PROFILE OF PERFORMANCE
For the period October 1, 2017, to March 31, 2018
AUDIT RESULTS1 THIS REPORTING PERIOD
Recommendations that funds be put to better use $3,158,563,142
Recommended questioned costs $19,330,923
Collections from audits $17,187,021
Administrative sanctions 1
Civil actions 0
Subpoenas 75
Personnel action 0
INVESTIGATION RESULTS1 THIS REPORTING PERIOD
Total restitutions and judgments $89,128,052
Total recoveries and receivables to HUD programs2 $59,781,898
Arrests 136
Indictments and informations 124
Convictions, pleas, and pretrial diversions 131
Civil actions 26
Total administrative sanctions 166
Suspensions 27
Debarments 50
Program Referrals 38
Removal from program participation 0
Evictions 33
Other3 18
Systemic implication reports 1
Search warrants 29
Subpoenas 450
JOINT CIVIL FRAUD RESULTS1 THIS REPORTING PERIOD
Recoveries and receivables to HUD programs or
$45,500
HUD program participants
Recoveries and receivables for other entities4 $0
Recommendations that funds be put to better use $95,769
Civil actions 2
Administrative sanctions 1
1
The Offices of Audit and Investigation and the Joint Civil Fraud Division periodically combine efforts and conduct joint civil fraud initiatives. Outcomes from these initiatives are shown in the
Joint Civil Fraud Results profile and are not duplicated in the Audit Results or Investigation Results.
2 Does not include civil settlements worked jointly with the Office of Audit
3 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.
4
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.
HIGHLIGHTS
OUR MISSION
We promote economy, efficiency, and effectiveness
in the administration of HUD programs through the
use of traditional and innovative approaches. We
protect the integrity of HUD’s programs and operations
by identifying opportunities for HUD programs to
progress and succeed.
OUR VISION
We are a collaborative team of diverse, empowered
professionals committed to excellence, innovation,
our core values, and sharing our knowledge and best
practices with the U.S. Department of Housing and
Urban Development (HUD) and the Inspector General
community. We leverage the specialized skill sets
within the Office of Inspector General (OIG) to bring
heightened awareness to HUD’s toughest challenges.
We support HUD’s efforts to achieve stronger housing
markets, quality and safer housing, and strengthened
communities.
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 MESSAGE FROM ACTING INSPECTOR GENER AL HELEN M. ALBERT
It is with great pleasure Cleveland, OH, HUD OIG investigators uncovered a
that I submit the U.S. title agency executive who instructed lenders doing
Department of Housing business with her company to wire incoming lending
and Urban Development proceeds to an account she used as her personal bank
(HUD), Office of account. The title agent then used the deposited funds
Inspector General’s for her own personal use and the operational expenses
(OIG) Semiannual of her company. Over a 2-year period, the title agent
Report to Congress for closed 19 FHA-insured and conventionally financed
the first half of fiscal real estate transactions, in which her company
year 2018. This report received escrow funds from lenders but failed to pay
describes the remarkable off the previous owners’ mortgages. The title agent
accomplishments of the was sentenced to 60 months incarceration and 3 years
dedicated employees supervised release and was ordered to pay to more
of HUD OIG. Also significant among our many than $2.4 million in restitution to buyers, sellers, and
accomplishments is our return on investment, which the underwriter for her title agency.
now exceeds a ratio of 55 to 1 for dollars spent for
our work compared to dollars returned to HUD and In another investigation in Little Rock, AR, work by
the U.S. Treasury. By promoting better stewardship HUD OIG investigators led to a determination that
and accountability in HUD’s programs, HUD OIG staff an FHA direct endorsement lender violated the False
ensures that we have a lasting, positive impact on the Claims Act by falsely certifying that it complied with
Department and on our communities for the benefit of Federal regulations to obtain insurance on mortgage
the American people. loans from the FHA. The lender paid underwriters
commissions, which created a greater incentive to
In addition to the investigative cases mentioned close FHA-insured loans. Additionally, the lender’s
below, for this reporting period, HUD OIG has quality control team identified mandatory reportable
conducted a number of significant and impactful audits issues from randomly pulled FHA loan files; however,
and evaluations. Our Office of Audit identified that in its senior management decided not to self-report
a 1-year period, HUD’s Federal Housing Administration those issues to HUD. Through a settlement, the lender
(FHA) improperly insured nearly 10,000 loans, worth agreed to pay more than $11.6 million to resolve the
more than $1.9 billion, to borrowers who were not allegations.
eligible for insurance because they had been barred
from obtaining Federal loans. These borrowers either In an additional case in Detroit, MI, HUD OIG
had delinquent Federal debt or were subject to Federal investigated a former executive director of a public
administrative offset for delinquent child support. housing agency (PHA), who embezzled, stole, or
misused more than $300,000 in Section 8 and public
We also continued our work on residential care housing program funds. During her tenure, the
facilities, including nursing homes. In an audit of executive director entered into housing assistance
the Riverside Health and Rehabilitation Center in payments contracts for rental units, in which she had
East Hartford, CT, we determined that the entity had an interest, with and for the benefit of immediate
not operated with the proper management agent family members. The executive director also
documents, resulting in more than $2.6 million in fraudulently used the PHA’s credit cards to purchase
unsupported management fees in a 2-year period. personal items for herself or for her family members
In another effort, our Civil Fraud Division issued a and wrote PHA checks to petty cash for her own use.
management alert notifying HUD that it had not The former executive director was sentenced to 37
provided acceptable oversight of the physical condition months incarceration and 2 years supervised release
of residential care facilities to ensure sustainable and was ordered to pay a forfeiture money judgment
properties for the life of the HUD-insured mortgage. of $336,240, representing the loss to HUD.
The alert also identified that HUD had not verified that
exigent health and safety violations were mitigated and In closing, we in HUD OIG are committed to working
that required repairs were made to facilities. Moreover, with Congress and the Department to improve HUD’s
our audits of the financial statements of HUD, FHA, and programs and operations and are proud of our many
the Government National Mortgage Association (Ginnie accomplishments, which are of consequence and
Mae) resulted in disclaimers of opinion for HUD and impactful to our Nation’s citizens.
Ginnie Mae, and FHA received an unqualified opinion.
Our Office of Investigation continues to have
significant impact on the Department through its
investigative work. As part of one investigation in
Helen M. Albert I Acting Inspector General
TRENDING
2017 DISASTER RECOVERY OIG has designated its Atlanta, Fort capacity of grantees that administer
Worth, and Los Angeles regional disaster funding in Texas, Florida,
OVERVIEW offices to perform the bulk of 2017 Puerto Rico, and the Virgin
In the wake of the destruction Disaster Recovery oversight. HUD Islands. OA is also reviewing the
and aftermath caused by the OIG has initiated assignments to process for relocating tenants from
2017 natural disasters, the U.S. ensure that the lessons learned a multifamily project in Miami,
Department of Housing and from previous disasters will be at FL, as a result of Hurricane Irma.
Urban Development, Office of the forefront in the approval of Finally, the HUD OIG Kansas City
Inspector General (HUD OIG), the grantees’ Disaster Recovery Region has initiated a cross-cutting
continues to focus on the challenges action plans and HUD’s Disaster review in coordination with several
and outcomes of the national Recovery guidance. OIG’s audit, other OIGs to determine whether
Disaster Recovery Initiative. investigative, and evaluation the process for appropriating and
Congress provided $35 billion staff will provide a continuing distributing disaster preparedness,
in supplemental appropriations and comprehensive review of response, and recovery funding
through HUD’s Community the expenditure of funds and efficiently and effectively provides
Development Block Grant (CDBG) administration. a universally understood and
Disaster Recovery program to organized continuing means of
help communities recover from AUDIT disaster assistance.
Hurricanes Harvey in Texas; Irma During this reporting period, the
in Florida, Georgia, South Carolina, Office of Audit (OA) opened INVESTIGATION
and the U.S. Virgin Islands; Maria six assignments related to The Office of Investigation (OI)
in Puerto Rico and the Virgin the 2017 disasters. Based on continues to provide impactful
Islands; and Nate along the coast congressional concerns regarding assistance to HUD’s Disaster
of Mississippi. These successive the Commonwealth of Puerto Recovery program through its
hurricanes were followed by Rico’s ability to administer disaster work associated with Disaster
devastating wildfires in northern funds, OA issued a time-sensitive Recovery efforts. While addressing
and southern California. The memorandum in November 2017 the current Disaster Recovery
culmination of these disasters addressing the Commonwealth’s Initiative, agents continue to seek
resulted in massive destruction and proposed framework for financial recoveries for fraud
loss of human life. administering its disaster funds. involved with hurricanes from past
OA is now conducting and years. In response to the fiscal
To address the enormous task of preparing for audits to assess and years 2017 and 2018 disasters, OI
enforcement and oversight, HUD recommend improvements to the agents provided on-the-ground
law enforcement support at several that housing discrimination Office of Investigation to detect
locations, as authorized by the complaints increase following fraudulent duplication of benefits
President’s disaster declaration. For natural disasters. Separately, the schemes. In terms of coordination
example, during Hurricane Irma, OI Office of Community Planning with HUD, OIG participates in
provided 24-hour law enforcement and Development (CPD) requires bimonthly meetings with HUD’s
assistance and coverage for a grantees that receive Disaster Office of Block Grant Assistance,
disaster medical assistance team Recovery grants to comply with Disaster Recovery and Special
(DMAT) in South Florida. OI fair housing and nondiscrimination Issues Division, to ensure that
agents assisted DMAT personnel requirements. The objectives it adequately coordinates and
with health and welfare checks for this evaluation are still in the collaborates with HUD on disaster
within the community, coordinated planning phase; however, OE may issues and efforts to detect and
with family members outside the examine (1) the extent to which prevent fraud.
impacted areas, and provided housing discrimination complaints
general law enforcement security. increase following natural disasters, HUD OIG is active with other
(2) how FHEO is prepared to agencies involved in Federal
Additionally, OI has been handle an increase in housing disaster response. It participates in
instrumental in assisting HUD with discrimination complaints following quarterly meetings of the Council
the damaged property assessments natural disasters, or (3) how CPD of the Inspectors General on
conducted throughout Puerto Rico oversees Disaster Recovery grantee Integrity and Efficiency’s (CIGIE)
and the U.S. Virgin Islands. For compliance with fair housing Disaster Assistance Working
example, OI has been working requirements. Group (DAWG), chaired by the
collaboratively with HUD to Acting Inspector General, U.S.
develop customized training JOINT INITIATIVES AND Department of Homeland Security.
opportunities in fraud detection COLLABORATION HUD OIG chairs the CIGIE
for damaged property assessment HUD OIG extensively coordinates DAWG Subcommittees for Audit
in Disaster Recovery efforts. its disaster oversight activities and Inspections and Evaluations
Additionally, in an effort to develop with stakeholders by fostering and Investigations. During these
a sound investigative strategy that partnerships within OIG and HUD. meetings with other OIGs, HUD
integrates diverse perspectives, OI Within HUD OIG, its offices OIG discusses ongoing activities
has leveraged the talent of a core continue to leverage their expertise and develops strategies for
team of agents and supervisory to tackle the most challenging and performing comprehensive analyses
agents to serve as subject- complex disaster-related issues. and joint initiatives in response
matter experts in disaster-related to recovery and reconstruction
investigations and initiatives. During the reporting period, efforts, as well as leveraging
OIG disaster experts in OA, OI, collective investigative efforts
EVALUATION and the Office of Legal Counsel to identify and address disaster-
During the next reporting period, worked with HUD on proposed related frauds. In addition, OIG
the Office of Evaluation (OE) funding notices to strengthen grant participates in periodic coordination
plans to launch an evaluation of procurement requirements. The meetings with the U.S. Government
the Office of Fair Housing and OIG team also worked closely with Accountability Office and learns of
Equal Opportunity’s (FHEO) several congressional staff members local concerns from the National
discrimination complaint process to highlight lessons learned on Association of State Auditors,
following natural disasters. In prior disasters, to identify potential Comptrollers, and Treasurers
2008, OE found issues with FHEO’s program and grantee risks, and to and the Association of Local
housing discrimination investigative recommend legislative fixes to help Government Auditors. OI has also
process and documentation address these concerns. teamed up with U.S. Department
(Evaluation of FHEO Housing of Justice task forces throughout
Discrimination Complaint OI has also worked with OE’s the country, including the National
Processing and Compliance (IED- Integrated Data Analytical Division Center for Disaster Fraud, to assist
07-001)). Since that time, OE has to support a joint project with the with investigative efforts and fraud
received information suggesting Small Business Administration’s prevention.
