring that the undisbursed award balance of $31,831,316 is put to its intended use. Implement adequate procedures and controls to address the weaknesses cited in this audit report to prevent the Cooperative from the possible repayment of the remaining $22,666,717 in 2015-CH-1010 9/30/2015 001-H $22,666,717 Program funds, which HUD disbursed for the project ($23,104,550 in Program funds disbursed for the project – $437,833 in proceeds from initial membership sales the Cooperative returned to HUD). 174 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Deobligate all obligations marked for deobligation during the department-wide open obligations review, including as much as $19,634,263 in 209 administrative obligations and $2,224,807 in 24 2016-FO-0003 11/18/2015 008-E program obligations marked for deobligation as of September 30, $22,144,094 2015. Additionally, HUD should review the 225 obligations with remaining balances of $285,024 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Refer Berkadia to the Mortgagee Review Board for appropriate 2015-KC-1005 8/4/2015 001-A action for violations that caused a more than $11 million loss to $11,312,956 HUD’s FHA insurance fund. Refer Prudential to the Mortgagee Review Board to take appropriate action for violations that caused $10,159,961 in 2015-AT-1003 6/30/2015 001-A $10,159,961 unnecessary or unreasonable cost to HUD’s FHA insurance fund or other administrative action as appropriate. Submit a plan for how it will proceed with respect to the multipurpose facility project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the activity and determine the eligibility of the $8,111,304 already invested. (Footnote 4: Total investments of $8,232,388 2016-AT-1002 12/17/2015 001-A $8,111,304 were adjusted to account for $109,084 questioned in recommendation 2A and $12,000 in recommendation 2B.) If HUD determines that the activity has been canceled or is not feasible, the Municipality must commit any unused loan proceeds for future loan repayments. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to provide documentation to support that the $5,926,104 paid for management and consulting services was similar in scope to the services procured by the other 2015-NY-1010 9/17/2015 003-A state agency, thus ensuring that the amount paid was procured in a $5,926,104 manner consistent with regulations at 24 CFR 85.36 and used for its intended purpose. If the amount is deemed unsupported after allowing maximum feasible deference to State contracting procedures, it should be repaid from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to provide support that the procurement for management and consultant services, for which $2,736,658 was disbursed, is equivalent to contract methods allowable under regulations at 24 CFR 85.36 and was executed in accordance with State procedures, thus ensuring that the 2015-NY-1010 9/17/2015 003-D $5,000,000 $2,263,342 to be disbursed will be put to better use. If the procurement is deemed not equivalent after allowing maximum feasible deference to State contracting procedures or not compliant with State procedures, the $2,736,658 should be repaid from non- Federal funds, and the remaining $2,263,342 should be deobligated, thus putting the funds to better use. 175 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provide documentation to support that $4,235,773 in NSP funds was spent for eligible costs by obtaining documentation showing that the projects met a national objective, purchase price discounts were met, rehabilitation costs were reasonable and necessary, resale 2015-BO-1003 3/4/2015 001-B $4,235,773 prices were in accordance with NSP requirements, rental amounts were affordable, and developers assumed risk by investing some of their own money in the project as applicable and if such support cannot be provided, repay the amount. Provide support showing that it took proper remedial action 2015-AT-0001 3/31/2015 001-B regarding five NSP3 grantees that missed the expenditure deadline, $3,345,967 thereby putting $3,379,269 to better use. Repay HUD $3,119,448 from non-Federal funds for program funds 2015-LA-1004 5/29/2015 001-A $3,119,448 spent on ineligible participants. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to submit to HUD for its review for compliance with Federal regulations the subrecipient 2015-NY-1010 9/17/2015 003-B $2,422,835 agreement, executed at our request, that obligates $2,422,835 for appraisal services provided in Long Island, NY, thus ensuring that these funds will be put to better use. We recommend that the HUD Director of Community Planning and Development instruct City officials to reduce the City’s CHDO 2015-NY-1005 4/30/2015 002-A $2,229,445 reserve balance reported in IDIS as of June 30, 2014, for the ineligible CHDO reserve of $2,229,445. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to reimburse the line of credit for 2015-NY-1011 9/17/2015 001-A $2,229,234 $2,229,234, which was disbursed to program recipients for ineligible costs Deobligate all obligations marked for deobligation during the department-wide open obligations review, including as much as $430,942 in 44 administrative obligations and $135,957 in 2 2016-FO-0003 11/18/2015 008-H program obligations marked for deobligation as of September 30, $2,053,090 2015. Additionally, HUD should review the 17 obligations with remaining balances of $1,486,191 and close out and deobligate amounts tied to obligations that are no longer valid or needed. Provide documentation to show that the 13 homes, with related program costs totaling $1,928,646, meet the Green Building 2015-PH-1005 9/25/2015 001-A $1,928,646 Standard or repay HUD from non-Federal funds for any amount that it cannot support. Repay from non-Federal funds $1,290,264 for funds spent on Filbert Phase 1 due to the modification of the resale restrictions for 2015-LA-1803 9/30/2015 001-A $1,807,490 HOME assisted units, which resulted in a failure to comply with HUD’s minimum required period of affordability. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to review the five properties with 2015-NY-1010 9/17/2015 002-C indications that they may be second homes and if they are, $1,664,658 reimburse the State’s line of credit from non-Federal funds for the $1,664,658 disbursed for these purchases. 176 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support the cost reasonableness of the drainage cleaning contract and 2015-FW-1002 6/26/2015 001-A $1,611,143 provide adequate support for payment of the contractor’s invoices or repay its grant any of the $1,611,143 that it cannot support. Repayment should be from non-Federal funds. Review the 216 obligations with remaining balances totaling 2016-FO-0003 11/18/2015 008-J $1,506,233 and close out and deobligate amounts tied to $1,506,233 obligations that are no longer valid or needed. Submit a plan for how it will proceed with respect to the municipal cemetery project, including a schedule that HUD can track to ensure its completion. HUD must reevaluate the feasibility of the 2016-AT-1002 12/17/2015 001-B activity and determine the eligibility of the $1,454,801 already $1,454,801 invested. If HUD determines that the activity has been canceled or is not feasible, the Municipality must commit any unused loan proceeds for future loan repayments. Repay $1,306,205 in NSP funds spent for ineligible activity costs 2015-BO-1003 3/4/2015 001-A $1,306,205 from non-Federal funds. We recommend that the HUD Director of Community Planning and Development instruct City officials to provide documentation to 2015-NY-1005 4/30/2015 002-B $1,163,598 support the additional CHDO reserve of $1,163,598 or reimburse the City’s HOME program line of credit from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to provide documentation that the selection of the appraiser in Staten Island was consistent with the 2015-NY-1010 9/17/2015 003-E $1,093,290 other State agency’s contract provisions. If such documentation cannot be provided, the $1,093,290 budgeted should be deobligated, thus ensuring that the funds will be put to better use. Provide documents supporting that the 93 units assisted under activities Escambia Co 14B and St. Lucie Co 14A/ARH were 2015-AT-1006 7/27/2015 001-A $1,075,000 impacted by the declared storm or reimburse HUD $2,026,266 from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to deobligate the undisbursed 2015-NY-1011 9/17/2015 001-B $911,662 amount of $911,662 to ensure that the funds will be put to their intended use. Develop and implement written policies and procedures to ensure that participants are eligible for the program and comply with HUD rules and requirements. Also, the Authority should ensure that these 2015-LA-1004 5/29/2015 001-C $873,428 policies and procedures include the monitoring of third-party organizations involved with the program so that $873,428 in program funds can be put to better use. We recommend that the HUD Director of Community Planning and Development instruct City officials to revise deed restrictions to 2015-NY-1005 4/30/2015 002-K correct effective affordability periods for the four properties that $850,008 had not been completed or repay more than $850,008 from non- Federal funds to the City’s HOME program line of credit. 177 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the HUD Director of Community Planning and Development instruct City officials to repay the $844,640 in 2015-NY-1005 4/30/2015 001-A HOME funds committed contrary to program regulations so that $844,640 these funds can be recaptured in accordance with Federal regulations. We recommend that the Deputy Assistant Secretary for Single Family Housing instruct First Niagara Bank to provide HUD evidence that the lender's servicing practices for loans identified in Appendix D were acceptable for mortgages insured by HUD. In 2015-NY-1006 5/22/2015 001-A the event that HUD determines servicing practices were inadequate, $825,133 First Niagara Bank should indemnify HUD for $825,133 in estimated losses for 10 loans. The estimated loss is based on the loss severity rate of 50 percent of the total unpaid principal balance of $1,650,266 as of December 31, 2014. Implement procedures and controls to ensure that (1) housing assistance payments are correctly calculated and paid and (2) required eligibility documentation is obtained and maintained to 2015-CH-1008 9/25/2015 001-C $820,881 ensure that $820,881 ($753,728 in overpayments + $67,153 in underpayments) in program funds is appropriately used for future payments. Require the three agencies to justify $814,382 in unnecessary assistance payments made for the overhoused cases or either reduce 2015-PH-0003 7/29/2015 001-A future HUD funding or reduce the contract or budget authority for $814,382 any funding increment by the applicable amounts that the agencies could not justify. We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the 2015-CH-0001 7/31/2015 001-A properties associated with the 32 loans without evidence of permits $792,837 complied with local code or reimburse HUD $792,837 for the escrow repair funds. Support or reimburse its program from non-Federal funds for the $686,701 in program funds drawn down for which it did not 2016-CH-1001 11/24/2015 001-A $686,701 provide sufficient documentation to support that the funds were used for eligible project expenses. Repay $1,089,613 in ineligible costs for funds that were misrepresented in IDIS, funds that were drawn before a legally 2015-LA-1803 9/30/2015 001-B $632,063 binding agreement was in place between the City and the developer, and did not produce a project (Filbert Phase 2). We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support 2015-FW-1002 6/26/2015 001-B $616,529 the reasonableness of the cost increases for the demolition contract or repay $616,529 to its grant from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to repay to the State’s line of credit 2015-NY-1010 9/17/2015 002-B $598,300 from non-Federal funds the $598,300 paid in excess of the FHA loan limits approved by the board resolution. Deobligate the $587,198 in eight administrative obligations marked 2016-FO-0003 11/18/2015 008-O for deobligation during the departmentwide open obligations $587,198 review. 178 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Submit all supporting documentation showing the eligibility and 2015-AT-1004 7/2/2015 001-A propriety of $538,485 drawn from its treasury account or reimburse $538,485 the HOPWA program line of credit from non-Federal funds. We recommend that the HUD Director of Community Planning and Development instruct City officials to impose deed restrictions or other mechanisms approved by HUD on the four properties assisted 2015-NY-1005 4/30/2015 002-J $527,116 with HOME funds to enforce affordability requirements or repay $527,116 from non-Federal funds to the City’s HOME program line of credit. Provide documentation to support its use of $519,284 in program 2015-PH-1001 1/30/2015 001-C funds for activities 1760 and 1816 or reimburse its program from $519,284 non-Federal funds for any amount that it cannot support. Provide documentation to support the $503,744 in unsupported payments identified by the review or reimburse the applicable 2015-PH-1805 4/20/2015 001-A $503,744 programs from non-Federal funds for any costs that it cannot support. Support or reimburse its program from non-Federal funds $1,211,842 (more than $652,000 disbursed to Chicago Neighborhood Initiatives, Inc. + $1 million disbursed to the City of 2015-CH-1009 9/30/2015 001-A Belleville + nearly $60,000 for the Association’s two contracts - $500,000 $500,000) for the program funds used for the three projects without sufficient documentation to support that the use of the funds met Federal requirements. Provide support for the $500,000 spent on this project, demonstrating that the homes in the subdivision were marketed to 2015-DE-1001 5/26/2015 004-A $500,000 low- and moderate-income households, or reimburse any amount that is not eligible from non-Federal funds. Provide support for the necessity and reasonableness of $489,518 2015-BO-1003 3/4/2015 001-C in unexpended NSP funds or reallocate the funds for other eligible $489,518 NSP activities. Ensure that HUD records the $500,000 settlement due in its 2015-DE-1802 9/30/2015 001-A accounting records, including the $11,000 paid at the time of $479,000 settlement, to recognize funds due as a return of an ineligible cost. Determine whether the documentation the State provided is adequate to support the $467,659 disbursed for wages and salaries 2015-PH-1003 6/4/2015 001-D charged to the program by contractors’ employees and if not, direct $467,659 the State to repay HUD from non-Federal funds any amount that it cannot support. Support or repay the payroll allocation, estimated at $457,357, to 2015-LA-1002 4/16/2015 001-B $457,357 its SHP grants for 2013. Provide adequate support or reimburse the U.S. Treasury from non- Federal funds for procurement activities from the 2008 grant 2015-AT-1005 7/9/2015 001-C totaling $457,327. (Footnote 4)The actual amount unsupported was $457,327 $460,397. To avoid double counting, the amount was reduced by $3,070, which is accounted for in the eligibility section. Provide adequate support or repay the program from non-Federal 2015-AT-1005 7/9/2015 001-D funds for procurement activities from the 2011 grant totaling $416,914 $416,914. 179 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Ensure that HUD records the $465,981 settlement due and the 2015-CF-1807 9/28/2015 001-A $50,000 payment received at settlement to recognize funds due as $415,981 return of an ineligible cost. We recommend that the Director of HUD’s Cleveland Office of Public and Indian Housing require the Authority to support or reimburse its program $414,781 ($375,336 + $7,273 in housing 2015-CH-1004 9/9/2015 001-C $414,781 assistance payments + $32,172 in associated administrative fees) from non-Federal funds for the unsupported payments of housing assistance cited in this finding. 