TABLE OF CONTENTS
Chapter 1– Single-Family Programs..................................................................................................................1
Audit............................................................................................................................................................................................. 1
Investigation...............................................................................................................................................................................2
Joint Civil Fraud.........................................................................................................................................................................3
Chapter 2 – Public and Indian Housing Programs.......................................................................................... 5
Audit.............................................................................................................................................................................................5
Investigation............................................................................................................................................................................... 7
Chapter 3 – Multifamily Housing and Healthcare Programs......................................................................... 9
Audit.............................................................................................................................................................................................9
Investigation............................................................................................................................................................................. 11
Joint Civil Fraud....................................................................................................................................................................... 12
Chapter 4 – Community Planning and Development Programs................................................................. 13
Audit........................................................................................................................................................................................... 13
Investigation.............................................................................................................................................................................14
Chapter 5 – Other Significant Audits and Evaluations................................................................................. 16
Audit...........................................................................................................................................................................................16
Evaluation.................................................................................................................................................................................19
Chapter 6 – Legislation, Regulations, and Other Directives....................................................................... 21
Chapter 7 – Report Resolution........................................................................................................................ 25
Chapter 8 – Whistleblower Ombudsman....................................................................................................... 42
Appendix 1 – Peer Review Reporting............................................................................................................. 44
Appendix 2 – Audit Reports Issued................................................................................................................. 45
Appendix 3 – Tables.......................................................................................................................................... 49
Appendix 4 – Inspector General Empowerment Act.................................................................................... 76
OIG Telephone Directory................................................................................................................................. 83
Acronyms and Abbreviations List.................................................................................................................... 87
Reporting Requirements.................................................................................................................................. 90
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 1 – SINGLE-FAMILY PROGRAMS
The Federal Housing Administration (FHA) single-family programs provide mortgage insurance to mortgage
lenders that, in turn, provide financing to enable individuals and families to purchase, rehabilitate, or construct
homes. Some of the highlights from this semiannual period are noted below.
AUDIT
Strategic Initiative 1: Contribute to the reduction of fraud in single-family insurance
programs
Key program results Questioned costs Funds put to better use
Audit 3 audits $1,053,688 $1,905,340,944
REVIEW OF FHA-INSURED LOANS
The U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audited FHA-
insured loans from calendar year 2016 to determine whether FHA insured loans to borrowers with delinquent
Federal debt or who were subject to Federal administrative offset for delinquent child support. FHA insured an
estimated 9,507 loans, worth more than $1.9 billion, which were not eligible for insurance because they were made
to borrowers with delinquent Federal debt or who were subject to Federal administrative offset for delinquent child
support.
OIG recommended that FHA put more than $1.9 billion to better use by developing a method for using the U.S.
Treasury Do Not Pay portal to identify delinquent Federal debt and delinquent child support to prevent future FHA-
insured loans to ineligible borrowers. OIG also recommended that FHA revise the single-family handbook to
comply with the regulation that prevents loans to borrowers with delinquent child support subject to Federal offset
and schedule the timely renewal of data-sharing agreements to prevent data loss in the Credit Alert Interactive
Voice Response System (CAIVRS) or discontinue the use of CAIVRS if the information duplicates the information
available in the Do Not Pay portal. (Audit Report: 2018-KC-0001)
HUD OIG audited CitiMortgage in O’Fallon, MO, to determine whether it filed for partial claims only after
completing the loan modifications and reinstating the loans. CitiMortgage improperly filed for 66 partial claims
before completing the loan modifications and reinstating the loans. The FHA insurance fund paid out more than
$1.7 million for these improper partial claims, including the lender incentive fees. CitiMortgage had repaid nearly
$723,000 of these claims before the audit.
OIG recommended that HUD require CitiMortgage to (1) repay HUD for improperly filed partial claims and
incentive fees totaling more than $1 million, (2) work with HUD to ensure the release of the liens on the 66
properties with improper partial claims, and (3) perform an internal review of all FHA Home Affordable
Modification Program partial claims that were combined with loan modifications to determine their eligibility and
report the results to HUD for the repayment of improperly filed partial claims. (Audit Report: 2018-KC-1001)
1
SEMIANNUAL REPORT TO CONGRESS
HUD OIG audited HUD’s process for ensuring that nonpayment orders adequately prevented the payment of claims
on FHA loans to determine whether HUD had adequate controls to prevent improper claims from being paid.
HUD’s use of nonpayment orders adequately prevented claims on FHA loans from being paid. A review of 17
claims that had an active nonpayment order and 10 claims that had an inactive nonpayment order for the first entry
did not identify any improper claims that were paid.
OIG made no recommendations. OIG further determined that some contents of the audit report would not be
appropriate for public disclosure, and those items were redacted. (Audit Report: 2018-LA-0001)
INVESTIGATION
Program Results
Administrative - civil actions 114
Convictions - pleas - pretrial diversions 33
Financial recoveries $74,265,008
MORTGAGE COMPANY AGREES TO PAY ALMOST $12 MILLION
In U.S. District Court, a mortgage lender entered into a settlement agreement with the U.S. Department of Justice,
Civil Division, and the U.S. Attorney’s Office to pay more than $11.6 million, of which HUD would receive more
than $8.8 million. The lender, a direct endorsement lender, violated the False Claims Act by falsely certifying that
it complied with Federal requirements to obtain insurance on mortgage loans from FHA. The lender paid
underwriters commissions, which created a greater incentive to close FHA-insured loans. Additionally, the lender’s
quality control team identified mandatory reportable issues from randomly pulled FHA loan files. However, its
senior management decided not to self-report those issues to HUD. HUD OIG conducted this investigation. (Little
Rock, AR)
TITLE AGENCY EXECUTIVE SENTENCED TO 5 YEARS INCARCERATION
A title agent was sentenced in U.S. District Court in connection with an earlier guilty plea to bank fraud and theft of
government funds. The title agent, who ran her own title agency, was sentenced to 5 years incarceration and 3 years
supervised release and ordered to pay more than $2.4 million in restitution to buyers, sellers, and the underwriter
for her title agency. The title agent instructed all lenders doing business with her company to wire incoming
lending proceeds to an account she used as her personal bank account. The title agent then used the deposited funds
for her own personal use and the operational expenses of her company. In an effort to conceal her misuse of the
lenders’ funds, the title agent voided and reissued her agency’s checks to make it appear to the lenders that the
funds were issued from the interest on trust account. Over a 2-year period, the title agent closed 19 FHA-insured
and conventionally financed real estate transactions in which her company received escrow funds from lenders but
failed to pay off the previous owners’ mortgages. In one of the transactions, the title agent retained, for her own
2
SEMIANNUAL REPORT TO CONGRESS
personal use, $152,000 in Neighborhood Stabilization Program funds intended for the City of Berea. HUD OIG and
the Federal Bureau of Investigation conducted this investigation. (Cleveland, OH)
MAJOR BANK AGREES TO PAY $3.4 MILLION FOR FALSE CLAIMS
A major bank settled a false claims case in U.S. District Court after the case was brought by a relater and joined by
the U.S. Department of Justice, HUD, and FHA under the False Claims Act. The bank agreed to settle the case for
$3.4 million. The relater alleged that the bank violated the False Claims Act by processing foreclosures using
surrogate signed endorsements placed on original notes. Using false statements and testimony regarding the
timeline of the foreclosure process, the bank misled courts into believing it had good standing to foreclose when it
did not. The settlement was calculated using losses HUD suffered on 39 FHA loans due to the bank’s actions.
HUD OIG conducted this investigation. (Miami, FL)
FRAUDSTER SENTENCED FOR ILLEGALLY SELLING FORECLOSED HOMES
A realtor was sentenced in U.S. District Court in connection with a previous guilty plea to conspiracy to commit
wire fraud. The realtor was sentenced to 51 months incarceration and 3 years supervised release and ordered to pay
$65,000 in restitution to his victims. As part of this conspiracy, the realtor identified vacant foreclosed on FHA
homes and conventionally insured properties and falsely represented to potential purchasers that he was authorized
to sell these homes. The realtor then kept the proceeds from the illegal sales and converted the funds to his personal
use. The realtor provided some of the potential purchasers with fictitious agreements of sale and other sale-
supporting documents such as deeds. HUD OIG; the Internal Revenue Service, Criminal Investigations Division;
the U.S. Department of Homeland Security, Investigations; and the Pennsylvania State Police conducted this
investigation. (Scranton, PA)
JOINT CIVIL FRAUD
Key program results Questioned costs Funds put to better use
Civil actions 1 $5,500 $95,769
HUD OIG conducted a review of an FHA home equity conversion mortgage (HECM) underwritten by MetLife
Home Loans, LLC. MetLife is an FHA-approved mortgage lender with its principal place of business located in
Irving, TX.
On June 9, 2017, HUD notified MetLife and the borrower’s son of their potential liability under the Program Fraud
Civil Remedies Act of 1986, 38 U.S.C. (United States Code) 3801-3812, for causing a false claim to be made
regarding the eligibility of an FHA HECM loan. MetLife underwrote the loan and failed to ensure that the
signatories to the loan had the legal authority to execute it. Specifically, the power of attorney through which the
borrower’s son executed the loan required his sister’s signature as well as his own.
3
SEMIANNUAL REPORT TO CONGRESS
On November 3, 2017, MetLife entered into a settlement agreement to pay HUD $4,000 upon execution of the
agreement. In addition, MetLife will indemnify and hold HUD harmless for any losses HUD incurs or has incurred
in connection with the loan. The estimated potential loss is nearly $96,000. On August 15, 2017, the borrower’s
son entered into a settlement agreement to pay HUD $1,500. (Memorandum: 2018-CF-1801)
4
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 2 – PUBLIC AND INDIAN HOUSING PROGRAMS
The U.S. Department of Housing and Urban Development (HUD) provides grants and subsidies to more than 3,300
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 7 audits $8,622,691 $2,336,693
REVIEW OF HUD’S HOUSING CHOICE VOUCHER PROGRAM
HUD’s Office of Inspector General (OIG) audited the Housing Choice Voucher program of the Fairmont-
Morgantown Housing Authority in Fairmont, WV, to determine whether the Authority adequately administered its
program in compliance with HUD requirements regarding participant eligibility and applicant selection.
The Authority did not comply with HUD’s and its own requirements when administering its Housing Choice
Voucher program. Specifically, it (1) did not conduct criminal background checks of applicants and participants
through State or local law enforcement or court records of the local jurisdiction, (2) made housing assistance
payments for ineligible participants, (3) did not always obtain written citizenship declarations and properly report
family citizenship status, and (4) did not maintain an accurate waiting list for applicant selection. As a result, it (1)
made unsupported housing assistance payments totaling more than $4.9 million, (2) made ineligible housing
assistance payments totaling nearly $20,000, (3) did not maintain and report correct family citizenship status, and
(4) did not treat program applicants fairly and consistently.
OIG recommended that HUD require the Authority to (1) provide documentation to show that adult members of
households for whom the Authority made housing assistance payments were not engaged in drug-related or violent
criminal activity or repay its program from non-Federal funds for any amounts it cannot support and if the
participants are deemed ineligible, follow applicable regulations to terminate or modify assistance; (2) repay its
program from non-Federal funds for the ineligible housing assistance payments; (3) correct the errors identified by
the audit; and (4) develop and implement controls to ensure that it follows policies and procedures required by its
administrative plan. OIG also recommended that HUD review the Authority’s waiting list to ensure that all areas
comply with HUD requirements. (Audit Report: 2018-PH-1001)
HUD OIG audited the Housing Choice Voucher program of the Fairmont-Morgantown Housing Authority in
Fairmont, WV, to determine whether the Authority ensured that its program units met HUD’s housing quality
standards and abated housing assistance payments as required.
5
SEMIANNUAL REPORT TO CONGRESS
The Authority did not always conduct adequate inspections to ensure that its program units met housing quality
standards and did not always accurately calculate housing assistance payment abatements. Of 68 program units
inspected, 63 did not meet HUD’s housing quality standards. Further, 22 of the 63 were in material noncompliance
with HUD’s standards. The Authority disbursed nearly $28,000 in housing assistance payments and received more
than $1,000 in administrative fees for these 22 units. Over the next year, if the Authority does not implement
adequate procedures to ensure that its program units meet housing quality standards, HUD could pay more than $1.2
million in housing assistance for units that materially fail to meet HUD’s standards. Additionally, the Authority did
not always accurately calculate housing assistance payment abatements for units that failed its inspections. It
incorrectly calculated the abatement amount for 13 of 37 units reviewed. As a result, HUD made ineligible housing
assistance payments totaling nearly $4,000 that should have been abated, and unit owners did not receive nearly
$300 in housing assistance payments that should not have been abated.