1Support or reimburse its program $411,382 from non-Federal funds ($395,299 + $2,418 in housing assistance payments + 2015-CH-1008 9/25/2015 001-I $13,665 in associated administrative fees for the missing eligibility $411,382 documentation) for the missing eligibility documentation and unsupported housing assistance payments. Reimburse FHA borrowers $376,102 for the unallowable, 2015-LA-1005 7/9/2015 001-E misrepresented discount fees and $7,110 for fees that were not $383,212 customary or reasonable. We recommend that the HUD Director of Community Planning and Development instruct City officials to provide documentation to support the income eligibility of the five home buyers assisted with 2015-NY-1005 4/30/2015 002-E $379,494 HOME funds and if documentation cannot be provided, reimburse the City’s HOME program line of credit $379,494 from non- Federal funds. We recommend that the HUD Director of Community Planning and Development instruct City officials to reimburse the City’s HOME 2015-NY-1005 4/30/2015 002-C program line of credit $344,776 from non-Federal funds for HOME $344,776 assistance spent on housing units acquired by five ineligible home buyers. We recommend that the HUD Director of Community Planning and Development instruct City officials to reimburse the City’s HOME 2015-NY-1005 4/30/2015 001-C $344,341 program line of credit $344,341 from non-Federal funds for assistance provided in excess of HOME subsidy limits. Support or repay the program for grant funds of $340,581 that were 2015-LA-1802 9/24/2015 001-C $340,581 drawn without being reviewed by HUD. We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support 2015-FW-1002 6/26/2015 001-C $328,737 the reasonableness of the cost increases for the grant management contract or repay $328,737 to its grant from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the properties associated with the six loans were not structural repairs 2015-CH-0001 7/31/2015 001-B or indemnify HUD for the four active loans with a total estimated $305,395 loss of $222,073 and reimburse HUD for the actual loss of $83,322 incurred on the sale of two properties associated with FHA case numbers 052-4308836 and 034-8239100. Continue to develop and implement procedures to ensure that future replacement homes are constructed in compliance with the 2015-PH-1005 9/25/2015 001-B Green Building Standard, thereby ensuring that program funds not $292,910 yet paid to the subgrantee for the 13 homes, with related program costs totaling $292,910, are put to better use. 180 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provide support for the $266,072 spent on projects for which the State did not maintain sufficient documentation to determine 2015-DE-1001 5/26/2015 001-B $266,072 whether the costs were eligible and reimburse any amount that is not eligible from non-Federal funds. Provide documentation to support $265,572 in unsupported administrative expenses. Any expenses determined not to be 2015-BO-1003 3/4/2015 001-E $265,572 properly supported should be considered ineligible and reimbursed. . Deobligate $140,165 in 41 administrative and $125,166 in 3 2016-FO-0003 11/18/2015 008-K program obligations marked for deobligation during the $265,331 department-wide open obligations review. We recommend that the Director of the San Antonio Office of Public Housing require the Authority to support payroll costs 2015-FW-1806 6/11/2015 001-B totaling $372,832 or repay its Housing Choice Voucher program $256,204 fund $321,684 and public housing program fund $51,148 from non- Federal funds. Reimburse its program from non-Federal funds $250,000 for the 2015-CH-1009 9/30/2015 001-C program funds that the City of Belleville inappropriately forgave $250,000 the Wagner Motor Car Company from repaying. Indemnify HUD $191,074 for two loans that were still active and did not receive proper loss mitigation (FHA case numbers 151- 6263199 and 151-9226347) and one loan (FHA case number 156- 2015-CH-1006 9/11/2015 001-C $191,074 0374114) in which the borrower’s revised payment was incorrect (50 percent loss severity rate applied to the unpaid balance of $382,147) Provide adequate supporting documentation for the $183,642 in 2015-LA-1001 1/30/2015 001-B unsupported operating expenses and lease costs or repay the $183,642 HOPWA program from non-Federal funds. We recommend that the HUD Director of Community Planning and Development instruct City officials to reimburse City’s HOME 2015-NY-1005 4/30/2015 002-D $163,516 program line of credit $163,516 from non-Federal funds for the two ineligible homeowners who owned other real properties. Reimburse the U.S. Treasury from non-Federal funds $151,699 2015-AT-1005 7/9/2015 001-A from the 2008 grant for ineligible procurement activities using the $151,699 expired environmental contract. Submit all supporting documentation showing the eligibility and 2015-AT-1004 7/2/2015 001-B propriety of $143,320 in HOPWA expenditures or reimburse the $143,320 HOPWA program line of credit from non-Federal funds. Reimburse $139,767 to its loan guarantee account from non- 2016-AT-1002 12/17/2015 002-A Federal funds for ineligible disbursements that were not related to $139,767 the approved projects. Provide supporting documentation for $136,346 in program funds 2015-LA-1004 5/29/2015 001-B used for participants for whom eligibility could not be determined $136,346 or repay HUD from non-Federal funds (see appendix D). We recommend that the Director of the San Antonio Office of Public Housing require the Authority to support purchases totaling 2015-FW-1806 6/11/2015 001-C $195,080 or repay its Housing Choice Voucher program fund $135,839 $123,791 and public housing program fund $71,289 from non- Federal funds. 181 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require servicers to repay HUD $414,673 for the 30 identified partial claims with excessive amounts (This includes $21,685 from 2015-LA-0003 9/18/2015 001-B $131,256 our review of the contractor and $392,988 from our statistical sample summarized in appendix D). We recommend that the HUD Director of Community Planning and Development instruct City officials to provide documentation to support that $125,810 in costs charged to the three unsupported 2015-NY-1005 4/30/2015 001-G $125,810 HOME activities was for eligible costs, and if such documentation cannot be provided, reimburse the City’s HOME program line of credit from non-Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to provide adequate documentation 2015-NY-1011 9/17/2015 001-D to support $119,124 in CDBG-DR funds that was disbursed to three $119,124 recipients. If any amount cannot be adequately supported, it should be repaid to the State’s line of credit. We recommend that the Director, Office of Public Housing, San Antonio, TX, require the Authority to repay from non-Federal 2016-FW-1801 10/2/2015 001-C $119,000 funds unreasonable contractor costs of $119,000 to its HUD low- rent program account. Provide supporting documentation to show that nine tenants were 2015-AT-1006 7/27/2015 002-A income eligible for assistance under activity Leon Co 14A or $116,148 reimburse its program $220,589 from non-Federal funds. We recommend that the HUD Director of Community Planning and Development instruct City officials to reimburse the City’s HOME 2015-NY-1005 4/30/2015 001-E $113,849 line of credit for $113,849 that was drawn down in excess of need so that these funds can be put to better use. We also recommend that the Director of HUD’s Detroit Office of Public and Indian Housing require the Commission to Reimburse 2015-CH-1002 8/26/2015 001-C HUD $111,761 from non-Federal funds ($100,507 for housing $111,761 assistance payments + $11,254 in associated administrative fees) for the overpayment of housing assistance cited in the finding. Reimburse from non-Federal funds the $105,514 spent on ineligible 2015-DE-1001 5/26/2015 001-A $105,514 costs. Require the agencies to review the cases identified as potentially overhoused and justify at least $103,732 in related unnecessary 2015-PH-0003 7/29/2015 001-B housing assistance payments made or correct vouchers as $103,732 appropriate. Any overpayments of assistance should be repaid to HUD from non-Federal funds. Repay $100,250 in NSP funds that were spent for ineligible 2015-BO-1003 3/4/2015 001-D $100,250 administrative expenses. Support that the required repairs to the property associated with FHA case numbers 241-9513470 and 277-1438986 were sufficiently addressed and complied with local codes or indemnify 2015-CH-0001 7/31/2015 001-E $97,355 HUD for the estimated loss of $97,355, based on the loss severity rate of 50 percent of the unpaid balance of $194,709 as of January 29, 2015. 182 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the HUD Director of Community Planning and Development instruct City officials to reimburse the City’s HOME 2015-NY-1005 4/30/2015 002-H program line of credit $95,781 from non-Federal funds for funds $95,781 spent on the development of two housing properties that were later terminated from the program. Support or reimburse $92,166 from non-Federal funds ($77,133 + $9,462 + $1,728 in housing assistance payments + $3,843 in associated administrative fees) for the missing eligibility 2016-CH-1002 12/16/2015 001-D $92,166 documentation, unsupported housing assistance payment calculations, payments to an incorrect landlord, and discrepancies in the housing assistance payments register. Reimburse HUD from non-Federal funds for the $87,651 in 2016-CH-1001 11/24/2015 001-B $87,651 program funds used for improper operating expenses. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to provide documentation to support that the $85,309 disbursed for four applicants was 2015-NY-1010 9/17/2015 002-E $85,309 calculated correctly. If adequate support cannot be provided, the amount should be repaid to the State’s line of credit from non- Federal funds. We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the borrower for FHA case number 451-1165810 was not reimbursed for the cost of 2015-CH-0001 7/31/2015 001-C $83,715 labor or indemnify the loan with an estimated loss amount of $83,715, based on the loss severity rate of 50 percent of the unpaid principal balance of $167,429 as of January 29, 2015. Provide adequate supporting documentation for the $82,563 in 2015-LA-1001 1/30/2015 001-A unsupported salary costs or repay the HOPWA program from non- $82,563 Federal funds. Reimburse its program $79,884 from non-Federal funds ($45,093 in housing assistance overpayments + $15,816 due to inappropriate 2015-CH-1008 9/25/2015 001-A voucher size + $605 in overpaid utility allowances + $18,370 in $79,884 associated administrative fees) for the inappropriate payments cited in this finding. We recommend that the Director, Office of Public Housing, Little Rock, require the Authority to support or repay its public housing program $611,338 from non-Federal funds for improperly procured 2015-FW-1807 8/14/2015 001-B contracts. However, if the Authority made any of the expenditures $78,293 from its capital fund grants that have not been validated within 2 years, or if the Authority is unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. Review the 20 obligations with remaining balances of $77,807 and 2016-FO-0003 11/18/2015 008-L close out and deobligate amounts tied to obligations that are no $77,807 longer valid or needed. Provide supporting documentation for the $77,200 in unsupported 2015-LA-1003 4/24/2015 001-C administrative and management costs or repay its project from non- $77,200 project funds for any costs that remain unsupported. Allow the HUD Office of Inspector General to post the civil 2015-PH-1804 2/19/2015 001-A penalty of $75,000 in HUD’s Audit Resolution and Corrective $75,000 Action Tracking System as funds put to better use. 183 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Support or repay $73,451 in unsupported costs to the program from 2015-LA-1002 4/16/2015 001-A $73,451 non-Federal funds. Reimburse FHA borrowers $25,700 for fees that were not 2015-LA-1009 9/30/2015 001-E customary or reasonable and $46,510 in discount fees that did not $72,210 represent their intended purpose. Support or reimburse HUD $71,827 for the loss incurred or incentive claim paid on two loans (FHA case numbers 151- 2015-CH-1006 9/11/2015 001-B $71,827 8081634 and 151-9161593) that lacked support of appropriate loss mitigation decisions. Require Breakthrough Living to repay the $69,577 that it collected from its Section 8 tenants. For any tenant who left the Section 8 2015-KC-1001 3/5/2015 002-A program and cannot be located, HUD should require Breakthrough $69,577 Living to send his or her refund to the Kansas State treasurer so the treasurer can get the refund to the tenant or a family member. Support or indemnify HUD $67,660 for the two active loans (FHA case numbers151-9161593 and 263-4317828) that lacked evidence 2015-CH-1006 9/11/2015 001-D $67,660 that loss mitigation was properly implemented (50 percent loss severity rate applied to the unpaid principal balance of $135,318). We recommend that the HUD Director of Community Planning and Development instruct City officials to provide documentation to support the income eligibility of the two homeowners who received 2015-NY-1005 4/30/2015 002-F $55,941 home-ownership assistance and if documentation cannot be provided, reimburse the City’s HOME program line of credit $55,941 from non-Federal funds. Support or repay $49,307 in unsupported costs to the program from 2015-LA-1802 9/24/2015 001-A $49,307 non-Federal funds. Require Breakthrough Living to repay from non-Federal sources the unpaid balance of $47,690 that it transferred from its reserve for 2015-KC-1001 3/5/2015 001-A $47,690 replacement account to its operating account and management agent. Repay the program $45,740 from non-Federal funds from the 2011 2015-AT-1005 7/9/2015 001-B grant for ineligible procurement activities using the expired $45,740 environmental contract. Support that the repair conditions and comments indicated in the direct endorsement underwriter form, form HUD-54114, were satisfied for FHA case number 501-8198149. If the repair 2015-CH-0001 7/31/2015 001-D conditions and comments were not properly addressed, the lenders $39,367 should indemnify the loan with an estimated loss amount of $39,367, based on the loss severity rate of 50 percent of the unpaid principal balance of $78,733 as of January 29, 2015. Provide supporting documentation showing the payment of the 2015-LA-1003 4/24/2015 001-H unremitted rents from its sponsor for deposit into the project’s bank $37,138 account totaling $37,138 or repay its project from nonproject funds. Provide supporting documentation for the $36,000 in unsupported 2015-LA-1008 9/22/2015 001-A accounting journal entries and correct inaccurate information $36,000 related to these entries in its general ledger. 184 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Support or reimburse its program $34,414 from non-Federal funds for the unsupported payment of housing assistance due to missing 2015-AT-1011 9/30/2015 001-A eligibility documentation. (Footnote: $25,590 + $6,223 in housing $34,414 assistance payments + $2,275 + $326 in associated administrative fees.) Reprocure its executive director services using the appropriate policies and procedures to ensure properly procured services going forward and use the quotes from that procurement to justify the 2015-KC-1007 8/20/2015 001-A $34,226 $34,226 spent for executive director services from August 2011 through December 2014. For any amount the Authority cannot support, HUD should reduce future annual operating funds. Provide support that $33,473 paid for procurements was reasonable 2015-AT-1012 9/30/2015 001-B or reimburse the appropriate projects for the balance from non- $33,473 project funds. Reimburse its program $33,291 from non-Federal funds ($19,629 for housing assistance payments + $307 in overpaid utility 2016-CH-1002 12/16/2015 001-A allowances and $12,826 + $529 in associated administrative fees) $33,291 for the overpayment of housing assistance and utility allowances cited in the finding. Support or reimburse its Public Housing Operating Fund and 2015-AT-1002 4/24/2015 001-B Capital Fund programs $33,144 from non-Federal funds for $33,144 disbursements that lacked supporting documentation. Reimburse HUD $32,885 for loss incurred on one loan that did not 2015-CH-1006 9/11/2015 001-A receive active and proper loss mitigation or were improperly denied $32,885 loss mitigation. Provide supporting documentation for the $31,637 in unsupported 2015-LA-1003 4/24/2015 001-D income deposit entries and correct any inaccurate information $31,637 related to the income deposits in its general ledger. Provide documentation to support $27,646 was spent on eligible 2015-AT-1012 9/30/2015 001-A purposes or reimburse the appropriate projects for the balance from $27,646 non-project funds. Require its sponsor to immediately repay the ineligible loans 2015-LA-1003 4/24/2015 001-F $25,300 totaling $25,300 from nonproject funds. Reprocure its executive director services using the appropriate policies and procedures to ensure properly procured services going forward and use the quotes from that procurement to justify the 2015-KC-1008 9/1/2015 001-A $24,600 $24,600 spent for executive director services from August 2011 through December 2014. For any amount the Authority cannot support, HUD should reduce future annual operating funds. Reimburse HUD $24,088 from non-Federal funds for the Family 2015-CH-1008 9/25/2015 002-A $24,088 Self-Sufficiency grant funds inappropriately received. We recommend that the Director, Office of Public Housing, Little Rock, require the Authority to support or repay its programs, as appropriate, $23,621 from non-Federal funds for unsupported leave balance payments to the former executive director. However, if the 2015-FW-1807 8/14/2015 001-F $23,621 Authority made any of the expenditures from its capital fund grants that have not been validated within 2 years, or if the Authority is unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. 185 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Reimburse its Public Housing Operating Fund and Capital Fund 2015-AT-1002 4/24/2015 001-A programs $22,178 from non-Federal funds for disbursements that $22,178 violated conflict-of-interest regulations. We recommend that HUD require the Authority to provide support 2015-FW-1004 8/17/2015 001-C for or reimburse the $21,426 in unsupported payments to its $21,426 program. Payment must be from non-Federal funds. Reprocure its fee accounting services using the appropriate policies and procedures to ensure properly procured services going forward and to use the quotes from that procurement to justify the $12,873 spent from the Public Housing Operating Fund program and the 2015-KC-1006 8/20/2015 001-C $21,248 $8,375 spent from the Housing Choice Voucher program funds for fee accounting services from October 2011 through December 2014. The Authority should repay any unsupported portion to the appropriate program fund from non-Federal funds. We recommend that the Director, Office of Public Housing, San Antonio, TX, require the Authority to repay from non-Federal 2016-FW-1801 10/2/2015 001-B $19,880 funds ineligible contractor costs of $19,880 to its HUD low-rent ($18,900) and Housing Choice Voucher ($980) program accounts. Obtain written approval from HUD for the $17,674 in unsupported 2015-LA-1008 9/22/2015 001-D rental credits or repay its project from nonproject funds for rental $17,674 credits that remain unsupported. Justify the three awards given to contractors when only one bid was 2015-KC-1008 9/1/2015 001-D received totaling $17,626. For any amount the Authority cannot $17,626 support, HUD should reduce future annual capital funds. Pursue collection from the applicable households or reimburse its 2015-CH-1008 9/25/2015 001-E program $16,648 from non-Federal funds for the overpayment of $16,648 housing assistance due to unreported income. Repay the applicable clients the overcharged program fees, which 2015-LA-1002 4/16/2015 003-A $15,435 combined totaled $15,435 (see appendix E). Reimburse its program $15,151 from non-Federal funds for the deficiencies cited in the finding. (Footnote: $672 + $10,228 + $537 2015-AT-1011 9/30/2015 001-B $15,151 + $2,152 in housing assistance payments + $574 + $503 + $140 + $345 in associated administrative fees.) Reimburse $13,726 to FHA borrowers for the fees that were not 2015-LA-1010 9/30/2015 001-E $13,726 customary or reasonable. Provide supporting documentation for the $13,418 in unsupported 2015-LA-1003 4/24/2015 001-E general costs or repay its project from nonproject funds for any $13,418 costs that remain unsupported. Agree to allow HUD OIG to record the $15,000 settlement in 2015-CF-1804 3/27/2015 001-A HUD’s Audit Resolution and Corrective Actions Tracking System $13,000 as an ineligible cost. Reimburse or apply $10,552 in credit to borrowers’ future 2015-CH-0001 7/31/2015 002-A premiums for the 54 active loans with overpaid premiums and $12,576 refund $2,024 to the borrowers of the 7 terminated loans. Reimburse $12,447 to the HOPWA program line of credit from 2015-AT-1004 7/2/2015 001-C non-Federal funds for ineligible disbursements that were not related $12,447 to the program. 186 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Submit supporting documentation showing the eligibility and 2016-AT-1002 12/17/2015 002-B propriety of $12,000 disbursed for construction permit fees or $12,000 reimburse its loan guarantee account from non-Federal funds. We recommend that the Director, Office of Public Housing, Fort 2015-FW-1805 4/10/2015 001-C Worth, TX, require the Authority to support or repay $11,875 in $11,875 unsupported salary costs. We recommend that the Director, Office of Public Housing, Fort Worth, TX, require the Authority to repay its low-rent public 2015-FW-1805 4/10/2015 001-D $11,256 housing program $11,256 from non-Federal funds for ineligible contract labor payments. Support or repay the June 2015 drawdown of $11,198, which 2015-LA-1802 9/24/2015 001-D $11,198 Veterans First was advised to use for its Susan Street past-due rent. Provide adequate support for the $9,632 not reviewed to show that 2015-KC-1006 8/20/2015 002-C funds were spent for eligible items or repay the affected program $9,632 from non-Federal funds. Repay the Housing Choice Voucher program for the $9,214 spent 2015-KC-1006 8/20/2015 002-D for Housing Quality Standards voucher inspections from non- $9,214 Federal funds. We recommend that the Director, Office of Public Housing, Fort Worth, TX, require the Authority to repay its low-rent public 2015-FW-1805 4/10/2015 001-E $9,072 housing program $9,072 for ineligible USDA program administrative expenses. We recommend that the Director, Office of Public Housing, Little Rock, require the Authority to repay its public housing program $11,651 from non-Federal funds for ineligible expenditures. 2015-FW-1807 8/14/2015 001-E However, if the Authority made any of the expenditures from its $8,803 capital fund grants that have not been validated within 2 years, or if the Authority is unable to determine the source of funds used to pay expenditures, the Authority should repay HUD. Repay $8,083 in ineligible costs to the program from non-Federal 2015-LA-1802 9/24/2015 001-B $8,083 funds Reimburse the appropriate households $6,330 ($4,292 in housing assistance underpayments + $1,488 due to inappropriate voucher 2015-CH-1008 9/25/2015 001-B $6,330 size + $550 in utility allowance underpayments) from program funds for the inappropriate underpayments cited in this finding. Require Breakthrough Living to repay from non-Federal sources 2015-KC-1001 3/5/2015 001-B the $5,642 that it used to pay for its management agent’s overhead $5,642 expenses. We recommend that the Director, Office of Public Housing, Fort Worth, TX, require the Authority to support or repay its low-rent 2015-FW-1805 4/10/2015 001-F $5,303 public housing program $5,303 for unsupported credit card charges. Reprocure its fee accounting services using the appropriate policies and procedures to ensure properly procured services going forward and use the quotes from that procurement to justify the $4,507 2015-KC-1007 8/20/2015 001-B $4,507 spent for fee accounting services from August 2011 through December 2014. For any amount the Authority cannot support, HUD should reduce future annual operating funds. 187 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provide supporting documentation for the $4,000 unsupported loan 2015-LA-1008 9/22/2015 001-C deposit entry and correct inaccurate information related to the $4,000 deposit in its general ledger. Reprocure its fee accounting services using the appropriate policies and procedures to ensure properly procured services going forward and use the quotes from that procurement to justify the $3,991 2015-KC-1008 9/1/2015 001-B $3,991 spent for fee accounting services from August 2011 through December 2014. For any amount the Authority cannot support, HUD should reduce future annual operating funds. Reimburse the appropriate households $2,476 ($2,183 in housing assistance underpayments + $293 in utility allowance 2016-CH-1002 12/16/2015 001-B underpayments) from program funds for the underpayment of $3,773 housing assistance due to calculation errors and discrepancies in the housing assistance payments register. Repay $3,245 in ineligible costs to the program from non-Federal 2015-LA-1002 4/16/2015 001-C $3,245 funds. Require the Authority to repay $3,178 for ineligible expenses from 2015-KC-1010 9/30/2015 002-A non-Federal funds to its program or to HUD as the field office $3,178 deems appropriate based on the funding source. Collect from its executive director services provider and repay its 2015-KC-1007 8/20/2015 002-A Capital Fund program the $3,000 that it improperly paid the $3,000 provider from its capital funds. Pursue collection from the applicable landlords or reimburse its program $2,900 from non-Federal funds for the overpayment of 2015-CH-1008 9/25/2015 001-H $2,900 housing assistance due to discrepancies in the housing assistance payment register. Justify the $2,400 spent for the 2012 annual agency plan and 2014 2015-KC-1007 8/20/2015 001-C 5-year and annual agency plan. For any amount the Authority $2,400 cannot support, HUD should reduce future annual operating funds. Reimburse the appropriate household $2,286 from non-Federal 2015-CH-1008 9/25/2015 001-D funds for the rent amounts paid in excess of 40 percent of its $2,286 adjusted monthly income for the unit that was not affordable. We recommend that the Director of the San Antonio Office of Public Housing require the Authority to support or repay its 2015-FW-1806 6/11/2015 001-L Housing Choice Voucher program fund $2,197 from non-Federal $2,197 funds for other unsupported amounts charged to the Authority’s credit card. Repay the affected programs the $2,148 spent for meals, social 2015-KC-1006 8/20/2015 002-A activities, donations, gifts, and floral arrangements from non- $2,148 Federal funds. We recommend that HUD require the Authority to repay its 2015-FW-1004 8/17/2015 001-A Housing Choice Voucher program $2,139 in incorrect housing $2,139 assistance. Payment must be from non-Federal funds. Provide supporting documentation for the $14,873 in unsupported 2015-LA-1008 9/22/2015 001-B disbursements that included a $200 loan to an employee, or repay $1,985 its project from nonproject funds for costs that remain unsupported. 188 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Justify the $1,200 spent for the 2014 5-year and annual agency 2015-KC-1008 9/1/2015 001-C plan. For any amount the Authority cannot support, HUD should $1,200 reduce future annual operating funds. Collect from the contractor that replaced the Authority’s air 2015-KC-1007 8/20/2015 002-B conditioning units and repay its Capital Fund program the $1,171 $1,171 that it improperly paid the contractor from its capital funds. Repay to its project $889 from nonproject funds for incurred 2015-LA-1003 4/24/2015 001-G $889 ineligible expenses. Require the Authority to provide adequate support that it spent $47,057 on allowable expense. Any amount determined to be 2015-KC-1010 9/30/2015 002-B ineligible should be repaid from non-Federal funds to its program $736 or to HUD as the field office deems appropriate based on the funding source. Require the Authority to provide adequate support that it spent $31,147 on allowable expenses. Any amount determined to be 2015-KC-1009 9/30/2015 002-B ineligible should be repaid from non-Federal funds to its program $519 or to HUD as the field office deems appropriate based on the funding source. Pursue collection from the applicable households or reimburse its 2016-CH-1002 12/16/2015 001-E program $2,293 from non-Federal funds for the overpayment of $461 housing assistance due to unreported income. Provide supporting documentation for the $450 balance in its general ledger account related to security deposits, ensure that the required security deposit bank account is established and funded to 2015-LA-1003 4/24/2015 001-I $450 the required amount in accordance with HUD rules and requirements, and correct any inaccurate information related to security deposits in its general ledger. Require the Authority to provide adequate support that it spent $27,600 on allowable expense. Any amount determined to be 2015-KC-1011 9/30/2015 002-B ineligible should be repaid from non-Federal funds to its program $435 or to HUD as the field office deems appropriate based on the funding source. We recommend that HUD require the Authority to provide support 2015-FW-1004 8/17/2015 001-D or repay its program $53 for the unexplained payments. Payment $53 must be from non-Federal funds. Provide adequate support for the $53 spent at the grocery store or 2015-KC-1006 8/20/2015 002-B $53 repay the affected program from non-Federal funds. We recommend that HUD require the Authority to 2015-FW-1004 8/17/2015 001-B Reimburse $22 to the family that was overcharged. $22 Reimbursement should be from the Authority’s reserves. Work with 134 grantees (29 NSP1 and 105 NSP3) that reported 2015-AT-0001 3/31/2015 001-C missing expenditure deadlines in DRGR to ensure that expenditure $0 information submitted is accurate and up to date. Develop, implement, and enforce procedures to comply with rent 2015-AT-1008 8/23/2015 001-B reasonableness requirements to prevent an estimated $195,975 in $0 excess rents from being charged to the program. Ensure that all of the NSP activities have the proper deed restrictions in place to ensure that the NSP properties remain 2015-BO-1003 3/4/2015 001-F $0 affordable for the required affordability period and the NSP funds are protected. 189 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establish an agreement between the State and Rhode Island 2015-BO-1003 3/4/2015 001-G Housing to define responsibilities for the Federal programs they $0 administer. Establish an agreement between the Providence Redevelopment 2015-BO-1003 3/4/2015 001-H Agency and the City of Providence, Office of Community $0 Development, to define responsibilities for the NSP activities. We recommend that the Director of HUD's Office of Affordable Housing Programs implement adequate procedures and controls to 2015-CH-0801 6/25/2015 001-A ensure that leases between rental housing projects' owners and $0 households for Program-funded units do not include language prohibited by HUD's regulations. We recommend that the Deputy Assistant Secretary for Public Housing Investments require the Authority to conduct special 2015-CH-1001 2/24/2015 001-B recertifications for the households with payment standards above $0 the percentage determined to be reasonable and cost effective so that their payment standards can be reduced within 1 year. We recommend that the Deputy Assistant Secretary for Public Housing Investments require the Authority to reimburse its 2015-CH-1001 2/24/2015 001-C $0 program from non-Federal funds for the excess housing assistance paid for the households based on the results of the analysis. Ensure that future grant agreements meet all requirements of 24 2015-DE-1001 5/26/2015 002-A $0 CFR 570.503. 