OIG recommended that HUD require the Authority to (1) certify, along with the owners of the 63 units cited, that
the applicable housing quality standards violations have been corrected; (2) reimburse its program from non-Federal
funds for the 22 units that materially failed to meet HUD’s housing quality standards; (3) develop and implement
procedures and controls to monitor the inspection process to ensure that program units meet HUD’s standards; (4)
reimburse its program for payments that should have been abated; and (5) reimburse five owners for excess
payments that it improperly abated. (Audit Report: 2018-PH-1002)
REVIEW OF HUD’S PROPERTY DISPOSITION PROCEEDS
HUD OIG audited the Glen Cove Housing Authority in Glen Cove, NY, to determine whether the Authority used
the property disposition proceeds it received from selling properties in accordance with applicable requirements,
including its HUD-approved disposition application.
The Authority did not always use proceeds generated from the sale of 19 properties in accordance with
requirements. Specifically, it loaned more than $900,000 to its nonprofit entity for activities that did not benefit its
residents and disbursed nearly $170,000 in proceeds and nearly $11,000 in other Federal funds for costs that were
not eligible or supported, such as Rental Assistance Demonstration Program conversion costs that require prior
HUD approval. Further, it did not ensure that the disposition application and related documentation were
maintained and that it submitted required reports to HUD. As a result, HUD and the Authority did not have
assurance that proceeds were used and available for use as intended to benefit the Authority’s residents, and HUD
could not fully monitor the Authority’s use of the proceeds.
OIG recommended that HUD require the Authority to (1) obtain retroactive approval from HUD for the outstanding
unauthorized loans and proceeds used for Rental Assistance Demonstration Program conversion costs or repay any
amount for which it does not obtain approval, (2) provide documentation to show that proceeds were used for
approved activities or repay any amount not supported, (3) repay proceeds and other Federal funds spent on
ineligible activities, and (4) strengthen its controls to ensure that $1 million in remaining proceeds and any funds to
be repaid are put to better use to benefit the Authority’s residents. (Audit Report: 2018-NY-1002)
REVIEW OF HUD’S PUBLIC HOUSING OPERATING AND CAPITAL FUND PROGRAMS
HUD OIG audited the Housing Authority of the City of Asbury Park, NJ, to determine whether the Authority
administered its Public Housing Operating and Capital Fund programs in accordance with applicable HUD, Federal,
and Authority requirements.
6
SEMIANNUAL REPORT TO CONGRESS
The Authority did not always administer its operating and capital funds in accordance with HUD, Federal, and
Authority requirements. Specifically, it did not (1) adequately support funds paid to the Long Branch Housing
Authority for technical, administrative, maintenance, and redevelopment services; (2) follow applicable
requirements when purchasing goods and services; and (3) properly support Capital Fund grant obligations. It also
improperly used operating funds to pay a settlement with the State of New Jersey. As a result, HUD did not have
assurance that (1) nearly $1.3 million paid to Long Branch was for eligible, reasonable, necessary, and allocable
costs; (2) more than $451,000 paid for goods and services was reasonable and related to valid contracts; (3) more
than $119,000 in capital funds would be used for eligible activities in a timely manner; and (4) nearly $76,000 was
available to the Authority to operate and fulfill its mission.
OIG recommended that HUD require the Authority to (1) provide documentation to show that (a) the payments to
Long Branch were for eligible, reasonable, necessary, and allocable costs; (b) the payments for goods and services
were reasonable and related to valid contracts that were in place before disbursements were made; and (c)
obligations of capital funds were supported; (2) reimburse the operating funds used for the settlement payment; and
(3) update its policies and procedures to ensure (a) that additional payments for technical, administrative,
maintenance, and redevelopment services are adequately supported and that services were provided in accordance
with requirements; (b) compliance with HUD and Federal procurement requirements; and (c) that capital funds are
obligated in a timely manner and adequately supported. (Audit Report: 2018-NY-1003)
REVIEW OF HUD’S GUIDANCE CONCERNING FEDERAL ASSISTANCE APPLICATION
HUD OIG reviewed the guidance concerning HUD’s Application for Federal Assistance (SF (standard form) 424)
to determine whether HUD provided clear directions and whether the guidance contained specific certifications for
PHAs.
HUD did not clearly define or provide guidance on what PHAs certified to when applying for operating subsidy
funds on the Application. Additionally, it did not require PHAs to physically sign the certifications listed on form
HUD-52723, Operating Fund Calculation of Operating Subsidy. As a result, HUD faced challenges when pursuing
civil remedies against noncompliant public housing officials.
OIG recommended that HUD follow departmental clearance procedures and issue clarification to PHAs to explain
what is being certified to in the Application. OIG also recommended that HUD require PHAs to sign the
certifications on form HUD-52723 or remove the certification. (Audit Memorandum: 2018-FW-0801)
INVESTIGATION
Program Results
Administrative - civil actions 166
Convictions - pleas - pretrial diversions 66
Financial recoveries $11,037,474
7
SEMIANNUAL REPORT TO CONGRESS
FIVE SENTENCED FOR CONSPIRACY IN LONG-RUNNING BILLING SCHEME
Two public employees, an AMTRAK employee, and two contractors were sentenced in U.S. District Court for their
earlier guilty pleas to conspiracy to commit mail fraud, bribery, and other crimes leading to a loss to HUD of
approximately $300,000. The contracting company owner was sentenced to 4 years incarceration and ordered to
pay $708,386 in restitution, and an employee of the contractor was sentenced to 12 months incarceration. A local
board of education employee was ordered to forfeit $9,108, and a local city employee was ordered to forfeit $1,249.
Over a period of 6 years, the conspirators took part in a contract, overbilling, and substitute products scheme that
misused Federal funds, including Community Development Block Grant and PHA funds. Some of the schemes
included providing substandard lumber in place of the billed construction lumber and inflating invoices in exchange
for goods, such as computers, appliances, and gift cards. HUD OIG, AMTRAK OIG, and the Federal Bureau of
Investigation (FBI) conducted this investigation. (Newark, NJ)
PUBLIC HOUSING AUTHORITY EXECUTIVE DIRECTOR SENTENCED FOR
EMBEZZLEMENT
A former executive director of a public housing commission was sentenced in U.S. District Court in connection
with her earlier guilty plea to conspiracy to commit Federal program fraud. The executive director was sentenced to
37 months incarceration and 2 years supervised release and ordered to pay $336,240, the total loss to HUD. During
her tenure, the executive director entered into Section 8 housing assistance payments contracts for rental units, in
which she had a proprietary interest, with and for the benefit of immediate family members and paid subsidies
relating to these contracts totaling $161,927. She also fraudulently used the commission’s two credit cards to
purchase personal items for herself and her family members from Amazon.com, Walmart, and Sam’s Club, totaling
$165,813 in public housing funds. Additionally, she fraudulently wrote approximately $8,500 in commission
checks to petty cash, which she negotiated and converted to her own use. HUD OIG and the FBI conducted this
investigation. (Detroit, MI)
MAN INCARCERATED FOR HOUSING ASSISTANCE FRAUD
A former Section 8 tenant was sentenced in U.S. District Court following his guilty plea to false statements, mail
fraud, and wire fraud. The man was sentenced to 24 months incarceration and 3 years supervised release and
ordered to pay $274,765 in restitution. Over a period of 20 years, the recipient fraudulently used the personally
identifiable information of a deceased person to file for housing assistance, Social Security benefits, and
international travel documents. As a result of his fraud scheme, the tenant received $169,974 in HUD subsidies to
which he was not eligible. HUD OIG; the Social Security Administration OIG; and the U.S. Department of State,
Diplomatic Security Service, conducted this investigation. (San Jose, CA)
8
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 3 – MULTIFAMILY HOUSING AND 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 5 audits $5,493,654 $1,440,165
REVIEW OF OFFICE OF HEALTHCARE PROGRAMS
HUD’s Office of Inspector General (OIG) audited the Federal Housing Administration-insured nursing home,
Riverside Health and Rehabilitation Center, in East Hartford, CT, to determine whether the project was operated
in accordance with its regulatory agreement and HUD requirements.
Although the operator generally complied with the regulatory requirements tested, it did not operate in accordance
with HUD requirements by not completing the required controlling documents. The uncompleted documents
included the management agent agreement and management agent certification with a related management agent.
The operator entered into a services agreement with the management agent, which did not have a fee structure that
complied with HUD requirements. In addition, the operator did not have a HUD-compliant operating lease with the
owner because the required operating lease addendum was not completed. As a result, the operator paid more than
$2.6 million in unsupported management fees in fiscal years 2015 and 2016. Also, without the required
management agent documents or a HUD-compliant operating lease, HUD and the owner may not have had the
authority to hold the operator accountable, and the operator may not have had the authority to hold the management
agent accountable for improper business associated with the project.
OIG recommended that HUD require the owner to (1) require the operator to complete the management agent
documents with the management agent or seek reimbursement for the more than $2.6 million in unsupported
management fees paid in fiscal years 2015 and 2016 and (2) submit the operating lease for HUD review and
complete the operating lease addendum in accordance with HUD requirements. (Audit Report: 2018-BO-1001)
REVIEW OF HUD’S SECTION 202 SUPPORTIVE HOUSING PROGRAM
HUD OIG audited the Section 202 Supportive Housing for the Elderly Program of Yabucoa Volunteers of America
Elderly Housing, Inc., in Yabucoa, PR, to determine whether Volunteers used Section 202 funds in accordance
with HUD agreements and requirements.
9
SEMIANNUAL REPORT TO CONGRESS
Volunteers disbursed Section 202 funds for a housing project that was incomplete and charged the project
unallowable construction costs. In addition, it was paid for duplicate construction costs. As a result, more than $1.8
million was disbursed for a project that did not meet HUD requirements. Volunteers also received more than $1
million in duplicate payments.
OIG recommended that HUD (1) track and ensure that Volunteers return to the U.S. Treasury any funds recovered
through the ongoing litigation pertaining to the Yabucoa housing project, (2) deobligate and recapture more than
$1.4 million in undrawn Section 202 funds assigned to the project, (3) require Volunteers to reimburse the Treasury
$140,000 from non-Federal funds for ineligible project construction costs charged to the Section 202 project, and
(4) instruct Volunteers to return to the Puerto Rico Department of Housing more than $1 million plus any interest
earned for the duplicate special escrow fund payments it received. (Audit Memorandum: 2018-AT-1802)
REVIEW OF HUD’S MULTIFAMILY SECTION 8 PROGRAM
HUD OIG audited the multifamily Section 8 project-based rental assistance program at the Villa Main Apartments
in Port Arthur, TX, to determine whether the owner administered its program in accordance with HUD regulations
and guidance; specifically, whether tenants were eligible for the program, housing assistance subsidies were
accurate, and units received required inspections.
The owner did not administer its Section 8 project-based rental assistance program at Villa Main in accordance with
HUD regulations and guidance. It assisted at least 82 tenants who were ineligible for assistance because they did
not exist or for whom the owner could not support their eligibility and that unit physical condition standards were
met. As a result, HUD paid the owner nearly $535,000 in subsidies for ineligible “ghost” tenants and incurred more
than $1 million in subsidies for which the owner could not support the tenants’ subsidy amounts or that the
subsidized units were in decent, safe, and sanitary condition.
OIG recommended that HUD require the Villa Main owner to (1) repay HUD for the housing subsidies received for
ineligible nonexistent “ghost” tenants and (2) support or repay HUD for tenants whose eligibility the owner could
not support. In addition, HUD should require its contract administrator to ensure that the Villa Main owner’s
recently implemented quality control program is working as designed and in accordance with HUD requirements.
OIG also recommended that HUD consider whether taking administrative actions against the appropriate owner(s)
is warranted. (Audit Report: 2018-FW-1002)
REVIEW OF HUD’S HOUSING PRESERVATION AND RESIDENT HOME-OWNERSHIP
PROGRAM
HUD OIG audited HUD’s oversight of grants funded through its resident home-ownership program under the Low-
Income Housing Preservation and Resident Homeownership Act of 1990 to determine whether HUD had adequate
oversight of grants funded through its program to ensure that the projects were operated in accordance with HUD’s
requirements.
HUD did not have adequate oversight of grants to ensure that the projects were operated in accordance with HUD’s
requirements. Specifically, it did not sufficiently monitor the projects and ensure that grantees submitted reports
showing continued compliance with the program. It also had not provided technical assistance to the grantees or
management agents, ensured that the grantees and management agents received training, or issued guidance
10
SEMIANNUAL REPORT TO CONGRESS
concerning requirements in the grant and use agreements. As a result, the grantees did not operate the projects in
accordance with HUD’s requirements and were at risk of having to reimburse HUD for the program grants.
OIG recommended that HUD (1) conduct onsite management reviews of the projects to ensure that they are
operated in accordance with HUD’s requirements and the grant agreements and (2) develop and issue guidance on
requirements in the grant and use agreements. (Audit Report: 2018-CH-0001)
REVIEW OF HUD’S POLICIES TO PREVENT MULTIFAMILY TENANTS FROM BYPASSING
WAITING LISTS
HUD OIG audited HUD’s multifamily housing program to determine whether HUD had adequate policies to
prevent multifamily tenants from being able to move into units and become heads of household without being put
on the established waiting list.
HUD did not have adequate policies to prevent multifamily tenants from improperly bypassing waiting lists. HUD
policies did not address situations in which tenants improperly bypassed waiting lists to be placed into HUD-
assisted multifamily units. HUD Handbook 4350.3, REV-1, section 4-16, required multifamily project owners to
use a waiting list if appropriate-size units were not available for applicants. The Handbook also required owners to
mark the date on which the application was received from the potential tenant and to select applicants from the
waiting list in chronological order to fill vacancies. But HUD policies did not provide guidance to owners when
there were indications of tenants bypassing waiting lists.
OIG recommended that HUD strengthen current written policies on occupancy requirements for subsidized
multifamily housing programs to ensure that prospective tenants do not improperly bypass waiting lists. (Audit
Memorandum: 2018-KC-0802)
INVESTIGATION
Program Results
Administrative - civil actions 7
Convictions - pleas - pretrial diversions 6
Financial recoveries $267,550
PROPERTY MANAGER SENTENCED FOR EMBEZZLEMENT
A property manager was sentenced in U.S. District Court in connection with a previous guilty plea to conspiracy to
commit theft of government funds. The property manager was sentenced to 18 months incarceration, 3 years
supervised release, and substance abuse counseling and was ordered to pay $52,241 in restitution to a HUD-
subsidized multifamily complex. Over a period of 2 years, the property manager diverted HUD funds for her
personal benefit by making payments to fictitious venders, stealing tenant cash payments and laundromat proceeds,
making unauthorized purchases on the development’s credit cards, and reimbursing herself for fictitious benefits.
HUD OIG conducted this investigation. (Shreveport, LA)
11
SEMIANNUAL REPORT TO CONGRESS
JOINT CIVIL FRAUD
Key program results Questioned costs Funds put to better use
Civil actions 3 $40,000 $0
HUD OIG reviewed concerns expressed in a complaint from a HUD employee regarding the physical condition of
HUD-insured residential care facilities. At least 10 facilities had received a score below 31 out of a possible 100 on
their most recent Real Estate Assessment Center (REAC) inspection performed between June 2016 and March
2017, suggesting that the physical condition of the facilities was unsatisfactory.
HUD failed to monitor the physical condition of residential care facilities in its portfolio to ensure sustainable
properties for the life of the HUD-insured mortgage. HUD did not verify that exigent health and safety violations
were mitigated and required repairs to the facilities were made. Additionally, although roof deficiencies are
potentially devastating to the physical condition of properties, the REAC inspectors were not required to access the
roof when a permanent means of access was not available. Further, HUD did not ensure that the routine inspection
schedule was followed and had allowed skilled nursing facilities to be exempt from REAC physical inspections.
Also, the REAC inspection scores did not accurately reflect the physical condition of the facilities and could not be
used to compare the facilities.
OIG recommended that HUD implement procedures to ensure that deficiencies identified during the REAC
inspections have been corrected, ensure that timely physical condition inspections of all Section 232 program
facilities are performed, and reimplement the REAC physical condition inspections for the skilled nursing facilities
that were exempted from routine physical inspections. OIG also recommended that HUD develop and implement
an inspection process for the Section 232 program that better reflects those properties’ physical conditions and
ensure that all areas of the properties are inspected, including the roofs and all buildings located on the property that
are insured by HUD. (Memorandum: 2018-CF-0801)
12
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 4 – 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 $2,294,853 $216,663
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 Jefferson Parish, LA, Community Development Department to determine whether the
Parish (1) ensured that payments to contractors were supported, reasonable, and necessary and (2) properly
monitored and ensured completion of the contractors’ work in accordance with contract and HUD requirements for
its CDBG- and HOME-funded property rehabilitation program.
The Parish did not always administer its rehabilitation program in accordance with program requirements.
Specifically, it did not always ensure that payments to contractors were eligible, supported, and reasonable, as it
made duplicate payments and overpayments and made payments (1) for work not completed and excessive material
costs, (2) without adequate invoice documentation or cost analyses for change orders, (3) without performing
independent cost estimates before the bidding process, and (4) for properties not brought up to code. In addition,
the Parish did not properly monitor and ensure completion of its contractors’ work. As a result, it could not provide
reasonable assurance to HUD that its program met its purpose or that it followed HUD and other requirements,
putting more than $216,000 in allocated HOME funds at risk of mismanagement. In addition, the Parish paid more
than $1 million in questioned costs and left homeowners in unsafe and unsanitary living conditions.
OIG recommended that HUD require the Parish to (1) develop and implement written procedures and take actions
to ensure that it better spends more than $216,000 in HOME funds, (2) repay more than $9,000 for duplicate
payments to contractors, (3) support or repay more than $1 million in questioned costs, (4) develop and implement
written procedures and management controls, and (5) correct the deficiencies identified during the onsite
inspections and in the remaining homes. (Audit Report: 2018-FW-1001)
13
SEMIANNUAL REPORT TO CONGRESS
HUD OIG audited the City of South Gate, CA’s CDBG program to determine whether the City administered its
CDBG funds in accordance with HUD requirements, focusing on code enforcement and graffiti abatement
activities.
The City did not administer CDBG funds in accordance with HUD requirements. Specifically, it (1) did not meet
HUD’s code enforcement requirements and (2) did not ensure that code enforcement and graffiti abatement salary
and benefit costs were adequately supported. As a result, it used more than $811,000 in CDBG funds for
unsupported code enforcement costs and more than $285,000 for unsupported graffiti removal costs.
OIG recommended that HUD require the City to (1) provide documentation to support the eligibility of the code
enforcement and graffiti abatement costs or repay the program from non-Federal funds; (2) develop and implement
policies and procedures to ensure that code enforcement and graffiti abatement salaries and benefits are accurately
charged to CDBG grants; and (3) develop and implement a targeted code enforcement strategy that would specify
deteriorating or deteriorated areas where code enforcement would be expected to arrest decline, including a
description of public or private improvements, rehabilitation, or services that would help facilitate code
enforcement. (Audit Report: 2018-LA-1003)
INVESTIGATION
Program Results
Administrative - civil actions 38
Convictions - pleas - pretrial diversions 8
Financial recoveries $2,268,038
NONPROFIT CORPORATION FINANCE DIRECTOR SENTENCED FOR EMBEZZLEMENT OF
HOPWA FUNDS
A former finance director and accountant for a nonprofit corporation was sentenced in U.S. District Court in
connection with her earlier guilty plea to theft of Federal program funds and making and subscribing a false return.
The accountant was sentenced to 30 months incarceration and 3 years supervised release and ordered to pay
$510,536 in restitution, with $321,961 of that amount due to HUD. HUD awarded the nonprofit organization a 3-
year grant for $1.3 million under the Housing Opportunities for Persons with AIDS (HOPWA) program. Financial
records showed that the accountant received wire payments of $637,544 over a period of 3 years when her salary
was $62,500. HUD OIG; the U.S. Department of Health and Human Services OIG; and the Internal Revenue
Service, Criminal Investigations Division, conducted this investigation. (St. Thomas, USVI)
NONPROFIT AGENCY CHIEF FINANCIAL OFFICER SENTENCED FOR THEFT OF
GOVERNMENT FUNDS
A former chief financial officer (CFO) of a HUD-funded nonprofit agency was sentenced in U.S. District Court for
his earlier guilty plea to theft of government funds. The CFO was sentenced to 13 months incarceration, 36 months
supervised release, and 6 months home detention and was ordered to pay $84,308 in restitution. The wife and
14
SEMIANNUAL REPORT TO CONGRESS
mother-in-law of the CFO, who also held roles as director and chief executive officer, agreed to pretrial diversions
of 12 and 9 months, respectively. The three subjects converted funds intended to be used for HUD’s CDBG
program to their own personal use by purchasing tickets to entertainment shows and sports events, for personal
travel on a cruise ship, and for unallowed meals. HUD OIG, the Office of State Inspector General, and the Federal
Bureau of Investigation conducted this investigation. (New Orleans, LA)
DISASTER RECIPIENT SENTENCED FOR THEFT BY DECEPTION
A homeowner was sentenced in New Jersey Superior Court in relation to his earlier guilty plea to theft by deception.
The man was sentenced to 18 months probation, approved for the Pretrial Intervention Program, and ordered to pay
$137,826 in restitution. In applications for Hurricane Sandy disaster assistance, the recipient falsely claimed he was
residing at a damaged location. The homeowner received a total of $137,826 in disaster relief funds, $113,001 of
which included HUD funding. HUD OIG, the U.S. Department of Homeland Security (DHS) OIG, the Small
Business Administration OIG, and the U.S. Department of Health and Human Services OIG conducted this
investigation. (Brick Township, NJ)
HOMEOWNER ORDERED TO REPAY ALMOST $200,000 IN DISASTER FUNDS
A homeowner and grant recipient was sentenced in New Jersey Superior Court after pleading guilty to multiple
charges of theft by deception. The recipient was sentenced to 12 months probation and ordered to pay $191,314 in
restitution. The homeowner falsely claimed that a home she owned was damaged by Hurricane Sandy and was her
primary residence at the time of the storm, for which she received $159,830 in HUD funds. Her actual primary
residence at the time of the storm was in another State, while the damaged home was a seasonal home, making it
ineligible for HUD assistance. HUD OIG and the New Jersey Division of Criminal Justice conducted this
investigation. (Ventnor City, NJ)
FAMILY SENTENCED FOR DISASTER FRAUD
A recipient of Hurricane Sandy disaster relief funds was sentenced in State Superior Court to 5 years probation and
ordered to pay $190,213 in restitution after being convicted of theft by deception. The homeowner filed false
damage claims for his property and received disaster relief funds from HUD, the Federal Emergency Management
Agency, and the New Jersey Department of Community Affairs. The property was determined not to be his primary
residence, although he certified that it was. As part of the Judgment of Conviction, the homeowner was ordered to
list the damaged property for sale. HUD OIG, DHS OIG, and the New Jersey Attorney General’s Office conducted
this investigation. (Toms River, NJ)
15
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 5 – 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 9 audits $0 $1,249,107,507
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 2017 AND 2016 FINANCIAL STATEMENTS
In accordance with the Chief Financial Officers Act of 1990, as amended, OIG is required to annually audit HUD’s
consolidated financial statements and the Federal Housing Administration’s (FHA) and Government National
Mortgage Association’s (Ginnie Mae) stand-alone financial statements. OIG’s objective was to express an opinion
on the fairness of HUD’s consolidated financial statements in accordance with U.S. generally accepted accounting
principles (GAAP) applicable to the Federal Government.
OIG expressed a disclaimer of opinion on HUD’s fiscal years 2017 and 2016 (restated) consolidated financial
statements because of the significant effects of certain unresolved audit matters, which restricted OIG’s ability to
obtain sufficient, appropriate evidence to express an opinion. These unresolved audit matters relate to (1) HUD’s
improper use of cumulative and first-in, first-out budgetary accounting methods of disbursing community planning
and development program funds, (2) the $3.6 billion in nonpooled loan assets from Ginnie Mae’s stand-alone
financial statements that OIG could not audit due to inadequate support, (3) unvalidated grant accrual estimates, and
(4) the improper accounting for certain HUD assets and liabilities. Additionally, due to weaknesses in its financial
reporting process, OIG was unable to review notes 3 and 7 to the consolidated financial statements.
OIG reported nine material weaknesses, six significant deficiencies, and three instances of noncompliance with
applicable laws and regulations. Primarily, HUD (1) lacked adequate controls over its financial reporting
preparation process; (2) inadequately accounted for assets, liabilities, commitments, and disbursements in
accordance with GAAP; (3) delayed completion of significant reconciliations; (4) lacked adequate financial
management systems to ensure accurate and reliable financial reporting; and (5) reported significant amounts of
invalid obligations. HUD’s weak customer complementary controls with its Federal shared service provider and
continued weaknesses in its financial management governance structure were instrumental in causing these internal
control weaknesses.
OIG recommended that HUD (1) properly account for all financial transactions in accordance with GAAP; (2)
improve internal controls over the financial reporting process, including developing and implementing effective
customer complementary controls; and (3) deobligate up to $648.9 million in invalid or inactive obligations and
return to the U.S. Treasury more than $329.3 million in unapportioned funds that are not available for obligation.
16
SEMIANNUAL REPORT TO CONGRESS
Additionally, OIG made recommendations to FHA and Ginnie Mae to improve and strengthen internal control over
financial reporting and governance of financial operations. (Audit Reports: 2018-FO-0004 and 2018-FO-0005)
AUDIT OF THE FEDERAL HOUSING ADMINISTRATION’S FINANCIAL STATEMENTS FOR
FISCAL YEARS 2017 AND 2016
HUD OIG audited FHA’s fiscal years 2017 and 2016 (restated) financial statements, including its report on FHA’s
internal control and test of compliance with selected provisions of applicable laws and regulations.