2015-DE-1001 5/26/2015 002-D Obtain training for its staff on the program income requirements. $0 Implement a procedure for conducting onsite monitoring over the 2015-DE-1001 5/26/2015 003-A course of each project, such as using regional directors to conduct $0 monitoring. Ensure that each subrecipient understands procurement 2015-DE-1001 5/26/2015 003-B requirements by continuing to require training for all new $0 subrecipients and for those that do not understand the requirements. Implement a procedure for checking all contractors in the System for Award Management before awarding any contract and all subcontractors before distributing Federal funds, such as requiring 2015-DE-1001 5/26/2015 003-C subrecipients to submit a copy of the System for Award $0 Management results for each contractor and subcontractor seeking payment with each draw request to ensure that they are verified before receiving Federal funds. Implement adequate policies and procedures to ensure that future 2015-DE-1001 5/26/2015 004-B projects will meet all CDBG requirements before approval and $0 maintain supporting documentation showing this compliance. 2015-DP-0005 2/24/2015 002-A Not released to public. $0 Establish and implement policies and procedures to demonstrate how Ginnie Mae provides appropriate accounting and financial 2015-FO-0003 2/27/2015 001-A reporting oversight of the master-subservicers to ensure that the $0 master-subservicers are capable of producing accurate and reliable accounting records and reports. 190 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establish and implement policies and procedures to properly account for and track at a loan level all of the accounting 2015-FO-0003 2/27/2015 001-B transactions and events in the life cycle of the loans. This measure $0 is intended to compensate for the servicing system’s inability to perform loan level transaction accounting. Establish and implement policies and procedures to ensure that 2015-FO-0003 2/27/2015 002-A $0 reimbursable costs are tracked and accounted for at the loan level. Determine the amount of reimbursable costs incurred by Ginnie Mae per loan, report the reimbursable costs incurred as receivables 2015-FO-0003 2/27/2015 002-B $0 rather than expensing them, and adjust them out of the mortgage- backed securities loss liability account as appropriate. Restate fiscal year 2013 financial statements to correct the impact 2015-FO-0003 2/27/2015 002-C $0 of the accounting errors determined in recommendation 2B. Review and recalculate the appropriate amount of interest accrued 2015-FO-0003 2/27/2015 002-D on the loans and adjust the accrued interest receivable balances $0 reported as appropriate. Report the escrow fund balances on the face of the financial 2015-FO-0003 2/27/2015 002-E statements, including additional disclosure information in the notes, $0 in accordance with generally accepted accounting principles. Restate fiscal year 2013 financial statements to show escrow fund 2015-FO-0003 2/27/2015 002-F $0 balances omitted on the face of the financial statements. Establish and implement policies and procedures for the documentation and validation of Ginnie Mae management 2015-FO-0003 2/27/2015 003-A $0 assumptions, including foreclosure costs and redefault rates, used in the loss reserve model going forward. Reevaluate the reasonableness of foreclosure cost and redefault rate management assumptions used in fiscal year 2014, considering the audit points cited in this report; document the results of the 2015-FO-0003 2/27/2015 003-B reevaluation for OIG’s review; and determine the accounting $0 adjustments needed, if any, to the fiscal year 2014 mortgage- backed securities loss liability account as a result of the changes in the management assumptions. Determine Ginnie Mae’s foreclosure cost reimbursement rate and 2015-FO-0003 2/27/2015 003-C take this information into account when developing its foreclosure $0 cost management assumption. Perform a validation of the FHA foreclosure cost assumption amount used in fiscal year 2014, document the results of the 2015-FO-0003 2/27/2015 003-D validation, and determine whether an adjustment to the fiscal year $0 2014 financial statements is warranted based on the updated foreclosure cost management assumption. Perform a separate reserve for loss estimate analysis on reperforming non-pooled loans and, based on the results of this 2015-FO-0003 2/27/2015 003-E $0 analysis, establish separate loss reserve estimates on reperforming non-pooled loans. Work with HUD’s Chief Financial Officer to design and implement 2015-FO-0003 2/27/2015 004-B $0 a compliant financial management governance structure. 191 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Overseeing a comprehensive risk assessment of Ginnie Mae’s 2015-FO-0003 2/27/2015 004-D $0 financial management governance. Preparing and implementing a plan, based on the results of the risk assessment in recommendation 4D, that: i) Demonstrates HUD OCFO oversight of Ginnie Mae’s, as a HUD component, financial management activities; ii) Ensures that Ginnie Mae updates its financial management policies to reflect conclusions reached in the financial management risk assessment; 2015-FO-0003 2/27/2015 004-E iii) Provides complete, reliable, consistent and timely information $0 for defaulted issuers’ pooled and non-pooled loans, prepared on a uniform basis for preparation of Ginnie Mae financial statements, management reporting, and cost reporting; and iv) Ensures all of Ginnie Mae’s financial management systems, both owned and outsourced, provide the financial information necessary to prepare and support financial statements that comply with generally accepted accounting principles. Reassess the susceptibility of significant improper payments for the CPD entitlement, non-entitlement, HOME Investment Partnerships Program, and other formula grant programs based on the results of 2015-FO-0005 5/15/2015 003-C $0 audit report 2014-FO-0003 as well as the community service and self-sufficiency requirement in public housing subsidiaries identified in OIG audit report 2015-KC-0001. We recommend that the Deputy Secretary of the U.S. Department of Housing and Urban Development ensure that HUD follows and complies with 24 CFR Part 50, Protection and Enhancement of 2015-FW-0001 6/16/2015 001-A Environmental Quality, and provides adequate oversight to ensure $0 compliance with 24 CFR Part 58, Environmental Review Procedures for Entities Assuming HUD Environmental Responsibilities. We recommend that the Deputy Secretary of the U.S. Department of Housing and Urban Development clarify the delegation of 2015-FW-0001 6/16/2015 001-C $0 authority issued in the Federal Register related to environmental responsibility and the implementation of requirements. If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and 2015-FW-0001 6/16/2015 001-D $0 Development establish an agreement that clearly outlines each program office’s responsibilities for oversight of environmental requirements and resource supplements. If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and 2015-FW-0001 6/16/2015 001-E $0 Development adopt a quality control monitoring program that includes a review of all program area field offices as required by Executive Order 11514. If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and 2015-FW-0001 6/16/2015 001-F $0 Development develop and implement a monitoring program that all program area field offices can use to monitor grantees and responsible entities under 24 CFR Part 58. 192 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, 2015-FW-0001 6/16/2015 001-G Public and Indian Housing, and Community Planning and $0 Development develop training programs that meet the needs of all program areas, including 24 CFR Parts 50 and 58. If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and 2015-FW-0001 6/16/2015 001-H Development develop and implement reporting requirements, $0 which ensure that written records are maintained and the appropriate headquarters personnel are notified of environmental concerns. If an independent program office is not established, the Deputy Secretary should ensure that the Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and 2015-FW-0001 6/16/2015 001-I Development ensure that each program area has a dedicated $0 program environmental clearance officer with an official job description that outlines his or her roles and responsibilities as required by 24 CFR Part 50. We recommend that the Director of the San Antonio Office of Public Housing require the Authority to determine the amount of 2015-FW-1806 6/11/2015 001-F $0 Federal and State taxes it owes for payments made to its contractors and pay those tax liabilities. We recommend that the Director of the San Antonio Office of Public Housing require the Authority to review its contracts with 2015-FW-1806 6/11/2015 001-G the contractors and their outside employment and take necessary $0 action to either properly treat them as contractors or reclassify them as employees. Develop and implement policies and procedures to ensure that OLG uses enforcement actions available under 12 U.S.C. 1715z- 2015-LA-0002 7/6/2015 001-D $0 3a(g) for lenders that do not underwrite loans according to the Section 184 processing guidelines. Ensure that only underwriters that are approved by OLG are 2015-LA-0002 7/6/2015 001-H $0 underwriting Section 184 loans. Develop and implement written policies and procedures for situations in which the borrower for a Section 184 loan is an Indian 2015-LA-0002 7/6/2015 001-I $0 housing authority, a tribally designated housing entity, or an Indian tribe. Ensure that the membership of its board of directors complies with 2015-LA-1003 4/24/2015 001-L $0 its by-laws by consisting of seven members. Obtain HUD training and technical assistance for its project administrator, management company, and board of directors to 2015-LA-1003 4/24/2015 001-M $0 ensure compliance with HUD rules and requirements that pertain to the management and operation of its project. 193 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies (31 U.S.C. (United States Code) 3801- 3812, 3729, or both), civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against NOVA, its principals, 2015-LA-1005 7/9/2015 001-A $0 or both for incorrectly certifying to the integrity of the data, the eligibility for FHA mortgage insurance, or that due diligence was exercised during the origination of 709 loans with potential losses of $48.5 million. Update all internal control checklists to include specific HUD FHA 2015-LA-1005 7/9/2015 001-H rules and regulations governing down payment assistance, premium $0 interest rates, and allowable fees. We recommend that the HUD Director of Community Planning and Development instruct City officials to correct the reported 2015-NY-1005 4/30/2015 002-M completion status and home-buyer information recorded in IDIS for $0 the three HOME activities for which incorrect information was recorded. 2015-PH-1001 1/30/2015 001-B Impose and record deed restrictions for activities 1760 and 1816. $0 Evaluate the apparent conflict-of-interest situation identified in this 2015-PH-1001 1/30/2015 001-F report, determine whether a conflict of interest existed, and pursue $0 administrative sanctions if warranted. Comply with its Management Agent Handbook requirements that stipulate HUD must perform management reviews of the management agent’s central office activities as well as regular 2015-AT-0002 8/21/2015 001-A $0 onsite reviews of functions carried out at the projects. These central office reviews should be performed at least once every 18 months. Issue a notice to inform all North Carolina grantees that they must use the lowest bidder in a sealed bid process unless they are able to 2015-AT-0801 8/25/2015 001-A $0 provide sufficient support in compliance with 24 CFR 85.36 to remove the bidder from the procurement process. Determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against the 2015-AT-1007 8/14/2015 001-B $0 borrower, its principals, or both for incorrectly certifying that the property’s critical repairs were completed before loan closing. Develop, implement, and enforce detailed procedures for County 2015-AT-1008 8/23/2015 001-D staff to detect double billing and prevent duplicate payments of $0 grant funds. Develop, implement, and enforce detailed procedures for staff and project sponsors to ensure that they comply with HUD’s match requirements. Procedures and accompanying guidance should include (1) tracking the cash or in-kind match amounts monthly or consistently to ensure that the match amount reported in its APR to HUD is accurate and supported by the documentation provided by 2015-AT-1008 8/23/2015 002-B $0 the project sponsors, (2) providing to project sponsors a list of the types of documentation that may be sufficient to ensure the eligibility of the use and source of the match funds, and (3) reviewing the documentation from project sponsors to ensure that the sources of the funds used to match the grant funds are eligible and sufficiently supported to comply with 24 CFR 578.73. 194 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Pursue administrative actions, as appropriate, against the 2015-AT-1009 9/3/2015 001-F responsible parties for the regulatory agreement violations cited in $0 this report. Determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against the 2015-AT-1009 9/3/2015 001-G hospital’s former chief financial officer for incorrectly certifying to $0 the accuracy of the financial information submitted to obtain the Section 242 program mortgage increase. Reimburse its program from non-Federal funds for the 2015-AT-1011 9/30/2015 001-C overpayment of any housing assistance for approval of rent $0 increases on program units contrary to its requirements. Revise HUD’s policies and procedures, including the supplemental 203(k) review checklist and review rating guidelines, to ensure that 2015-CH-0001 7/31/2015 001-F $0 HUD reviewers properly and consistently identify and resolve deficiencies. Ensure that post endorsement technical reviewers receive sufficient 2015-CH-0001 7/31/2015 001-G training to understand the scope of the repairs and improvements $0 by contractors. Determine the overpaid mortgage insurance premium for the 69 active loans after September 2014 for the life of the loans, and 2015-CH-0001 7/31/2015 002-B $0 reimburse or apply the overpayments as credits to borrowers’ future premium payments. Determine the number of 203(k) loans impacted by the incorrect loan-to-value ratio for mortgage insurance premium calculations 2015-CH-0001 7/31/2015 002-C $0 and when applicable, reimburse borrowers or apply the overpaid premiums as credits toward borrowers’ future premium payments. Implement adequate policies and procedures to ensure that the activities included in Authority’s plans are (1) allowable under the Moving to Work statutory purposes, (2) described in sufficient 2015-CH-0802 8/26/2015 001-A $0 detail to convey anticipated impacts (including financial impact), and (3) in accordance with the terms and authorizations set forth in the Moving to Work agreements. Renegotiate the rents to the owners or require the households to 2015-CH-1008 9/25/2015 001-G move to units that are affordable, for the households residing in $0 units that are not affordable. Develop and implement adequate quality control procedures to ensure that it (1) correctly calculates and pays housing assistance 2015-CH-1008 9/25/2015 001-J $0 and (2) obtains and maintains the required eligibility documentation. Review the remaining program household files, determine whether the appropriate voucher sizes were provided, conduct special 2015-CH-1008 9/25/2015 001-L recertifications for the households with vouchers that do not $0 comply with the Authority’s administrative plan, and issue the appropriate voucher sizes. Implement adequate procedures and controls to ensure that (1) program participants are connected to needed supportive services, 2015-CH-1008 9/25/2015 002-B (2) services included in the participants’ contracts of participation $0 are provided, (3) and participants’ escrow accounts are properly maintained. 