In OIG’s opinion, FHA’s fiscal years 2017 and 2016 financial statements were presented fairly, in all material
respects, in accordance with U.S. GAAP for the Federal Government. OIG’s opinion is reported in FHA’s Fiscal
Year 2017 Annual Management Report. The results of OIG’s audit of FHA’s principal financial statements and
notes for the fiscal years ending September 30, 2017 and 2016, including its report on FHA’s internal control and
test of compliance with selected provisions of laws and regulations applicable to FHA, are presented in this report.
The audit disclosed two material weaknesses, two significant deficiencies in internal controls, and no instances of
noncompliance with applicable laws and regulations. (Audit Report: 2018-FO-0003)
AUDIT OF THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS
2017 AND 2016 FINANCIAL STATEMENTS
HUD OIG audited Ginnie Mae’s fiscal years 2017 and 2016 (restated) financial statements, including its report on
Ginnie Mae’s internal control and test of compliance with selected provisions of laws and regulations applicable to
Ginnie Mae.
In fiscal year 2017, for the fourth consecutive year, OIG was unable to obtain sufficient, appropriate evidence to
express an opinion on the fairness of the $3.6 billion (net of allowance) in nonpooled loan assets from Ginnie Mae’s
defaulted issuers’ portfolio as of September 30, 2017. Ginnie Mae also continued to improperly account for FHA
reimbursable costs as an expense instead of capitalizing them. Additionally, critical information needed to perform
the audit was not provided in sufficient time to audit the guaranty asset and guaranty liability financial statement
line items. 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 control, OIG
has not been able to obtain sufficient, appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s
fiscal years 2017 and 2016 (restated) financial statements. Based on the results of its work, OIG identified four
material weaknesses, one significant deficiency, and one reportable noncompliance with selected provisions of laws
and regulations. (Audit Report: 2018-FO-0002)
FISCAL YEAR 2017 REVIEW OF INFORMATION SYSTEMS CONTROLS IN SUPPORT OF
THE FINANCIAL STATEMENTS AUDIT
HUD OIG audited information system controls over HUD’s computing environment as part of its audit of HUD’s
financial statements for fiscal year 2017 under the Chief Financial Officer’s Act of 1990. The audit objective was to
17
SEMIANNUAL REPORT TO CONGRESS
assess general controls over HUD’s computing environment for compliance with HUD information technology (IT)
policies and Federal information system security and financial management requirements.
OIG has determined that the contents of this audit report would not be appropriate for public disclosure and has,
therefore, limited its distribution to certain officials. (Audit Report: 2018-DP-0003)
AUDIT OF SELECTED FHA INFORMATION SYSTEMS AND CREDIT REFORM ESTIMATION
AND REESTIMATION PROCESS APPLICATIONS
HUD OIG audited general and application controls over selected FHA information systems and the credit reform
estimation and reestimation process as part of the internal control assessments required for the fiscal year 2017
financial statement audit under the Chief Financial Officer’s Act of 1990. The objective was to review the controls
for compliance with HUD IT policies and Federal information system security and financial management
requirements.
OIG has determined that the contents of the audit report would not be appropriate for public disclosure and has,
therefore, limited its distribution to certain officials. (Audit Report: 2018-DP-0002)
AUDIT OF INFORMATION SYSTEM CONTROLS OVER THE GINNIE MAE FINANCIAL
ACCOUNTING SYSTEM
HUD OIG audited general and application controls over the Ginnie Mae Financial Accounting System (GFAS) as
part of the internal control assessments required for the fiscal year 2017 financial statements audit under the Chief
Financial Officer’s Act of 1990. The audit objective was to review internal controls over the security, integrity,
confidentiality, and availability of the data maintained in GFAS. OIG also reviewed the functionality and
supporting business process application controls over GFAS.
OIG has determined that the contents of this audit report would not be appropriate for public disclosure and has,
therefore, limited its distribution to certain officials. (Audit Report: 2018-DP-0001)
ATTESTATION REVIEW OF HUD’S DATA ACT IMPLEMENTATION EFFORTS
In accordance with the statutory requirements of the Digital Accountability and Transparency Act of 2014 (DATA
Act) and standards established by the Office of Management and Budget (OMB), HUD OIG audited HUD’s
compliance with the DATA Act for the second quarter of fiscal year 2017.
OIG assessed (1) the completeness, timeliness, quality, and accuracy of fiscal year 2017 second quarter financial
and award data submitted for publication on USASpending.gov and (2) HUD’s implementation and use of the
governmentwide financial data standards established by OMB and the U.S. Department of the Treasury.
HUD did not comply with the DATA Act for complete and accurate data submissions to USASpending.gov by the
statutory May 2017 deadline. HUD underreported a total of $17.9 billion in incurred obligations, $16.9 billion in
outlays, and $4.2 billion in apportionments and did not comply with the DATA Act. Specifically, FHA operational
activity contributed to an absolute value of $17.3 billion in obligations incurred and $16.6 billion in outlays, and
18
SEMIANNUAL REPORT TO CONGRESS
Ginnie Mae contributed an additional absolute value of $558.3 million in obligations incurred and $215.8 million in
outlays being excluded from the submission. As a result, the stakeholders and end users accessing the agencies’
data on USASpending.gov could not obtain a complete and accurate representation of HUD’s financial positions
and performance due to HUD’s not reporting all activity associated with the U.S. Standard General Ledger accounts
for each award.
OIG made five recommendations to improve HUD’s future compliance with the DATA Act and remediate any
issues identified by allocating sufficient resources, establishing a governance structure, ensuring that internal control
policies and procedures are developed and implemented, and completing data quality and error resolution for
programs that were excluded from HUD’s second quarter submission. (Audit Report: 2018-FO-0001)
ANNUAL RISK ASSESSMENT OF HUD’S USE OF CHARGE CARDS
HUD OIG completed its annual risk assessment of HUD’s charge cards as required by the Government Charge Card
Abuse Prevention Act of 2012, Public Law 112-194, and OMB Memorandum M-13-21. The objective was to
analyze the risks of illegal, improper, or erroneous purchases in HUD’s fiscal year 2016 travel and purchase card
programs. OIG found that a moderate risk remained in HUD’s travel card program and a low risk was associated
with HUD’s purchase card program.
HUD’s travel card program had a moderate risk of susceptibility to illegal, improper, or erroneous purchases. Risk-
increasing factors included a continuation of identified potentially unauthorized travel transactions from the prior
year’s OIG audit, unclear program guidance, and an increase in travel card use from fiscal year 2015. Risk-
decreasing factors included HUD’s timeliness in closing open travel card recommendations.
HUD’s purchase card program had a low risk of susceptibility to illegal, improper, or erroneous purchases. Risk-
increasing factors included noted difficulties with the Administrative Resource Center’s ability to properly block
certain restricted merchant category codes. Risk-decreasing factors included fewer identified transactions with
control issues from the prior year’s OIG audit, HUD’s timeliness in closing open purchase card recommendations,
and a decrease in purchase card use from fiscal year 2015.
OIG made no recommendations. It will use the risk assessment to determine the scope, frequency, and number of
periodic audits or reviews of charge card programs. (Audit Memorandum: 2018-KC-0801)
EVALUATION
E-DISCOVERY MANAGEMENT SYSTEM’S CAPACITY TO MEET CUSTOMER DEMAND FOR
ELECTRONIC DATA
To meet mission needs, several HUD program offices request electronically stored information (ESI) using HUD’s
E-Discovery Management System. The collection of ESI does not meet customer demand because processing ESI
requests takes too long to meet customers’ needs. Several factors contribute to this result. Namely, (1) the contract
for the system was not scoped using complete demand information, (2) demand for ESI has changed over time and
may increase, and (3) technical issues create challenges for the timely delivery of ESI to customers. This condition
poses several risks to HUD, including monetary and other sanctions, missed opportunities to perform investigative
fieldwork, and litigation and associated costs. HUD planned several changes to its IT infrastructure, which over
time, may increase its capacity to process ESI requests and decrease the time it takes to deliver collection results to
customers.
19
SEMIANNUAL REPORT TO CONGRESS
OIG recommended that the Office of General Counsel (OGC) (1) conduct a study to project HUD’s capacity needs
for ESI collections and (2) give its completed study to the Office of the Chief Information Officer (OCIO) for
consideration during future contract award decisions regarding E-Discovery services. In March 2018, OGC
completed the study and provided it to OCIO. The recommendations are now closed. (Evaluation Report: 2017-
OE-0008)
CIGIE WEB APPLICATION SECURITY CROSS-CUTTING REVIEW
HUD OIG led an OIG cross-cutting Council of the Inspectors General on Integrity and Efficiency (CIGIE) review
project group of 10 OIGs, which assessed the ability of Federal agencies and other designated Federal entities to
identify, assess, and resolve security vulnerabilities on Government publicly accessible web applications. The
testing and assessments of the review within the participating agencies identified the following three significant
deficiencies: incomplete and inaccurate inventories, thousands of critical and high-severity vulnerabilities in
Federal Government website environments, and inconsistent or poor implementation of Federal agency web security
policies and processes. The resulting report included seven recommendations that all Federal agencies should
implement. The final report also provided critical assessment criteria that were added to the fiscal year 2018
Federal Information Security Modernization Act of 2014 (FISMA) Inspectors General (IG) metrics. The report was
publicly published on the CIGIE and oversight.gov websites. (Evaluation Report: 2016-OE-0006)
FEDERAL AUDIT EXECUTIVE COUNCIL IT SUBCOMMITTEE FISMA MATURITY MODEL
DEVELOPMENT
HUD OIG continued its collaboration with CIGIE and the Federal Audit Executive Council IT Subcommittee for
the third year in a row by participating in the ongoing development of the maturity models and metric updates for
the FISMA IG metrics. The maturity models and revised reporting approach allow IGs to measure and report on
Federal agency cybersecurity programs more consistently. HUD OIG was one of only a handful of IG offices to
maintain an ongoing volunteer status to help develop and update the metrics. To see the most recent FISMA
metrics report, visit https://www.dhs.gov/publication/fy17-fisma-documents.
20
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 6 – 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 500 hours to reviewing 102 issuances. The draft directives consisted of 69
notices, 5 mortgagee letters, and 28 other directives. OIG provided comments on 37 (or 36 percent) of the
issuances and nonconcurred on 3 but lifted one nonconcurrence. Of the 28 other directives, OIG reviewed 3 final
rules, 16 handbooks-guidebooks, 6 congressional status and research reports, 1 strategic plan, and 2 reference-
guidance documents. On the three final rules, OIG had a comment on one and no position on two. Below is a
summary of selected reviews for this 6-month period.
NOTICES, POLICY ISSUANCES, AND FINAL RULES
SINGLE-FAMILY HOUSING
Foreclosure moratorium – On October 20, 2017, the U.S. Department of Housing and Urban Development (HUD)
published Mortgagee Letter 2017-15, which extends its initial 90-day foreclosure moratorium for Hurricanes
Harvey, Irma, and Maria for an additional 90-day period as such period relates to each individual Presidentially
Declared Major Disaster Area’s (PDMDA) declaration date. This extension was in force until February 21, 2018,
for Hurricane Harvey; March 9, 2018, for Hurricane Irma; and March 19, 2018, for Hurricane Maria. The extension
of these three initial moratoriums applies to the initiation of foreclosures and foreclosures already in process.
Property Assessed Clean Energy loans – On December 7, 2017, HUD published Mortgagee Letter 2017-17,
which revises its policies with respect to the insurance of mortgages on properties encumbered with Property
Assessed Clean Energy (PACE) obligations. Specifically, properties encumbered with a PACE obligation will no
longer be eligible for Federal Housing Administration (FHA)-insured forward mortgages.
Foreclosure avoidance – On December 20, 2017, HUD published a guide to help struggling homeowners avoid
foreclosure as part of a public-private partnership between Federal agencies and industry partners. The guide
provides homeowners with information on the critical first steps to take if they are at risk of missing a mortgage
payment or facing foreclosure. OIG reviewed the draft publication during the last semiannual reporting period and
provided a suggestion to define the terms “delinquent” and “default.” Further, OIG suggested that additional details
be provided in the section explaining what happens when the mortgage payment is late. HUD implemented the
suggestions.
Loss mitigation in PDMDAs – On February 22, 2018, HUD published Mortgagee Letter 2018-01, which amends
the loss mitigation policies for disaster-affected borrowers located in the PDMDAs of Louisiana-Hurricane Harvey
(DR-4345); Texas-Hurricane Harvey (DR-4332); Florida-Hurricane Irma (DR-4337); Georgia-Hurricane Irma (DR-
4338); Puerto Rico-Hurricane Irma (DR-4336); South Carolina-Hurricane Irma (DR-4346); the Virgin Islands-
Hurricane Irma (DR-4335); Puerto Rico-Hurricane Maria (DR-4339); the Virgin Islands-Hurricane Maria (DR-
4340); California wildfires (DR-4344); or California wildfires, flooding, mud flows, and debris flows (FEMA-DR-
4353). The mortgagee letter eases the requirements for loss mitigation services to help affected borrowers stay in
their homes, while reducing losses to FHA’s Mutual Mortgage Insurance fund.
Foreclosure moratorium – On March 1, 2018, HUD published Mortgagee Letter 2018-02, which extends its
current 180-day foreclosure moratorium for Hurricane Maria-impacted areas for an additional 60 days. This
21
SEMIANNUAL REPORT TO CONGRESS
extension period relates to Hurricane Maria’s PDMDAs’ declaration date. This extension applies only to the
individual assistance areas within the PDMDAs associated with Puerto Rico and the U.S. Virgin Islands.
PUBLIC AND INDIAN HOUSING
Relief from HUD requirements available to PHAs to assist with recovery and relief efforts on behalf of
families affected by Hurricanes Harvey, Irma, Maria, etc. – On October 6, 2017, HUD published a notice
advising the public that HUD, as a result of Presidential Major Disaster Declarations (MDD) following Hurricanes
Harvey, Irma, and Maria, has established an expedited process for the review of requests for relief from HUD
regulatory and administrative requirements for public housing agencies (PHA) and tribes or tribally designated
housing entities (TDHE) located in Texas, the U.S. Virgin Islands, Puerto Rico, Florida, and Georgia. Specifically,
these PHAs, tribes, and TDHEs may request waivers of HUD requirements and receive an expedited review of such
requests. In addition, this notice advises that PHAs, tribes, and TDHEs located in areas covered by MDDs issued
during the remainder of 2017 may use the flexibilities and expedited waiver process set out by this notice.
Sections 184 and 184-A Loan Guarantee Program – On January 31, 2018, HUD published a notice informing the
public that HUD is seeking approval from Office of Management and Budget for information collection regarding
the Sections 184 and 184-A Loan Guarantee Program. HUD’s Office of Native American Programs (ONAP) is
developing a system called the Loan Origination System (ONAP-LOS) to support the Section 184 Indian Home
Loan Guarantee Program. ONAP-LOS will deliver automated processes for case registration, reservation of funds,
issuance of loan guarantee certificates, and lender registration and recertification. This system will capture and
maintain data across the following major information categories: lenders, borrowers, properties, and loans. The
enhanced enterprise solution will provide participating lender partners with clarity and transparency regarding the
ONAP enforcement efforts and will expand access to credit for eligible borrowers. ONAP designed the new system
to reduce the number of forms needed and the time to prepare the forms while ensuring the highest level of security
and privacy protections. ONAP-LOS is available to all lenders with direct guarantee approval upon completion of
scheduled training.
MULTIFAMILY HOUSING
Streamlining administrative regulations for multifamily housing programs and implementing family income
reviews under the Fixing America’s Surface Transportation Act – On December 12, 2017, HUD published
Federal Register Notice FR-5743-I-04, which amends the regulatory language to implement the Fixing America’s
Surface Transportation (FAST) Act and to align the current regulatory flexibilities with those provided in the FAST
Act. In addition, this interim final rule seeks to extend to certain multifamily housing programs some of the
streamlining changes that were proposed for and made only to the Housing Choice Voucher and public housing
programs. HUD published a final rule on March 8, 2016, containing changes to streamline regulatory requirements
pertaining to certain elements of the Housing Choice Voucher, public housing, and various multifamily housing
rental assistance programs. The goal of the final rule was to reduce the administrative burden on PHAs and
multifamily housing owners, including changes pertaining to annual income reviews in the Housing Choice
Voucher, public housing, and Section 8 project-based rental assistance programs for families with sources of fixed
income.
Refinancing of pre-1974 Section 202 direct loans – On March 22, 2018, HUD issued Housing Notice H 2018-02,
which supplements Housing Notice H 2013-17, providing additional guidance to owners of pre-1974 Section 202
direct loan properties that have the option of refinancing the Section 202 direct loan for the purposes of reducing the
22
SEMIANNUAL REPORT TO CONGRESS
interest rate or making capital improvements. To prevent the displacement of unassisted, low-income elderly
tenants following the refinancing of a pre-1974 Section 202 direct loan, HUD is authorized to provide rental
assistance under the Housing Choice Voucher program or project-based rental assistance under a senior preservation
rental assistance contract.
COMMUNITY PLANNING AND DEVELOPMENT
CDBG-assisted properties – On September 29, 2017, OIG issued Audit Report 2016-PH-0001, which found that
HUD could improve its oversight of the disposition of real properties assisted with Community Development Block
Grant (CDBG) funds. The report recommended that HUD issue guidance reminding grantees of the requirements to
report address information for assisted properties and calculate and report program income related to the disposition
of these properties. It also recommended that HUD develop a process to ensure that grantees properly report the
addresses of assisted properties in its Integrated Disbursement and Information System and properly calculate and
report program income from the disposition of the sale of these properties regularly. HUD responded that it already
had such guidance in development and agreed to modify the guidance to incorporate OIG’s recommendations. On
October 18, 2017, HUD published Notice CPD-17-09, Management of Community Development Block Grant
Assisted Real Property. The notice addressed OIG’s recommendations.
Disaster funding – On December 27, 2017, HUD published a notice allocating $57.8 million in CDBG Disaster
Recovery (CDBG-DR) funds to the State of Texas in response to Hurricane Harvey. This allocation was made
under the requirements of Public Law 115-31. The allocation was the amount remaining from the $400 million
appropriated under Public Law 115-13, which specified that funds allocated for disasters in 2017 or later be
allocated and used under the same authority and conditions as those applicable to CDBG-DR funds appropriated by
Public Law 114-223. Public Law 115-31 provides that the funds remain available until spent and became effective
January 2018.
ADMINISTRATIVE-OTHER
Establishment of performance review boards – On November 21, 2017, HUD published Federal Register Notice
FR 6065-N-01, which established two performance review boards to make recommendations to the appointing
authority on the performance of its senior executives. One board has the responsibility to review career Senior
Executive Service (SES) performance, while the other board has a responsibility to review noncareer SES
performance.
Withdrawal of proposed rules – On December 22, 2017, HUD published Federal Notice FR-6071-N-01, in which,
as part of the efforts of HUD’s Regulatory Reform Task Force, HUD informs the public that it has determined not
to pursue five proposed rules published in the Federal Register and as a result, is withdrawing the rules from HUD’s
Unified Agenda of Regulatory and Deregulatory Actions. HUD is taking this action consistent with Executive
Order 13771, entitled “Reducing Regulation and Controlling Regulatory Costs,” and Executive Order 13777,
entitled “Enforcing the Regulatory Reform Agenda,” which, among other things, require that the cost of planned
regulations be prudently managed and controlled.
Amendment of Freedom of Information Act – On February 21, 2018, HUD issued Federal Register Notice FR-
6048-F-01, which amends the Freedom of Information Act (FOIA) regulations for its OIG to align with HUD’s
FOIA regulations, to implement the FOIA Improvement Act of 2016, and to explain current OIG policies and
practices with respect to FOIA.
23
SEMIANNUAL REPORT TO CONGRESS
CONSUMER ADVISORIES AND ALERTS
As a way to assist in fraud prevention, OIG issues consumer advisories and alerts, as well as industry advisories
and bulletins, on its 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 and consumers are well informed about 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 multifamily industry advisory and one consumer fraud alert, which are summarized below.
4 Keys for Multifamily Owners’ Oversight of Management Agent Activities (issued October 6, 2017)—Owners
of HUD-assisted or -insured properties should have a system of quality control over project operations, especially if
they are absentee owners that leave daily operations to a management agent. Owners must be aware of the risks
they face from the errors and frauds that may be committed by their agents. This bulletin emphasizes owners’
responsibility for asset management and ensuring that project funds are spent properly and distributions do not
violate HUD rules. It also offers best practices for avoiding management agent violations and the potential
consequences of not handling them appropriately. The bulletin provides examples of consequences that have
occurred when owners failed to provide oversight to their management agents.
Fraud Alert: Fake Hotline Callback (issued October 24, 2017)—HUD OIG learned that HUD housing
discrimination hotline numbers are being used as part of a telephone spoofing scam targeting individuals throughout
the country. These scammers represent themselves as HUD hotline employees and can alter the appearance of the
caller ID to make it seem as if the call is coming from a HUD hotline number. The perpetrator may use various
tactics to obtain or verify the victim’s personal information, which can then be used to steal money from an
individual’s bank account or for other fraudulent activity. HUD OIG takes this matter seriously. OIG encouraged
the public to remain vigilant, protect their personal information, and guard against providing personal information
during calls that purport to be from any HUD or HUD OIG hotline telephone number. OIG also reminded the
public that it is still safe to call the HUD and HUD OIG hotlines to submit a request or report an incident.
24
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 7 – REPORT RESOLUTION
In the 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 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 reports issued before the start of the period that do not have management decisions, have
significantly revised management decisions, or have significant management decisions with which OIG disagrees.
It also has a status report on HUD’s implementation of the Federal Financial Management Improvement Act of
1996 (FFMIA). In addition to this chapter on resolution, see appendix 3, table B, “Significant 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, 2018
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. OIG 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). 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 Federal 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 from 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 Office of Chief Information Officer (OCIO), plans were being developed to address
the recommendation. However, PIH did not provide a management decision, and it was difficult to determine when
or whether these new systems would be implemented. OIG followed up with PIH and OCIO on September 19,
2017, about entering a management decision to reflect current plans, but as of September 30, 2017, OIG had not
received a response. On February 21, 2018, OIG followed up with PIH again regarding this recommendation, but
no management decision had been submitted as of March 31, 2018. (Audit Report: 2014-FO-0003)
25
SEMIANNUAL REPORT TO CONGRESS
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, 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 the prevention, detection,
and recovery of improper payments caused by rent component and billing errors, which are root causes identified by
HUD’s contractor studies.
The OIG report included several recommendations that required the Office of Chief Financial Officer (OCFO) to
work with PIH and the Office of Multifamily Housing Programs to ensure sufficient and accurate IPERA reporting
in its agency financial report (AFR). The report also recommended that OCFO conduct a current billing study and
if not performed annually in future years, report the reason for this in the AFR and update the previous study to
reflect program and inflationary changes. Similarly, the report recommended a study to assess improper payments
arising from the Housing Choice Voucher program. Finally, the report recommended that OCFO report on
multifamily, public housing, and Section 8 program improper payment rates separately in the AFRs.
Initially, OCFO disagreed with several of OIG’s recommendations, citing (1) funding issues in conducting current
billing studies, which it believes do not produce tangible results; (2) disagreement on the need to determine whether
improper payments exist as the result of changes in the funding of the Housing Choice Voucher program; and (3)
management’s position that formal policies and procedures for the IPERA reporting process are not necessary. OIG
generally disagreed with OCFO’s management decisions because they disregarded IPERA reporting requirements
and Office of Management and Budget (OMB) guidance and the management decisions did not reflect OCFO’s
responsibility as the lead official for directing and overseeing HUD’s actions to address improper payments.
OIG sent a referral memorandum to the Acting Chief Financial Officer on September 23, 2014, regarding its
disagreement, along with an untimely referral memorandum for two recommendations that had not had management
decisions entered. Following OIG’s memorandum, OCFO entered management decisions for seven of nine
recommendations, of which OIG agreed with only one. The remaining six recommendations, along with two
recommendations for which management had not yet entered a management decision, were referred to the Deputy
Secretary on March 31, 2015. OIG briefed the Deputy Secretary’s staff on the subject report on April 20, 2015, and
in August 2015, meetings were held with OCFO to discuss what was needed to come to agreement. As of March
31, 2018, management decisions had been agreed upon for all recommendations except two.
OCFO submitted a new management decision for one of these recommendations on March 15, 2018. OIG
disagreed with the management decision because OCFO stated that it was performing a program reset and this
recommendation was based on estimating improper payments using a previous methodology. Additionally, OCFO
stated that HUD does not make payments to tenants. The proposed management decision also requested that the
recommendation be closed. OIG disagreed with the proposed management decision because it is too vague and
does not reflect how the recommendation will be addressed in the program reset. Further, it does not acknowledge
that one of its supplemental measures was to reduce improper payments made to deceased single-member
households. While the program is being reset and new supplemental measures may be developed, OIG cannot agree
to a proposed management decision for those reasons.