195 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Implement adequate controls to ensure that the Department 2015-CH-1009 9/30/2015 001-D $0 administers the program in accordance with Federal requirements. Develop and maintain a waiting list for rental units that meets the 2015-CH-1010 9/30/2015 001-A $0 requirements of the resident home-ownership plan. Provide sufficient documentation to support that HUD had received 50 percent of the proceeds from initial membership sales as of June 2015-CH-1010 9/30/2015 001-B 2015. If the Cooperative cannot do this, it should pay HUD half of $0 the principal on the Cooperative notes for all memberships less the amount the Cooperative paid HUD for initial membership sales. Verify the current household income for all members to determine whether the members are paying more than 35 percent of their households’ adjusted gross monthly income for membership fees. 2015-CH-1010 9/30/2015 001-D For any members that are paying more than 35 percent of their $0 households’ adjusted gross monthly income for membership fees, it should determine the amount the household overpaid and reimburse the household that amount. Make a preliminary determination as to whether the Cooperative is in default of the grant agreement. If it is preliminarily determined 2015-CH-1010 9/30/2015 001-I that the Cooperative is in default, provide the Cooperative notice of $0 the determination and propose corrective or remedial actions to address the default. We recommend that the Deputy Assistant Secretary, Office of Public Housing and Voucher Programs, Require that housing agencies provide HUD with a signed acknowledgement by executive directors and board chairpersons when they are hired or 2015-FW-0802 9/16/2015 001-C $0 appointed. The acknowledgement should detail their awareness and understanding of their responsibilities, and their acceptance that failure to comply with requirements could result in administrative or other actions. We recommend that the Director of the Departmental Enforcement Center Consider administrative sanctions against the former 2015-FW-1808 9/10/2015 001-L $0 executive director and board for the gross mismanagement and poor physical condition of the Authority’s property. Issue guidance to help participating jurisdictions accurately report 2015-KC-0002 8/11/2015 001-A $0 the amount of match contributed and consumed. Include monitoring of HOME match during its performance 2015-KC-0002 8/11/2015 001-B reviews to ensure that match contributions exist, are eligible, and $0 are supported. Require the 10 jurisdictions that overstated their excess match 2015-KC-0002 8/11/2015 001-C balances to remove the overstated amounts from their reported $0 HOME match carry-forward balances. Create and implement policies and procedures specifying the 2015-KC-0002 8/11/2015 002-A $0 process for assigning match reductions. Begin using the poverty rate instead of the family poverty rate for 2015-KC-0002 8/11/2015 002-B $0 determining eligible fiscal match reductions. Use the national average for per capita income reported by the U.S. 2015-KC-0002 8/11/2015 002-C $0 Census Bureau for determining eligible fiscal match reductions. 196 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Review the reductions assigned in IDIS by pulling a report of all 2015-KC-0002 8/11/2015 002-D match liabilities from IDIS and comparing that report to the $0 calculated reductions. Request a conflict of interest waiver for its fee accounting services 2015-KC-1006 8/20/2015 001-D contract for its Housing Choice Voucher program if a conflict $0 exists following the reprocurement. Monitor the Authority’s expenditures after training to ensure that 2015-KC-1009 9/30/2015 001-C the executive director understands and correctly applies $0 procurement requirements. Require the Authority to obtain appropriate training on eligible uses 2015-KC-1009 9/30/2015 002-C of program funds, including items that can be charged to tenant $0 services, travel expenses, and hiring practices. Monitor the Authority after the recommended training and tenant file reviews are complete to ensure the executive director 2015-KC-1009 9/30/2015 003-J $0 understands and properly implements public housing occupancy requirements. Require the Authority’s executive director to obtain appropriate 2015-KC-1009 9/30/2015 005-B training regarding inventory and record keeping requirements to $0 supplement the training recommended in the other findings. Monitor the Authority to ensure that it implements appropriate 2015-KC-1009 9/30/2015 005-C $0 records management systems. Determine whether Authority management is able to properly implement HUD requirements and consider remedies that may be 2015-KC-1009 9/30/2015 005-D $0 required to address any noncompliance with the annual contributions contract. Monitor the Authority’s expenditures after training to ensure that 2015-KC-1010 9/30/2015 001-C the executive director understands and correctly applies $0 procurement requirements. Require the Authority to obtain appropriate training on eligible uses 2015-KC-1010 9/30/2015 002-C of program funds, including items that can be charged to tenant $0 services, travel expenses, and hiring practices. Monitor the Authority after the recommended training and tenant file reviews are complete to ensure the executive director 2015-KC-1010 9/30/2015 003-J $0 understands and properly implements public housing occupancy requirements. Require the Authority’s executive director to obtain appropriate 2015-KC-1010 9/30/2015 005-B training regarding inventory and record-keeping requirements to $0 supplement the training recommended in the other findings. Monitor the Authority to ensure that it implements appropriate 2015-KC-1010 9/30/2015 005-C $0 records management systems. Determine whether Authority management is able to properly implement HUD requirements and consider remedies that may be 2015-KC-1010 9/30/2015 005-D $0 required to address any noncompliance with the annual contributions contract. Monitor the Authority’s expenditures after training to ensure that 2015-KC-1011 9/30/2015 001-C the executive director understands and correctly applies $0 procurement requirements. 197 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Authority to obtain appropriate training on eligible uses 2015-KC-1011 9/30/2015 002-C of program funds, including items that can be charged to tenant $0 services, travel expenses, and hiring practices. Monitor the Authority after the recommended training and tenant file reviews are complete to ensure the executive director 2015-KC-1011 9/30/2015 003-I $0 understands and properly implements public housing occupancy requirements. Require the Authority’s executive director to obtain appropriate 2015-KC-1011 9/30/2015 005-B training regarding inventory and record-keeping requirements to $0 supplement the training recommended in the other findings. Monitor the Authority to ensure that it implements appropriate 2015-KC-1011 9/30/2015 005-C $0 records management systems. Determine whether Authority management is able to properly implement HUD requirements and consider remedies that may be 2015-KC-1011 9/30/2015 005-D $0 required to address any noncompliance with the annual contributions contract. Require LoanCare to repay any additional costs associated with the 2015-KC-1012 9/30/2015 001-A $0 violations noted. Update Mortgagee Letter 2013-32 to require that borrowers have 2015-LA-0003 9/18/2015 002-H $0 surplus income after the FHA-HAMP modification. Develop and implement written policies and procedures to ensure that project funds are used solely for reasonable operating expenses 2015-LA-1008 9/22/2015 001-E $0 or necessary repairs unless it receives prior written approval from HUD and uses surplus cash. Obtain written approval from HUD for its management agent and execute a management agreement that defines the management 2015-LA-1008 9/22/2015 001-F $0 agent’s roles and responsibilities as required by HUD rules and requirements. Develop and implement written policies and procedures to address 2015-LA-1008 9/22/2015 001-G $0 the financial operations of the project. 2015-LA-1008 9/22/2015 001-H Submit to HUD all outstanding financial statements. $0 Obtain HUD training and technical assistance for itself and its identity-of-interest management agent to ensure compliance with 2015-LA-1008 9/22/2015 001-I $0 HUD rules and requirements that pertain to the management and operation of its project. Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies (31 U.S.C. (United States Code) 3801- 3812, 3729, or both), civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against loanDepot, its 2015-LA-1009 9/30/2015 001-A $0 principals, or both for incorrectly certifying to the integrity of the data, the eligibility for FHA mortgage insurance, or that due diligence was exercised during the origination of 384 loans with potential losses of $33 million. Update all internal control (e.g. policies and procedures, checklists, etc.) to include specific guidance on HUD FHA rules and 2015-LA-1009 9/30/2015 001-H $0 regulations governing downpayment assistance, premium interest rates, and allowable fees. 198 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies (31 U.S.C. (United States Code) 3801- 3812, 3729, or both), civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against loanDepot, its 2015-LA-1010 9/30/2015 001-A $0 principals, or both for incorrectly certifying to the integrity of the data, to the eligibility for FHA mortgage insurance, or that due diligence was exercised during the origination of 234 loans with potential losses of $21.3 million. Update all internal controls (e.g. policies and procedures, checklists, etc.) to include specific guidance on HUD FHA rules 2015-LA-1010 9/30/2015 001-H $0 and regulations governing downpayment assistance, premium interest rates, and allowable fees. Pursue civil remedies or administrative sanctions against Veterans 2015-LA-1802 9/24/2015 001-F $0 First and responsible parties for the misuse of HUD funds. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to Strengthen controls to ensure that the enhanced buyout program partial action plan description, 2015-NY-1010 9/17/2015 001-C Program Policy Manual and publicly disseminated program $0 information align with resolutions affecting the program and how the program is implemented, and that the public is adequately informed of how the program is implemented. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to establish controls to provide 2015-NY-1010 9/17/2015 002-D greater assurance that funds are not disbursed for the purchase of $0 second homes, including obtaining leases to document the rental status of properties. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to strengthen controls to ensure 2015-NY-1010 9/17/2015 002-F $0 that buyout awards are calculated in accordance with Federal regulations. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to strengthen controls to ensure 2015-NY-1010 9/17/2015 002-G $0 that enhanced buyout incentives are paid in accordance with the State’s partial action plan and Federal regulations. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to strengthen controls over procurement actions to ensure that services funded with CDBG-DR funds are procured via a direct contract, a subrecipient agreement, a 2015-NY-1010 9/17/2015 003-C $0 memorandum of understanding, or some similar document to provide greater assurance that State officials receive the services intended and have the ability to establish and monitor performance goals. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to strengthen controls over maintenance of procurement files to provide greater assurance that 2015-NY-1010 9/17/2015 003-F $0 the files contain all information required by regulations at 24 CFR 85.36b(9) and that a cost analysis and independent cost estimate are completed in accordance with regulations at 24 CFR 85.36. 199 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to strengthen controls over 2015-NY-1010 9/17/2015 003-G procurement actions to ensure that contracts paid with CDBG-DR $0 funds contain provisions required by regulations at 24 CFR 85.36(i). We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to request a HUD review of the 2015-NY-1010 9/17/2015 003-H $0 State’s procurement regulations to ensure that they are equivalent to regulations at 24 CFR 85.36(b). We recommend that HUD’s Deputy Assistant Secretary for Grant Programs instruct State officials to seek additional guidance from HUD as to what contractor-related information should be reported on its Web site to comply with the requirement of Public law 113-2 2015-NY-1010 9/17/2015 003-I $0 that grantees maintain on a public Web site information accounting for how all grant funds are used if contractor expenditure data is not reported on usaspending.gov as understood by HUD when it issued a reporting waiver. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to strengthen controls over 2015-NY-1011 9/17/2015 001-C determining the eligibility of award recipients and substantiate $0 award calculations to ensure that costs charged to the CDBG-DR program are eligible. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to strengthen controls over the 2015-NY-1011 9/17/2015 001-E $0 maintenance of documentation to provide greater assurance that disbursed funds are adequately supported. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to document the amount paid for the 2015-NY-1011 9/17/2015 001-H flawed studies used to support the $160-per-square-foot cost figure $0 and take action to recoup the amount paid, thus ensuring that this amount will be available for other eligible costs. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to strengthen controls to ensure that grant 2015-NY-1011 9/17/2015 002-A agreements are signed before checks are disbursed to homeowner $0 recipients, thus providing greater assurance that State officials can enforce grant provisions. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to establish and implement procedures to 2015-NY-1011 9/17/2015 002-B recapture ineligible disbursements to provide greater assurance that $0 funds disbursed for ineligible activities and costs are promptly recovered. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to properly document the low- and 2015-NY-1011 9/17/2015 002-C $0 moderate-income status of the two homeowners whose status was improperly reported. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to strengthen controls over classifying 2015-NY-1011 9/17/2015 002-D $0 assisted homeowners as low and moderate income to ensure that CDBG-DR national objectives are accurately reported. 200 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to strengthen controls over the 2015-NY-1011 9/17/2015 002-E $0 verification of recipient eligibility to ensure that CDBG-DR funds are not used to assist second homes. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct the State to strengthen controls to ensure that all 2015-NY-1011 9/17/2015 002-G $0 required contracts and amounts are accurately reported on its Web site. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to strengthen controls over work 2015-NY-1011 9/17/2015 003-B $0 authorization documentation to ensure that information on deliverables and unit cost is provided. We recommend that the Director of HUD’s Office of Residential Care Facilities instruct Morris Park officials to establish and implement procedures to ensure that distributions are made to the 2015-NY-1012 9/30/2015 001-A $0 owner only if the project complies with all requirements in the regulatory agreement, to include compliance with notices of physical inspection deficiencies. We recommend that the Director of HUD’s Office of Residential Care Facilities instruct Morris Park officials to establish and 2015-NY-1012 9/30/2015 001-B $0 implement written accounting procedures to ensure that books and records are maintained in accordance with HUD requirements. We recommend that the Director of HUD’s Office of Residential 2015-NY-1012 9/30/2015 001-C Care Facilities instruct Morris Park officials to ensure that $0 accounting records are reconciled monthly. We recommend that the Director of HUD’s Office of Residential Care Facilities instruct Morris Park officials to implement 2015-NY-1012 9/30/2015 001-D procedures to ensure that audited financial statements are prepared $0 and submitted to HUD in a timely manner in accordance with the regulatory agreement. Provide supporting documentation showing that it complied with all environmental requirements. If the Municipality does not 2016-AT-1002 12/17/2015 002-C provide evidence that it complied with all environmental $0 requirements, HUD must initiate appropriate sanctions under 24 CFR 58.77(d)(1)(v) for noncompliance. Either transfer the unexpended Section 108 loan proceeds to the 2016-AT-1002 12/17/2015 002-D $0 repayment account or submit a request for extension to HUD. Provide HUD the additional security requirements according to the 2016-AT-1002 12/17/2015 002-E $0 loan agreement. Develop and implement a financial management system in accordance with HUD requirements to ensure that program funds 2016-AT-1002 12/17/2015 002-F can be traced to a level, which ensures that such funds have not $0 been used in violation of the restrictions and prohibitions of applicable statutes. Ensure that all Section 108 loan proceeds deposited at commercial 2016-AT-1002 12/17/2015 002-G $0 banks are properly collateralized with Government obligations. Provide training, technical assistance, and increase monitoring of 2016-AT-1002 12/17/2015 002-H the Municipality’s performance in the administration of its Section $0 108 loan program. 