OCFO submitted several proposed management decisions for the other recommendation on September 30, 2014,
March 31, 2016, March 30, 2017, and March 14, 2018. Originally, HUD disagreed with OIG’s recommendation
26
SEMIANNUAL REPORT TO CONGRESS
and refused to provide a corrective action plan, which would ensure that the true error rate in certain programs was
not masked when reported in the AFR. Most recently, OCFO decided to perform a program reset, which is
expected to be implemented with fiscal year 2018 AFR reporting. OCFO has attempted to use the program reset as
a basis for its proposed management decisions. However, OIG continued to disagree with the proposed
management decisions because the plan and evidence to provide closure were too vague. OCFO has been unable to
provide sufficient details in its proposed management decision to describe how the recommendation will be
implemented, nor has it been able to provide sufficient justification for a final action target date of January 30, 2020.
(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 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 486 loans from
January 2004 to February 2014 that had enforceable indemnification agreements and losses to HUD, but lenders
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
only the final default date for billing. 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 into another FHA-insured loan. As a result, HUD incurred losses of $373,228 for 5 loans, and
16 loans had a potential loss to HUD of approximately $1 million. The remaining 43 loans were either terminated
or did not go into delinquency before the indemnification agreement expired, or the agreement did not state that it
would extend to loans that were streamline refinanced.
OIG rejected three management decisions proposed by the Offices of Single Family Housing and Finance and
Budget because they did not follow the plain language explicitly stated in signed indemnification agreements. The
Offices of Single Family Housing and Finance and Budget disagreed with OIG’s determination that HUD should
have billed lenders for FHA loans that either were in default or went into default during the indemnification
agreement period.
OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on January 8,
2015. OIG met with the HUD Offices of General Counsel, Housing, Single Family Housing, and Finance and
Budget on January 30, 2015. The meeting ended in disagreement; however, the HUD Office of General Counsel
and OIG Office of Legal Counsel continued discussions.
Single Family Housing received two legal opinions from HUD’s Office of General Counsel, dated January 26,
2015, and February 24, 2015, respectively. Combined, the legal opinions support Single Family Housing’s and
Finance and Budget’s position that they have collected in a manner consistent with longstanding policy that
emphasized the definition of the “date of default.” Single Family Housing maintains that its collection practice is
27
SEMIANNUAL REPORT TO CONGRESS
consistent with FHA’s regulatory definition of “date of default” found in 24 CFR (Code of Federal Regulations)
203.331, which refers to the first “uncorrected” failure and the first failure to pay that is not satisfied by later
payments.
OIG disagrees and believes that Single Family Housing and Finance and Budget have adopted a collection practice
not supported by the plain language of the indemnification agreements or required by HUD regulations. Based on
the plain language explicitly stated in signed indemnification agreements, OIG believes that the indemnification
agreement should be enforced for any loan that “goes into default” during the indemnification agreement term,
regardless of whether the loan emerged from a default status after the agreement expired. In response to HUD’s
legal opinions, OIG received its own legal opinion from the OIG Office of Legal Counsel that supports OIG’s
position.
OIG held discussions with HUD’s Offices of General Counsel, Single Family Housing, and Finance and Budget
regarding the recommendations in question, but no agreeable management decisions were reached. On March 31,
2015, OIG referred the recommendations to the Deputy Secretary for a decision and as of March 31, 2018, was
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 and (2) take steps to
strengthen Ginnie Mae’s financial management operations.
Initially, OIG did not reach consensus with Ginnie Mae on the necessary corrective actions for 9 of the 20 audit
recommendations and referred the matter to the Deputy Secretary for a decision on September 21, 2015. In August
2016, OIG reached an agreement on three of nine management decisions that it previously rejected. As a result,
there are now six audit recommendations without a management decision. OIG’s audit recommendations request
that HUD’s Chief Financial Officer provide oversight of Ginnie Mae’s financial management operations, but
HUD’s corrective action plan to provide the oversight of Ginnie Mae lacked specificity. As of March 31, 2018, the
Deputy Secretary had not provided a decision on the six recommendations referred. (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. Out of 11 audit recommendations, OIG did not reach consensus on the necessary corrective actions for 3
of these recommendations.
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.
28
SEMIANNUAL REPORT TO CONGRESS
For the remaining two information technology (IT)-related audit recommendations, Ginnie Mae’s master
subservicer (MSS) disagreed with one audit recommendation. The MSS believes that it has the proper segregation
of duties for cash processes, payment processing, and reconciliation of all financial activities. However, OIG
disagrees and maintains its original position that segregation of duties means that no single person should have
control of two or more conflicting functions within a transaction or operation. Further, 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 OIG’s (1) finding “that management had an ineffective monitoring tool in place”
and (2) 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 Deputy
Secretary on March 6, 2017. As of March 31, 2018, OIG was awaiting a decision on the remaining three
recommendations referred to the Deputy Secretary. (Audit Report: 2016-FO-0001)
ADDITIONAL DETAILS TO SUPPLEMENT OUR FISCAL YEARS 2015 AND 2014
(RESTATED) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FINANCIAL
STATEMENT AUDIT, ISSUE DATE: NOVEMBER 18, 2015
HUD OIG audited HUD’s consolidated financial statements and reported on deficiencies, including the areas of (1)
accounting for liabilities for PIH programs in accordance with GAAP and FFMIA and (2) HUD’s financial
management governance structure and internal controls over financial reporting. HUD disagreed with several
recommendations made in each of these areas, and as a result, OIG first referred them to the Principal Deputy
Assistant Secretary for Public and Indian Housing and the Deputy Chief Financial Officer on April 21, 2016. OIG
received a response to 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. OIG had received two new proposals as of March 31, 2018, but could not agree with them due
to an insufficient proposal that was not clear on how to address the recommendations and insufficient evidence to
support closure.
Accounting for Liabilities for PIH Programs in Accordance With GAAP and FFMIA
OIG reported that HUD does not recognize the accounts payables 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. OIG believes
29
SEMIANNUAL REPORT TO CONGRESS
that this recommendation cannot be resolved until PIH’s cash management process is automated, which is discussed
in Audit Report 2014-FO-0003 (discussed above).
Regarding HUD’s financial management governance structure and internal controls over financial reporting, OIG
reported on deficiencies found in the financial governance and financial reporting areas. OIG could not accept the
proposed management decisions for eight recommendations because OCFO (1) requested final action target dates
that were too far into the future, (2) claimed that 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, and April
6, 2017. 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. New proposals were submitted for two recommendations on January 2 and
February 22, 2018, but were rejected because (1) the proposed management decision did not sufficiently address the
recommendation and (2) there was insufficient evidence for closure to support implementation of the planned
management decision. As of March 31, 2018, OIG had received no new proposals for the remaining outstanding
recommendations. (Audit Report: 2016-FO-0003)
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 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 Deputy Assistant Secretary for Grant Programs proposed a management decision in December 2016. However,
after discussions with HUD, OIG rejected the proposed management decision because it did not specifically 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 decision as an acceptable alternative action, OIG requested
clarification and documentation from HUD. However, HUD did not provide the requested information and
documentation, and OIG referred this recommendation to the Assistant Secretary for Community Planning and
Development on March 30, 2017. HUD proposed another management decision in April 2017; however, OIG
rejected it because it also did not directly address the intent of the recommendation. OIG referred this
30
SEMIANNUAL REPORT TO CONGRESS
recommendation to the Deputy Secretary on August 23, 2017, and as of March 31, 2018, had not received a
decision. (Audit Report: 2016-PH-0001)
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’s certifications were accurate and supported. OIG 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, and the Secretary’s certifications did not meet the intent of the Disaster Relief
Appropriations Act of 2013. 5
The report included five recommendations for the Deputy Assistant Secretary for Grant Programs. The 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 Deputy
Secretary in her decision regarding resolution of recommendations from OIG’s audit of New Jersey’s Sandy
Integrated Recovery Operations and Management System. 6 In the January 10, 2017, decision, the Deputy Secretary
wrote that the State certified that its procurement standards were equivalent to the Federal 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 disagreed 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
5
Public Law 113-2, dated January 29, 2013
6
2015-PH-1003, dated June 4, 2015
31
SEMIANNUAL REPORT TO CONGRESS
audit report. OIG referred these recommendations to the Deputy Secretary on March 31, 2017, and as of March 31,
2018, had not received a decision. (Audit Report: 2016-PH-0005)
AUDIT OF FISCAL YEARS 2016 AND 2015 (RESTATED) FINANCIAL STATEMENTS AUDIT,
ISSUE DATE: NOVEMBER 14, 2016
HUD OIG audited Ginnie Mae’s fiscal year 2016 stand-alone financial statements. OIG conducted this audit in
accordance with the Chief Financial Officers Act of 1990 as amended. Of 19 recommendations issued, OIG did not
reach consensus on the necessary corrective actions for 2 of these recommendations.
The first disagreement was associated with OIG’s recommendation for Ginnie Mae to reverse the accounting
writeoff of the advances account. In conjunction with the subledger data solution, Ginnie Mae needs to conduct a
proper analysis to determine whether any of the $248 million balances in the advances accounts are collectible.
Ginnie Mae believed that it could not reverse the $248 million residual balance in the advances account. Based on
its analysis, Ginnie Mae explained that this residual balance should have been charged off by the realized losses
incurred on liquidated loans from fiscal years 2009 through 2016 but was not. Therefore, according to Ginnie Mae,
this residual balance was no longer supportable or collectible after the sale of the mortgage servicing rights.
Additionally, Ginnie Mae stated that it cannot pursue additional collection from its MSSes based on the terms of the
settlement with them. OIG has concerns about the reliability of Ginnie Mae’s analysis because when OIG
attempted to review Ginnie Mae’s support for the advances writeoff, it was unable to validate the accuracy of the
information used in Ginnie Mae’s analysis. For example, of $248 million, OIG could not validate the $180 million
in realized losses because this information was based on rough estimates ($50 million) and MSSes’ accounting
reports that OIG considered unauditable ($130 million). Ginnie Mae could not explain the other $68 million.
Further, OIG’s audit showed that the $248 million residual balance may contain advances related to unliquidated
nonpooled loans. Specifically, in fiscal year 2016, Ginnie Mae informed OIG that all advance balances associated
with liquidated loans were removed from the advances account and attached (carried forward) to the liquidated
loans balance. However, in fiscal year 2017, OIG learned that this was not the case. According to Ginnie Mae, the
advance balances associated with these loans were not carried forward. Therefore, there are legitimate collection
action claims that Ginnie Mae can pursue on these unliquidated nonpooled loans.
The second disagreement was related to OIG’s recommendation for Ginnie Mae to appropriately exclude the loan
impairment allowance on other indebtedness instead of reporting it as part of the loan impairment allowance in its
mortgage held for investment (MHI) account. Ginnie Mae partially agreed with OIG regarding the MHI allowance
issue. Ginnie Mae agreed that it should have excluded from the MHI allowance account the allowance portion
related to the reimbursable preforeclosure expense but not the nonreimbursable preforeclosure expense portion.
According to Ginnie Mae, it included the nonreimbursable preforeclosure expense in the MHI allowance calculation
because the expense was necessary to collect proceeds of the MHI loans. Ginnie Mae cited Accounting Standards
Codification (ASC) 450-20 and the Interagency Policy Statement on the allowance for loan and lease losses as the
bases for its conclusion with respect to the issue of nonreimbursable preforeclosure expense. Overall, Ginnie Mae
concluded that in estimating the MHI allowance, the expected-anticipated recoveries and anticipated recoveries
from insurance, as well as the expected but not yet incurred preforeclosure costs, will need to be included in
determining the collectability of cash flows from these loans. Regarding nonreimbursable preforeclosure expenses,
OIG does not agree with Ginnie Mae that its inclusion in the ASC 450-20 or ASC 310-10 components of the MHI
allowance was in accordance with GAAP.
Both disagreements were referred to the Deputy Secretary on August 24, 2017. As of March 31, 2018, OIG was
awaiting a decision. (Audit Report: 2017-FO-0001)
32
SEMIANNUAL REPORT TO CONGRESS
ADDITIONAL DETAILS TO SUPPLEMENT OUR FISCAL YEARS 2016 AND 2015
(RESTATED) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FINANCIAL
STATEMENT AUDIT, ISSUE DATE: NOVEMBER 15, 2016
HUD OIG audited HUD’s consolidated financial statements and reported on deficiencies in the areas of (1) HUD’s
loan guarantee balances; (2) HUD’s accounting for its property, plant, and equipment; (3) significant reconciliations
not completed in a timely manner; (4) HUD’s lack of a policy and procedure framework; and (5) invalid obligations
that remained on HUD’s books. OIG issued several referrals regarding these recommendations to HUD senior
management for untimeliness and disagreement between May 31 and July 24, 2017. For recommendations
regarding HUD’s accounting for property, plant, and equipment, the Office of Administration needs to work with
OCFO to develop an adequate management decision for one recommendation that remained unaddressed as of
March 31, 2018. For the recommendation regarding HUD’s loan guarantee balances, OIG rejected HUD’s initial
management decision on April 24, 2017, as it did not contain adequate evidence to provide closure. As of March
31, 2018, HUD had not submitted a revised management decision. For significant reconciliations not completed in
a timely manner, OCFO submitted management decisions on September 5, 2017, but OIG did not agree with the
evidence to provide closure. As of March 31, 2018, OIG had not received new proposed management decisions for
the remaining recommendations. (Audit Report: 2017-FO-0003)
HUD’S TRANSITION TO A FEDERAL SHARED SERVICE PROVIDER FAILED TO MEET
EXPECTATIONS, ISSUE DATE: FEBRUARY 1, 2017
HUD OIG audited 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.