201 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Enforce HUD’s requirements for the owners and operator to 2016-AT-1801 12/16/2015 001-A immediately obtain and maintain liability and property insurance $0 on the project. 2016-DP-0002 12/21/2015 001-A Not released to public. $0 2016-DP-0002 12/21/2015 001-B Not released to public. $0 2016-DP-0002 12/21/2015 001-C Not released to public. $0 2016-DP-0002 12/21/2015 002-B Not released to public. $0 2016-DP-0002 12/21/2015 004-A Not released to public. $0 2016-DP-0801 11/30/2015 001-A Not released to public. $0 2016-DP-0801 11/30/2015 001-B Not released to public. $0 2016-DP-0801 11/30/2015 001-C Not released to public. $0 2016-DP-0801 11/30/2015 001-D Not released to public. $0 2016-DP-0801 11/30/2015 001-E Not released to public. $0 2016-DP-0801 11/30/2015 001-F Not released to public. $0 2016-DP-0801 11/30/2015 001-G Not released to public. $0 Prepare an analysis of all outstanding REMIC deals to determine 2016-FO-0001 11/13/2015 002-A the cumulative effect of misstatements and make the appropriate $0 adjustments to the financial statements. Update the accounting policies and procedures related to revenue 2016-FO-0001 11/13/2015 002-B $0 recognition to reasonably ensure compliance with GAAP. Establish and implement policies and procedures to ensure that asset balances in Ginnie Mae’s books are appropriately adjusted to 2016-FO-0001 11/13/2015 002-C $0 account for the timing differences in the collection and remittance of cash from its master sub-servicers Provide additional justification to support the reasonableness of the 2016-FO-0001 11/13/2015 002-E delinquency and foreclosure rates assumptions or create projections $0 for this assumption that are better supported by best practices. Ensure that the systems and processes for servicing and financial 2016-FO-0001 11/13/2015 004-A reporting on Ginnie Mae’s defaulted issuers’ portfolio are ready $0 and capable of handling loan level accounting. 202 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Establish and implement entity wide policies and procedures for an effective model risk management. At a minimum, it should include the following elements: • Controls over model development, implementation and use; • Controls over model validation; 2016-FO-0001 11/13/2015 004-B • Controls over model documentation; $0 • Controls over evaluation for fitness, selection and validation of third-party models; and • Establish adequate structure of responsibilities for model oversight, including evaluation of model data inputs, assumptions and methodology Segregate duties between individuals collecting, recording, depositing, and reconciling cash, and periodically review the 2016-FO-0001 11/13/2015 005-A $0 controls over the cash process to ensure proper implementation of compatible functions in its cash operations department. Conduct ongoing monitoring of change reports to ensure that unauthorized changes are not made to Ginnie Mae's data, and 2016-FO-0001 11/13/2015 005-B $0 establish a policy regarding ongoing monitoring of change activity that requires performing periodic reviews of change reports. Automate the approval process to include restricting the ability to make unauthorized changes unless evidence of approval is present or increase the scope of the “Admin Adjustments Report” to include all exceptions and adjustments. Additionally, the 2016-FO-0001 11/13/2015 005-C $0 contractor should review the report for changes, verify that the changes identified in the report coincide with evidence of proper authorization, and ensure changes that are not properly supported are investigated and resolved accordingly. Request a legal opinion from the implementing agency, the U.S. 2016-FO-0001 11/13/2015 006-A Treasury, for a determination of whether Ginnie Mae is required to $0 comply with DCIA. Evaluate the IHBG investment process and implement a proper 2016-FO-0003 11/18/2015 002-A $0 accounting treatment in accordance with Federal GAAP. Work with the Office of Native American Programs to calculate the amounts advanced to grantees and restate HUD’s financial 2016-FO-0003 11/18/2015 002-B $0 statements to recognize the prepayments on the financial statements. Develop standard operating procedures for routinely obtaining 2016-FO-0003 11/18/2015 002-C information on grantee investment activity and accurately reporting $0 amounts in HUD’s general ledger and financial statements. Establish a process to track the amount HUD owes to PHAs to 2016-FO-0003 11/18/2015 002-D cover prepayment shortages and provide the information to OCFO $0 so that it can be properly recognized as accounts payable. Develop a tracking function for the payments advanced to IHBG 2016-FO-0003 11/18/2015 002-E recipients to facilitate financial reporting and monitoring $0 compliance with grant time restrictions. Assign adequate resources to identify and resolve incorrect 2016-FO-0003 11/18/2015 004-A transactions in GFAS so that the system can be used for reliable $0 financial reporting of Ginnie Mae’s budgetary resources. 203 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Promptly complete all reconciliation processes to determine the 2016-FO-0003 11/18/2015 004-B $0 root causes of incorrect balances. Based on root causes identified, make necessary adjustments to the system configurations in GFAS to ensure proper and accurate 2016-FO-0003 11/18/2015 004-C $0 budgetary resource reporting that complies with FFMIA and OMB A-11. Review user roles in GFAS and assign additional staff to ensure 2016-FO-0003 11/18/2015 004-D $0 that proper segregation of duties is maintained. Evaluate the weaknesses identified by NAPA, as well as OCFO’s disagreement with those weaknesses and recommendations, and 2016-FO-0003 11/18/2015 006-A $0 identify what corrective actions will be taken and when those actions will be taken. Develop a process to ensure that issues and recommendations from all evaluations and audits, including those performed by third parties like NAPA, are adequately documented and tracked and 2016-FO-0003 11/18/2015 006-B properly evaluated by senior management to ensure that HUD’s $0 FMFIA structure remains compliant. HUD should also ensure that corrective actions are agreed upon and responsibility for implementing corrective actions is appropriately delegated. Develop procedures to provide oversight of OCPO procurement activities to ensure that those with financial accounting and 2016-FO-0003 11/18/2015 006-C $0 reporting impact are properly captured and reflected in HUD’s financial statements. Review projects and acquisitions to determine whether the proper 2016-FO-0003 11/18/2015 006-D accounting treatment was applied and determine whether $0 corrections to HUD’s financial statements are needed. Contact all other HUD program offices to determine whether any other programs authorize or are aware of grantees holding funds in 2016-FO-0003 11/18/2015 006-E advance of their immediate disbursement needs and determine $0 financial statement impact on and compliance with Treasury cash management requirements of any found. Distribute the workload among available accountants when staff is 2016-FO-0003 11/18/2015 006-F unavailable to ensure that all cash reconciliations are performed in $0 a timely manner. Ensure that standard operating procedures for IGT activity are updated, to include reconciling IGT balances for all transactions required by the Federal Intragovernmental Transactions 2016-FO-0003 11/18/2015 006-G Accounting Policies Guide included in the Treasury Financial $0 Manual 2-4700. HUD should also include procedures to promptly reconcile, research, and resolve differences identified in the Treasury quarterly scorecard. Provide training on IGT reporting to ensure that responsible staff is sufficiently trained to allow reconciliations to be promptly 2016-FO-0003 11/18/2015 006-H $0 performed and differences identified to be identified, researched, and resolved in a timely manner. 204 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Ensure that the agency’s key IGT point of contact is responsible for overseeing and coordinating efforts with component entities to 2016-FO-0003 11/18/2015 006-I $0 ensure that Treasury quarterly scorecard differences are promptly researched and resolved. Revise policies and procedures to ensure that MCRs are routinely monitored and completed for all program areas and establish a 2016-FO-0003 11/18/2015 006-J timeframe for completion of the MCR reports. Further, HUD $0 should ensure that an escalation process is included to address untimely completion of the MCR process. Develop policies and procedures to ensure that any data changes and accounting adjustments processed by OCFO Systems staff that impact the general ledger are sufficiently documented, identifying a 2016-FO-0003 11/18/2015 007-A $0 description of the event, the preparers of the adjustment, the approving officials of the adjustment, and dates when adjustments occurred. Develop and implement a monitoring plan to review outstanding disaster grant activity to ensure that the expenditure rates are consistently tracked and evaluated and that there are specific 2016-FO-0003 11/18/2015 008-C criteria to identify slow-moving projects. The procedures should $0 include a process to follow up and recommend corrective actions for the slow-moving projects identified, to include recapturing funds if necessary. Design and implement a policy to ensure that reconciliations of expenditure activity between HUD’s financial management systems and DRGR are periodically performed for all active 2016-FO-0003 11/18/2015 008-D $0 disaster grant balances to ensure that expenditure activity is accurate in DRGR. The policy should also include procedures for follow-up and resolution of identified differences. Implement a payment recapture audit for the HOME program, 2016-FO-0003 11/18/2015 012-A specifically to identify and recapture improper payments made as a $0 result of the continued use of the cumulative method. Include the HOME program in the next annual improper payment risk assessment and ensure that the impact of the cumulative 2016-FO-0003 11/18/2015 012-B method to meet commitment deadlines is included in the risk $0 assessment process to evaluate the susceptibility to significant improper payments Perform a detailed review of the procurement procedures for each of the State grantees that received funds under the Disaster Relief Act. If the State did not demonstrate that its procedures incorporated the specific procurement standards included in 24 CFR 85.36(b) through (i) or that its procedures were equivalent to each individual procurement provision of 24 CFR 85.36(b) through (i), HUD should (1) require the grantee to update its procedures and 2016-PH-0005 9/29/2016 001-A $4,872,056,594 provide an updated certification and (2) review the updated grantee certification to confirm that the State meets requirements and has a proficient procurement process in place, thereby putting up to $4,872,056,594 to better use. In cases in which HUD has not yet awarded all of the allocated funds to the State, HUD should complete these steps before it executes any additional grant agreements with the State. 205 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Issue a change to regulations at 24 CFR Part 203, which would avoid unnecessary costs to the FHA insurance fund, allowing an 2017-KC-0001 10/14/2016 001-A estimated $2.23 billion to be put to better use. These changes $2,238,721,464 include (1) a maximum period for filing insurance claims and (2) disallowance of expenses incurred beyond established timeframes. Implement adequate procedures and controls to ensure that public housing agencies maintain valid declarations of trust that are recorded in public records to prevent more than $509 million in annual operating subsidy funds from being provided to projects in which HUD’s interests and investments are not protected. Such procedures and controls should include but not be limited to (1) issuing additional guidance regarding declarations of trust to assist 2016-CH-0001 2/26/2016 001-D HUD’s field office staff, public housing agencies, and independent $509,000,000 auditors in clarifying HUD’s requirements and appropriately evaluating the declarations of trust and (2) amending the A-133 Compliance Supplement to require auditors to review an entire project at a time and include steps for determining whether all property of the project is included on declarations of trust and whether the declarations of trust were properly recorded in public records. Ensure that the $276.5 million identified as invalid obligations in 2017-FO-0002 11/14/2016 002-D $276,567,940 fiscal years 2015 and 2016 are deobligated as appropriate. Reverse the accounting write-off of the advances accounts. In conjunction with the subledger data solution, conduct a proper 2017-FO-0001 11/14/2016 002-F $248,016,624 analysis to determine whether any of the $248 million balances in the advances accounts are collectible. Close out and deobligate the remaining balances on 3,121 expired homeless assistance contracts of $151,719,152. Further, deobligate 2017-FO-0003 11/15/2016 008-A $162,715,936 $10,996,784 in 234 program obligations marked for deobligation during the department-wide open obligations review. Complete any outstanding validation reviews and transition back as 2017-FO-0003 11/15/2016 012-A much as $168.3 million in Housing Choice Voucher program $150,100,000 funding from PHAs. Record the deobligations provided by OCPO totaling as much as $86.4 million for the contracts identified during our review. 2017-FO-0003 11/15/2016 008-Q Additionally, Ginnie Mae should deobligate the $587,505 in three $86,987,505 administrative obligations marked for deobligation during the department-wide open obligations review. We recommend that the Acting Deputy Assistant Secretary for Grant Programs require the State to develop and implement policies and procedures to document and perform detailed review and 2016-FW-1010 9/30/2016 001-A testing to establish eligibility, existence, disaster event $81,982,712 qualifications, reasonableness of cost estimates, prioritization, and fund allocation, both retroactively and prospectively, which would put $81,982,712 to better use. Acknowledge that the attached settlement agreement for $70 2016-CF-1801 9/8/2016 001-A $59,000,000 million represents an amount due HUD. 206 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Revise FHA’s internal control procedures to realign with its regulatory requirements so that the first reimbursement letter is sent 2017-FO-0002 11/14/2016 003-B immediately after 60 days instead of after 6 months and establish a $55,350,830 timeframe for collection once partial claims are referred to the Mortgagee Review Board. Acknowledge that $76 million of the $113 million in the attached 2016-CF-1806 9/19/2016 001-A $50,000,000 settlement agreement represents an amount due HUD. Establish a process for requiring removal of pooled loans that 2016-KC-0002 9/21/2016 001-B remain uninsured at the maximum time to put $49.3 million to $49,300,000 better use. Provide documentation to show that the $40,046,144 disbursed under the contract was for costs that met a national objective or 2016-PH-1009 9/30/2016 001-A direct the State to repay HUD from non-Federal funds any amount $40,046,144 that it cannot support (excluding any amount repaid as a result of recommendations 1B, 1C, 1D, 1E, and 1F). Review and if necessary deobligate the 785 expired or inactive Section 235-236, Section 202-811, and Project Based Section 8 2017-FO-0003 11/15/2016 008-G $34,720,566 projects totaling $22,075,052, $12,261,389, and $384,125, respectively. We recommend that HUD’s Deputy Assistant Secretary for Grant Programs direct State officials to provide documentation showing that the approximately $22 million disbursed for the identified 2016-NY-1009 8/12/2016 001-A $21,958,549 procurements complied with the applicable procurement requirement at 24 CFR 85.36(f) and repay any amounts determined to be unsupported from non-Federal funds. Deobligate all obligations marked for deobligation during the department-wide open obligations review, including as much as 2017-FO-0003 11/15/2016 008-F $18,290,686 in 307 administrative obligations and $3,420,032 in $21,710,718 202 program obligations marked for deobligation as of September 30, 2016. Require the contractor to complete the necessary debt collection 2016-KC-0001 8/17/2016 001-A efforts for $21,526,130 in uncollected partial claims associated $21,526,130 with FHA mortgages terminated during fiscal year 2015. Add a performance requirement measuring partial claims collection to the contractor’s performance work statement to effectively hold 2016-KC-0001 8/17/2016 001-B $21,526,130 the contractor to an acceptable level of performance to put more than $21,526,130 to better use. We recommend that HUD’s Acting Deputy Assistant Secretary for Grant Programs instruct City officials to reimburse the Program 2017-NY-1004 12/21/2016 001-A $18,274,054 from non-Federal funds $18,274,054 in exempt State sales tax on repairs and maintenance services. Review the status of the remaining balances on 1,356 expired ESG 2017-FO-0003 11/15/2016 008-B contracts totaling $17,986,109 and determine whether these $17,986,109 balances should be recaptured. 207 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Make a preliminary determination as to whether the Condominium Association is in default of the grant agreement. If it is preliminarily determined that the Condominium Association is in default, HUD should provide the Condominium Association notice of the determination and propose corrective or remedial actions to 2016-CH-1009 9/30/2016 001-V address the default and prevent the Condominium Association from $13,878,088 the possible repayment of the remaining $13,878,088 in program funds, which HUD disbursed for the project ($14,156,600 in program funds disbursed for the project – $278,512 in proceeds from initial unit sales the Condominium Association remitted to HUD). Support that the $13,333,151 awarded for the architect, engineer, and construction management services contracts was fair and 2017-BO-1001 10/12/2016 001-A $13,333,151 reasonable in accordance Federal procurement requirements or repay to HUD from non-Federal funds any amounts not supported. We recommend that the Acting Deputy Assistant Secretary for 2016-FW-1010 9/30/2016 001-B Grant Programs require the State to support or properly obligate $11,717,288 $11,717,288 in unsupported obligations. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to reimburse the City’s CDBG local bank account for the $11,532,769 2016-NY-1007 3/30/2016 001-A $11,532,769 in uncollected program income generated from the disposition of real property previously assisted with CDBG funds, thus ensuring that these funds can be used for eligible activities. Support that the Hibiscus Hill Apartments acquisition was necessary and served the purpose intended and support that the 2016-LA-1009 8/26/2016 001-A premium paid for the acquisition over the market value was $10,000,000 reasonable and that HUD received an adequate value, or repay its CDBG program line of credit $10,000,000 from non-Federal funds. We recommend that the Director of HUD’s Buffalo Office of Public Housing instruct Town officials to develop and implement procedures and controls to ensure that program units meet housing quality standards, thereby ensuring that an estimated $9,351,175 in future program funds is spent for units that are decent, safe, and 2017-NY-1003 12/14/2016 001-C $9,351,175 sanitary. These procedures should include but not be limited to regular, updated training for the contractor’s housing inspectors to ensure that they are familiar with all relevant regulations and rotating its contractor’s housing inspectors to prevent units from always being inspected by the same official. We recommend that the Director of the Public Housing Financial Management Division obtain adequate supporting documentation 2016-NY-0001 9/12/2016 001-D of the utility expense level amounts and verify the computation of $8,993,484 $8,993,484 in operating funds is accurate or recapture ineligible amounts. Develop and implement procedures and controls to ensure that program units meet housing quality standards, thereby ensuring that 2016-PH-1008 9/29/2016 001-E $7,576,867 an estimated $7,576,867 in program funds is spent for units that are decent, safe, and sanitary. 208 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Implement adequate procedures and controls to ensure that all program units meet HUD’s and Authority’s own housing quality standards to prevent $7,560,158 in program funds from being spent on units that do not comply with requirements over the next year. 2016-AT-1005 5/10/2016 001-C $7,560,158 The procedures should include but not be limited to ensuring that inspectors are properly trained and familiar with HUD’s and the Authority’s requirements to ensure that they conduct complete and accurate inspections. Direct the applicable lenders to provide evidence that the properties for the 99 FHA-insured loans, which closed after October 1, 2015, but were not included in our sample, had a safe and potable water source at the time the loans closed and were endorsed, or, if the 2016-PH-0003 7/29/2016 001-C $7,514,800 lenders cannot provide this evidence, 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 $7,514,800 to better use. Research grants with no drawdown activity and if a bonafide need 2017-FO-0003 11/15/2016 008-E no longer exists, close out and deobligate remaining balances on $6,966,585 the 16 grants with no drawdown activity totaling $6,966,585. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to provide documentation in the loan file that HUD approved the withdrawal of funds after the required deadline, and provide an 2016-NY-1003 2/5/2016 001-E $6,724,820 explanation and obtain approval for the untimely disbursement of the $6,724,820 after it had been drawn down. Any costs determined to be inadequately supported should be reimbursed from non-Federal funds. Provide adequate documentation to support HUD approval for the $6,340,504 loan between Dolores Frances and Pico Union and how 2016-LA-1008 8/26/2016 001-D $6,340,504 the funds were used or remove the loan and any associated encumbrance from the project. Work with HUD to develop a plan to ensure that energy savings are realized to prevent a potential default on the $5,869,770 energy 2016-CH-1005 8/3/2016 001-C $5,869,770 conservation loan used to purchase energy conservation equipment attached to the Authority’s public housing properties. We recommend that HUD’s Acting Deputy Assistant Secretary for Grant Programs instruct City officials to submit an amended action plan for approval to ensure that it agrees with the City’s policies regarding the use of $4,467,299 and planned use of $1,314,068 in 2017-NY-1001 11/2/2016 001-A additional CDBG-DR assistance covering up to 100 percent of $5,781,367 eligible reimbursable expenses incurred by homeowners with SBA loans. If an amended action plan is not submitted and approved, repay the Program from non-Federal funds for additional reimbursements provided solely to homeowners with SBA loans. Provide adequate support that $5,573,214 ($866,235 in Capital Fund program and $4,706,979 in American Recovery and 2016-BO-1002 6/27/2016 001-E Reinvestment Act funds) was spent for eligible costs. Any amounts $5,573,214 that cannot be supported should be repaid to the program from non- Federal funds. 209 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s Office of Block Grant Assistance require the State to develop and implement written procedures and actions that would correct and prevent the deficiencies outlined in the finding to ensure that the Parish adequately supports program participant eligibility. The written procedures and actions should include but not be limited to (1) reviewing and amending the Parish’s program policies, documentation checklist, and income calculation worksheet to ensure the consistency of file documentation and eligibility 2016-FW-1006 8/31/2016 001-A determinations; (2) providing training and assistance to the Parish $5,365,327 and its contractors regarding program participant eligibility determinations and documentation requirements; and (3) conducting a final file review before disbursing funds on behalf of program participants to ensure that files have complete documentation, appropriate follow-ups are conducted, and the participant remains eligible for disaster assistance. Implementing this recommendation should better ensure that the Parish spends at least $5,365,327 in CDBG disaster assistance funds obligated for its disaster assistance programs in accordance with requirements. Direct the New Orleans, LA, field office to enforce its monitoring findings and require the grantee to provide documentation to 2016-PH-0001 6/30/2016 001-A support costs totaling $4,959,911 or the grantee must reimburse its $4,959,911 program from non-Federal funds for any costs that it cannot support. Provide documentation to show that fees it charged for maintenance services totaling $4,927,176 were reasonable or 2016-PH-1005 8/17/2016 001-B $4,927,176 reimburse its public housing projects from non-Federal funds for any amount that it cannot support. Provide adequate documentation to support that the $4,586,471 loan between Dolores Frances and Alliant Tax Credit Fund, LTD, 2016-LA-1008 8/26/2016 001-E $4,586,471 was approved by HUD or remove the loan and any associated encumbrance from the project. Direct the Minneapolis, MN, field office to require the grantee to provide documentation to support the $4,299,963 in unsupported 2016-PH-0001 6/30/2016 001-D $4,299,963 payments identified or the grantee must reimburse its program from non-Federal funds for any costs that it cannot support. Repay the U.S. Treasury $2,096,528 ($1,637,704 in public housing funds and $458,823 in Housing Choice Voucher program funds) 2016-LA-1006 6/3/2016 001-C $4,193,056 for its ineligible use of Federal funds for payment of debt to the City. Develop and implement controls to ensure that program units meet housing quality standards, thereby ensuring that an estimated 2016-PH-1002 4/27/2016 001-F $4,014,032 $4,014,032 in program funds is spent for units that are decent, safe, and sanitary. We recommend that the Director of the Public Housing Financial Management Division determine whether any of the overpayment 2016-NY-0001 9/12/2016 001-A $3,630,286 of $3,630,286 was ineligible and take appropriate actions to recoup the ineligible payments. 210 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Provide documentation to show that prices paid for services and products totaling $3,028,666 were fair and reasonable or reimburse 2016-PH-1007 9/27/2016 001-A $3,028,666 the applicable program from non-Federal funds for any amount that it cannot support. We recommend that the Director of the Houston Office of Public Housing require the Authority to support or repay $3,014,541 to its 2017-FW-1003 12/27/2016 001-D $3,014,541 public housing and voucher programs from non-Federal funds for the contractor payments listed in appendix C. Improve its quality control procedures to ensure that all properties in its active inventory comply with its contract with HUD and its 2016-CH-1008 9/29/2016 001-D own requirements to prevent $2,532,000 in monthly ongoing $2,532,000 property management fees from being spent for properties that are not adequately maintained over the next year. Direct the applicable lenders to provide evidence that the properties for the 28 FHA-insured loans, which closed before October 1, 2015, and were endorsed after October 1, 2015, but were not included in our sample, had a safe and potable water source at the 2016-PH-0003 7/29/2016 001-D time the loans closed and were endorsed, or, if the lenders cannot $2,512,464 provide this evidence, 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 $2,512,464 to better use. Provide documentation to show that $2,377,970 disbursed for other direct costs was supported and was for prices that were fair 2016-PH-1009 9/30/2016 001-C and reasonable or repay HUD from non-Federal funds any amount $2,377,970 that it cannot support (excluding any amount repaid as a result of recommendation 1B). Repay to HUD from non-Federal funds the $2,138,469 in ineligible 2017-BO-1001 10/12/2016 002-C CDBG-DR funds committed and spent without publishing the $2,138,469 required notice of intent and request for release of funds. We recommend that the Director of HUD’s Office of Residential Care Facilities instruct project officials to provide documentation to justify $2,047,444 in unsupported costs. Any costs determined to 2016-NY-1010 9/29/2016 001-C be ineligible and paid from project funds should be reimbursed by $2,047,444 the responsible party to the proper project account from nonproject funds. Any costs determined to be ineligible that were charged but not paid should be removed from the projects’ books and accounts. We recommend that the Director of HUD’s Office of Residential Care Facilities instruct project officials to reimburse the proper project account from nonproject funds for any of the $1,812,777 2016-NY-1010 9/29/2016 001-B $1,812,777 ($252,823 + $1,559,954) in ineligible expenses paid with project funds. Those ineligible expenses that were charged but not paid should be removed from the projects’ books and accounts. Provide documentation to support that $1,807,359 in NSP funds was spent for reasonable, necessary, and supported costs. Any 2016-BO-1003 6/28/2016 001-C $1,807,359 amount for which adequate support cannot be provided should be repaid to the Treasury from non-Federal funds. 211 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Direct the Washington, DC, field office to require the grantee to provide documentation to support the $1,766,778 in unsupported 2016-PH-0001 6/30/2016 001-E $1,766,778 payments identified or the grantee must reimburse its program from non-Federal funds for any costs that it cannot support. Provide documentation to support that $750,000 in Housing Choice Voucher and $1,000,000 in low-rent program reserve funds were 2016-BO-1002 6/27/2016 001-G used for eligible Housing Choice Voucher and low-rent program $1,750,000 costs. Any amount determined to be unsupported should be repaid from non-Federal funds. Fully implement its procedures to ensure that all program units meet HUD’s housing quality standards to prevent $1,709,556 in program funds from being spent on units that do not comply with 2016-AT-1013 9/13/2016 001-C $1,709,556 HUD’s requirements over the next year. The procedures should include but not be limited to ensuring that inspectors consistently conduct accurate and complete inspections. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to provide documentation to support the $1,652,223 in CDBG funds 2016-NY-1007 3/30/2016 001-F $1,652,223 used for developing the 22 affordable townhouses. Any amount determined to be ineligible should be reimbursed to the City’s CDBG program line of credit from non-Federal funds. Support that the noncompetitively procured fire apparatus costs were reasonable and that potential bidders were not harmed by the 2016-LA-1009 8/26/2016 001-D City’s arbitrary action or repay its CDBG program line of credit $1,615,516 $1,615,516 from non-Federal funds for the noncompetitively procured fire apparatus contracts. Fully implement its policies and procedures to ensure that its staff complies with HUD regulations and its administrative plan when 2016-AT-1013 9/13/2016 002-D administering its program to prevent disbursing $ 1,607,706 in $1,607,706 program funds for improper housing assistance payments over the next year. We recommend that the Director of HUD’s Office of Block Grant Assistance require the State to ensure that the Parish supports the 2016-FW-1006 8/31/2016 001-D cost reasonableness of the grant management contract or repay $1,534,629 $1,534,629 to its CDBG disaster assistance program from non- Federal funds. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to reimburse the $1,500,000 in CDBG funds spent for the delinquent 2016-NY-1003 2/5/2016 001-G float loan that defaulted in 1998 through one of the options $1,500,000 identified in HUD regulations so that it can be closed out as bad debt, thereby making the funds available for use on other eligible activities We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to record the mortgages on the five CDBG-assisted properties that 2016-NY-1007 3/30/2016 001-I $1,475,674 were demolished and acquired with CDBG assistance of $1,475,674, thus ensuring that these properties are administered in compliance with program requirements. 212 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Support that the costs for a contract awarded to one of the property owner’s affiliates was reasonable and the integrity of the subrecipient’s procurement was not compromised by the 2016-LA-1009 8/26/2016 001-C $1,450,000 relationship or repay its CDBG program line of credit $1,450,000 from non-Federal funds for the subrecipient’s procurement violation. Provide adequate documentation to support that $1,448,663 in CDBG-DR funds was spent for supported, necessary and 2017-BO-1002 10/17/2016 001-A $1,448,663 reasonable costs. Any amount for which adequate support cannot be provided should be repaid from non-Federal funds. Require the Housing Board to provide support showing that a conflict of interest did not exist between the Mobile Development 2016-AT-1010 8/4/2016 001-A $1,241,958 Enterprises and Superior Masonry or reimburse HUD $1,241,958 from non-Federal funds. We recommend that the Director of the Public Housing Financial 2016-NY-0001 9/12/2016 001-B Management Division validate the $1,191,767 in underpayments $1,191,767 and determine if any corrections should be made. We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to provide documentation to support that the $1,166,000 public 2016-NY-1003 2/5/2016 001-J facilities and improvements procurement contract price was fair $1,166,000 and reasonable and that the sole-source method used was justified. Any costs determined not to be fair and reasonable should be reimbursed from non-Federal funds. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to 2016-NY-1007 3/30/2016 001-C strengthen administrative controls to ensure that future Section 108 $1,162,801 income of $1,162,801 will be recorded in IDIS, thus ensuring that these funds can be used for eligible activities. Enforce the Miami, FL, field office’s monitoring findings and require the grantee to provide documentation to support costs 2016-PH-0001 6/30/2016 001-B $1,161,616 totaling $1,161,616 or the grantee must reimburse its program from non-Federal funds for any costs that it cannot support. Provide documentation to support the $999,977 in unsupported 2016-PH-1801 4/4/2016 001-A payments identified by the review or reimburse its program from $999,977 non-Federal funds for costs that it cannot support. Provide support that $944,687 (Footnote 2: Emergency funds of more than $1.1 million drawn between July 1, 2011, and December 31, 2015, were adjusted to consider $158,800 questioned in recommendation 1C and $38,164 questioned in recommendation 2016-AT-1012 8/29/2016 001-B $944,687 1D.) in Emergency funds drawn from HUD is reconciled with the accounting records and that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes or reimburse the Emergency programs from non-Federal funds. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to record $930,241 in Section 108 income generated from the 2016-NY-1007 3/30/2016 001-B $930,241 refinancing of the Section 108 loan in IDIS, thus ensuring that $930,241 in Section 108 income is properly accounted for and put to better use. 213 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Require the Authority to provide support to HUD showing that it received the best value in all instances when it incorrectly awarded 2016-DE-1005 9/28/2016 001-B a contract based on a faxed bid. For any portion the $918,766 the $918,766 Authority cannot support, HUD should require the Authority to repay its HOME and NSP programs from non-Federal funds. Require the members to provide support or reimburse HUD’s FHA 2016-AT-1009 8/2/2016 001-B $865,142 insurance fund $865,142 for unsupported project disbursements. We recommend that HUD’s Acting Deputy Assistant Secretary for Grant Programs coordinate with the Office of Healthy Homes and Lead Hazard Control to provide technical assistance and instruct City officials to provide supporting documentation that lead-based 2017-NY-1001 11/2/2016 002-C paint testing was performed, identified hazards were removed, and $833,199 clearance was achieved for the 41 properties for which homeowners received $833,199 in CDBG-DR assistance. If supporting documentation is not provided, City officials should repay the $833,199 from non-Federal funds. Reimburse its program $707,091 from non-Federal funds ($645,509 in housing assistance payments and $61,582 in 2016-CH-1004 7/28/2016 001-A $707,091 associated administrative fees) for the inappropriate payments cited in this finding. Provide support showing that the $684,020 charged by the City for 2016-LA-1006 6/3/2016 001-L $684,020 general liability coverage was reasonable. We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to Support 2016-FW-1001 3/21/2016 002-A $677,948 the cost reasonableness of the 64 housing rehabilitation contracts or repay $677,948 to its CDBG program from non-Federal funds. Repay to the Treasury from non-Federal funds the $666,668 in NSP 2016-BO-1003 6/28/2016 001-A funds spent for ineligible activity costs and funds that had already $666,668 been paid by another Federal program. Provide support for the proper allocation of the $650,990 in information technology costs charged to the Capital Fund program. 2016-BO-1002 6/27/2016 001-F $650,990 Any amounts that cannot be supported should be repaid from non- Federal funds. Deobligate all obligations marked for deobligation during the department-wide open obligations review, including as much as 2017-FO-0003 11/15/2016 008-K $384,703 in 27 administrative obligations and $234,619 in 6 $619,322 program obligations marked for deobligation as of September 30, 2016. Support the eligibility of $605,614 used for unsupported allocated overhead costs charged for the fiscal year ending September 30, 2016-LA-1013 9/30/2016 001-A 2015, and its current fiscal year through June 30, 2016, or $605,614 reimburse its administrative fee reserve account using non-Federal funds. Provide adequate support for $575,855 in CDBG unsupported 2016-KC-1005 9/28/2016 001-A salary costs or reimburse the affected programs from non-Federal $575,855 funds any portion it cannot support. 214 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Direct the applicable lenders to provide evidence that the properties for the seven additional FHA-insured loans reviewed, for which the files did not contain evidence of water testing, had a safe and potable water source at the time the loans closed and were 2016-PH-0003 7/29/2016 001-B endorsed, or, if the lenders cannot provide this evidence, direct $570,827 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 $570,827 to better use. Provide documentation to support $516,560 disbursed for wages and salaries charged to its programs by its contractor’s employees 2016-PH-1009 9/30/2016 001-D $516,560 or repay HUD from non-Federal funds any amount that it cannot support. Acknowledge that the attached settlement agreement for $510,000 2016-CF-1813 9/30/2016 001-A $510,000 represents an amount due HUD. Reimburse its public housing projects $507,800 from non-Federal 2016-PH-1005 8/17/2016 001-A funds related to the ineligible duplication of the information $507,800 technology fee. Reimburse its program $497,668 ($453,995 in housing assistance 2016-CH-1007 9/28/2016 001-A payments + $43,673 in associated administrative fees) from non- $497,668 Federal funds for the inappropriate payments cited in this finding. Support or reimburse its program $496,585 from non-Federal funds ($467,426 + $444 in housing assistance payments + $28,715 in 2016-CH-1006 8/23/2016 001-A $496,585 administrative fees) for the missing eligibility documentation and unsupported housing assistance payments. Provide support showing that the contracts for which $488,150 ($216,142 and $272,008 for legal services and public relations services, respectively) was paid were procured at the most 2016-BO-1002 6/27/2016 001-K $488,150 competitive and best price and the costs paid were necessary and reasonable. Any unnecessary or unreasonable costs should be repaid from non-Federal funds to the program(s) that paid the costs. We recommend that the Director of HUD’s Office of Public Housing instruct Authority officials to provide documentation 2017-NY-1002 11/22/2016 001-A showing that the $474,571 in identified procurements was $474,571 reasonable or repay any amounts not supported from non-Federal funds. Obtain adequate support to document the reasonableness and necessity of $472,246 or reprogram the funds to other allowable 2017-BO-1002 10/17/2016 001-B $472,246 activities, thus ensuring that the funds will be put to their intended use. Support or reimburse its program $964,365 ($619,750 + $344,615) 2016-CH-1005 8/3/2016 001-A from non-Federal funds for the unsupported procurement and $463,885 contracting cited in this finding. Require Majestic Management to provide support that $462,281 2017-KC-1001 12/16/2016 002-B paid for procurements was reasonable or reimburse the appropriate $462,281 projects for the balance. Provide documentation to support that it paid itself $447,345 for 2017-KC-1001 12/16/2016 001-B eligible purposes or reimburse the appropriate projects for the $447,345 balance. 215 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS Repay the program from non-Federal funds the $444,876 disbursed 2016-BO-1002 6/27/2016 001-A for Capital Fund program operating costs that exceeded the $444,876 allowable amount. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to record the mortgage on the CDBG-assisted rental property that was 2016-NY-1007 3/30/2016 001-H $426,296 rehabilitated or reimburse the $426,296 from non-Federal funds to the City’s CDBG program line of credit, thus ensuring that the funds are put to their intended use. Acknowledge that the attached settlement agreement for $425,000 2016-SE-1801 9/12/2016 001-A $416,145 represents an amount due to HUD. Deobligate the remaining $404,126 from its task letter for the 2016-CH-1013 9/30/2016 001-B $404,126 housing unit renovations project. We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and Development instruct City officials to record the receipt and expense of $397,031 in the City’s accounting 2016-NY-1007 3/30/2016 002-C records and correctly classify the amount in IDIS to show the use $397,031 of the City’s CDBG funds for repayment of a guaranteed Section 108 loan, thus ensuring that the funds were put to their intended use. We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support 2016-FW-1001 3/21/2016 001-C that project 3, to build a bike path along the Mississippi River, met $396,836 a national objective or repay $396,836 to its CDBG program from non-Federal funds. Reimburse HUD for $379,547 in ineligible costs related to 2016-AT-1006 6/17/2016 001-A $379,547 activities 831and 843 from non-Federal funds. Reimburse HUD, for transmission to the U.S. Treasury, $372,783 from non-Federal funds for the unnecessary interest the U.S. Treasury paid on the program funds that the Office of the 2016-CH-1003 6/30/2016 001-A $372,783 Lieutenant Governor drew down from the U.S. Treasury to reimburse the Authority for program income that it used or when the Authority had available program income. Provide supporting documentation or reimburse its program for 2016-AT-1006 6/17/2016 001-B $362,723 in unsupported expenditures related to activities 831, 747, $362,723 and 800 from non-Federal funds. Support the cost reasonableness of the nine contracts or reimburse 2016-AT-1008 7/19/2016 001-A $408,958 to the appropriate Operating Fund, Capital Fund, and $352,228 Housing Choice Voucher programs from non-Federal funds. Coordinate with the appropriate HUD offices to provide sufficient documentation to support what HUD did with $341,230 in 2017-CH-0001 10/25/2016 001-B proceeds from initial sales. If any proceeds were not remitted to $341,230 the U.S. Treasury, coordinate with the appropriate offices to ensure that the proceeds are remitted to the U.S. Treasury. 216 SEMIANNUAL REPORT TO CONGRESS ESTIMATED REPORT REPORT REC # RECOMMENDATION TEXT COST NUMBER DATE SAVINGS We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support 2016-FW-1001 3/21/2016 001-A that project 1, to recruit and train low-income persons for $338,176 construction jobs in the Baton Rouge area, met a national objective or repay $338,176 to its CDBG program from non-Federal funds. Require the City to repay its program $317,803 for the 2016-PH-1003 5/24/2016 001-A disbursements it made for activity 3061 after the subrecipient $317,803 agreement expired. Repay to HUD from non-Federal funds the $316,850 in payments 2017-BO-1001 10/12/2016 001-B $316,850 made for services outside the scope of the seven contracts. Require the Authority to provide support to HUD showing the necessity of drug testing every house and that the Authority received the best value for amounts spent on testing and 2016-DE-1005 9/28/2016 001-A $315,166 remediation. For any portion the $315,166 the Authority cannot support, HUD should require the Authority to repay its HOME and NSP programs from non-Federal funds. We recommend that the Acting Director of the HUD Southwest Region Office of Multifamily Housing Programs require the Corporation to develop and implement a HUD-approved written plan and checklists that will correct the project’s physical condition and other deficiencies outlined in the finding and prevent a recurrence of such issues to ensure compliance with HUD requirements. The written plan should include actions to (1) obtain a fully functioning board and operate in compliance with the Corporation’s bylaws and any HUD requirements, (2) correct all hazardous and unsafe physical deficiencies, including those cited in the February 2016 REAC inspection; (3) revise its operating budget to ensure the most economical use of funds and that the project 2016-FW-1004 7/27/2016 001-A $314,184 income covers operating expenses; (4) establish written board- approved policies and procedures; and (5) obtain HUD-approved training for management and the Corporation’s board regarding their roles and responsibilities. The checklists should include systems and procedures to ensure that the Corporation meets all requirements, including but not limited to fully funding its reserve fund for replacements, spending funds for eligible costs, and submitting all required forms and documents. Implementing this recommendation should better ensure that the Corporation spends and better manages at least $314,184 in housing subsidies that it is set to receive in the next 12 months in accordance with requirements. Indemnify HUD against potential losses of $304,871 for the three 2016-LA-1011 9/12/2016 001-B loans that did not comply with FHA underwriting requirements $304,871 (appendix E). Recapture the remaining balance of $300,278 allocated to the 2016-AT-1006 6/17/2016 001-C $300,278 stalled Barclay Apartment activity 843. Acknowledge that the attached settlement agreement for 2016-DE-1802 9/12/2016 001-A
SAR 77 - Semiannual Report to Congress for the period Ending March 31, 2017
Published by the Department of Housing and Urban Development, Office of Inspector General on 2017-06-16.
Below is a raw (and likely hideous) rendition of the original report. (PDF)