HUD’s transition to a Federal shared service provider (FSSP) did not significantly improve the handling of its
financial management transactions. Weaknesses identified with the controls over NCIS and PRISM™ contributed
to this issue. A year after the transition, HUD had inaccurate data resulting from the conversions and continued to
execute programmatic transactions using its legacy applications. The transition increased the number of batch
processes required to record programmatic financial transactions and introduced manual processes and delays for
budget and procurement transactions. In addition, the interface program that allowed for and translated the financial
transactions between HUD and the Administrative Resource Center (ARC) was not covered under HUD’s disaster
recovery plan. These conditions occurred because of funding shortfalls as well as HUD’s decisions to (1) separate
phase 1 of the project into smaller releases, (2) move forward with the implementation despite unresolved issues,
and (3) terminate the project before its completion. These system issues and limitations inhibited HUD’s ability to
produce reliable, useful, and timely financial information.
While HUD considered its New Core Project implementation successful, it acknowledged that not all of the
originally planned capabilities were deployed. HUD needs to pursue new process improvement projects to address
the functionalities that were not achieved with phase 1 of New Core, which will require additional time and funding.
HUD will also need to pursue process improvements for the functionality planned in the future phases of the
project. In April 2016, HUD ended the New Core Project and the transition to an FSSP after spending $96.3
million; however, the transition did not allow HUD to decommission all of the applications it wanted to or achieve
the planned cost savings.
33
SEMIANNUAL REPORT TO CONGRESS
HUD OIG made two recommendations in this audit that were directed to the Deputy Secretary; specifically, (1)
reevaluate the functionality initially planned under the New Core Project and determine how the agency will
implement the functionality needed for budget formulation, cost accounting, property management, and the
consolidation of HUD’s financial statements and (2) take an active role in the implementation of financial
management improvement initiatives-projects moving forward to ensure collaboration within HUD and that
adequate funding and governance are in place.
OIG had not received a response or a proposed management decision related to the two recommendations. OIG
referred these recommendations to the Deputy Secretary on June 6, 2017. As of March 31, 2018, HUD had not
submitted management decisions for these recommendations. (Audit Report: 2017-DP-0001)
HUD’S OFFICE OF COMMUNITY PLANNING AND DEVELOPMENT DID NOT
APPROPRIATELY ASSESS STATE CDBG GRANTEES’ RISK TO THE INTEGRITY OF CPD
PROGRAMS OR ADEQUATELY MONITOR ITS GRANTEES, ISSUE DATE: JULY 10, 2017
HUD OIG audited HUD’s Office of Community Planning and Development’s (CPD) risk assessment and
monitoring of its State CDBG recipients. OIG’s reporting objective was to determine whether CPD appropriately
assessed State CDBG grantees’ risk to the integrity of CPD programs and adequately monitored its grantees.
OIG found that CPD did not appropriately assess State CDBG grantees’ risk to the integrity of CPD programs or
adequately monitor its grantees. This condition occurred because its field office staff did not follow CPD risk
assessment and monitoring requirements and field office management responsible for reviewing staff performance
did not correct the noncompliance of staff performing these responsibilities. In addition, the headquarters desk
officer review function was administrative in focus and failed to note noncompliance. As a result, CPD could not
be assured that its field offices correctly identified the high-risk grantees or conducted adequate monitoring to
mitigate risk to the integrity of CPD programs.
The report included five recommendations, including recommendations to (1) develop and implement a policy
requiring field offices to rate grantees of at least medium risk that have not been monitored in their respective
program area within the last 3 years on factors that require assessments of capacity, program complexity, and
monitoring findings resulting in repayment or grant reductions; (2) develop and implement guidance for field
offices to maintain supporting documentation in their official files with an adequate explanation of procedures
performed to verify risk scores assigned, which could include upgrading CPD’s systems to allow for the attachment
of supporting documentation for risk analyses; and (3) update monitoring exhibits to require staff to document
procedures performed, provide sufficient explanation to verify procedures performed and conclusions drawn, and
reference appropriate supporting documentation.
CPD provided proposed management decisions on October 19, 2017, for all five recommendations. OIG found that
the response did not adequately address the three recommendations discussed above. OIG advised HUD of its
concerns on October 27, 2017, but was unable to reach agreement within 120 days.
OIG referred the three recommendations without management decisions to the Assistant Secretary for Community
Planning and Development on December 19, 2017. Following OIG’s referral, CPD submitted proposed
management decisions, along with additional documentation, on March 30, 2018. OIG is reviewing the proposed
management decisions and documentation. (Audit Report: 2017-FW-0001)
34
SEMIANNUAL REPORT TO CONGRESS
HUD NEEDS TO CLARIFY WHETHER ILLEGAL-UNDOCUMENTED ALIENS ARE ELIGIBLE
FOR ASSISTANCE UNDER THE HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS
PROGRAM, ISSUE DATE: AUGUST 21, 2017
HUD OIG assisted the U.S. Attorney’s Office, Southern District of New York, in a civil investigation related to
illegal-undocumented aliens receiving Housing Opportunities for Persons With AIDS (HOPWA) assistance. The
HOPWA program at 24 CFR (Code of Federal Regulations) Part 574 is a HUD CPD grant program that provides
formula allocations and competitively awarded grants to eligible States, cities, and nonprofit organizations to
provide housing assistance and related supportive services to meet the housing needs of low-income persons and
their families living with HIV-AIDS.
Noncitizen or alien ineligibility for federally funded programs is a recurring issue in Congress. Two laws primarily
govern noncitizen or alien eligibility for housing programs: Title IV of the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 - 8 U.S.C. (United States Code 1611) (PRWORA) and Section 214 of the
Housing and Community Development Act of 1980 as amended. PRWORA states that aliens, who are not qualified
aliens, are not eligible for “Federal public benefits,” a term defined in the law to include public and assisted
housing. Under this statute, illegal aliens do not meet the definition of qualified aliens and as a result, are ineligible
for Federal public benefits. However, PRWORA exempted certain Federal public benefits from the alien eligibility
restrictions, including programs, services, or assistance (such as soup kitchens, crisis counseling and intervention,
and short-term shelters) specified by the Attorney General after consulting with the appropriate Federal agency.
The issue of nonqualified aliens receiving assistance under HOPWA or other homeless assistance programs has not
been clearly addressed in HUD regulations and guidance. Specifically, OIG has not been able to identify clear
guidance as to whether programs that are funded through HUD’s community development programs and
administered through nonprofits (such as HOPWA) have been clearly designated as a Federal public benefit. This
designation is important because aliens, who have not been qualified to be considered “qualified aliens” under 8
U.S.C. 1611, are not eligible for Federal public benefits. Also, it is not clear whether homeless assistance grants are
considered a Federal public benefit. There is a discord between “housing assistance,” which is considered a Federal
public benefit and is limited to qualified aliens, and “homeless assistance.” If homeless assistance grants were
considered a Federal public benefit, HOPWA would not be available to illegal-undocumented aliens. However,
because it is unclear whether such grants are considered Federal public benefits, there is a potential for unqualified
aliens to fall under the exceptions in 8 U.S.C. 1611 (which include emergency type programs) and qualify to receive
benefits.
OIG recommended that HUD CPD (1) clarify whether assistance provided under its community development
programs, such as HOPWA, are considered Federal public benefits and are, therefore, subject to PRWORA’s
noncitizen eligibility restrictions and (2) consult with the Office of the Attorney General to establish whether
HOPWA and other homeless assistance programs are a Federal public benefit that meets the definition of
“providing assistance for the protection of life or safety” and are, therefore, exempt from PRWORA noncitizen
eligibility restrictions.
HUD CPD submitted management decisions for both recommendations on December 18, 2017, but the management
decisions stated that CPD was not able to take action on the recommendations, and HUD OIG rejected them. This
issue was referred to the Assistant Secretary on December 19, 2017. In January 2018, OIG attempted to meet with
HUD regarding the recommendations but was unsuccessful. The issue was referred to the Deputy Secretary on
February 27, 2018. As of March 31, 2018, OIG was awaiting a decision from the Deputy Secretary.
(Memorandum: 2017-CF-0801)
35
SEMIANNUAL REPORT TO CONGRESS
HUD DID NOT PROVIDE SUFFICIENT GUIDANCE AND OVERSIGHT TO ENSURE THAT
STATE DISASTER GRANTEES FOLLOWED PROFICIENT PROCUREMENT PROCESSES,
ISSUE DATE: SEPTEMBER 22, 2017
HUD OIG audited HUD’s oversight of disaster grantee procurement processes to determine whether HUD provided
sufficient guidance and oversight to ensure that disaster grantees followed proficient procurement processes when
purchasing products and services. OIG found that HUD did not provide sufficient guidance and oversight to ensure
that State disaster grantees followed proficient procurement processes. Although HUD agreed to correct
procurement issues identified in a previous audit, 7 OIG has since issued 17 audit reports on disaster grantees with
questioned costs totaling nearly $391.7 million related to procurement. These conditions occurred because HUD
was so focused on providing maximum feasible deference to State grantees that it was unable to ensure that grantees
followed proficient procurement processes. HUD also believed that State grantees were not required to have
procurement standards that aligned with each of the Federal procurement standards. As a result, HUD lacked
assurance that State grantees purchased necessary products and services competitively at fair and reasonable prices.
OIG made four recommendations to the Deputy Assistant Secretary for Grant Programs. The Deputy Assistant
Secretary for Grant Programs proposed corrective actions on November 24, 2017. For two of the recommendations,
the Deputy Assistant Secretary for Grant Programs stated that the matter of the applicability of the Federal
procurement standards at 2 CFR 200.318 through 200.326 8 (or 24 CFR 85.36(b) through (i)) and the requirements
of the Federal Register notices on procurement was closed by the Deputy Secretary in her decision regarding
resolution of recommendations from OIG’s audit of New Jersey’s Sandy Integrated Recovery Operations and
Management System. 9 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 Deputy Assistant Secretary for Grant Programs
also noted that the Senate Appropriations Committee report on fiscal year 2018 U.S. Department of Transportation-
HUD appropriations legislation 10 addressed this issue. The report stated that the Committee believed that as long as
HUD provided consistent and rigorous oversight of the procurement processes employed by the State and local
recipients, an equivalent, though not identical, procurement standard that upholds the principles of fair and open
competition can prevent Federal dollars appropriated for disaster recovery from being spent irresponsibly. The
Deputy Assistant Secretary for Grant Programs further stated that HUD clarified its definition of proficient
procurement processes and policies when it published subsequent Federal Register notices allocating funds under
Public Laws 114-113, 114-223, and 114-254. Based on this information, the Deputy Assistant Secretary believed it
was appropriate to close these two recommendations.
OIG disagrees with the Deputy Assistant Secretary’s request to close these two recommendations 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 continues to assert that the procurement standards at 24 CFR
85.36 were applicable to the State because its procedures needed to be equivalent to these Federal standards. OIG
acknowledges the Senate Committee’s belief that consistent and rigorous oversight of equivalent State procurement
processes and standards that uphold the principles of fair and open competition can prevent Federal dollars from
being spent irresponsibly. However, Federal procurement involves the acquisition of products and services at fair
7
Audit Report 2013-FW-001, Generally, HUD’s Hurricane Disaster Recovery Program Assisted the Gulf Coast States’ Recovery;
However, Some Program Improvements Are Needed, issued March 28, 2013
8
Before December 26, 2014, the relevant procurement requirements were found at 24 CFR 85.36. HUD has since moved its uniform
administrative requirements, cost principles, and audit requirements for Federal awards to 2 CFR Part 200.
9
2015-PH-1003, dated June 4, 2015
10
Senate Report 1115-138, dated July 27, 2017
36
SEMIANNUAL REPORT TO CONGRESS
and reasonable prices, which OIG believes is a higher standard and requires cost estimates and cost analyses. OIG
believes that HUD weakened its interpretation of Federal procurement standards in the subsequent Federal Register
notices because rather than considering a State’s procurement process proficient if its procurement standards were
equivalent to the Federal standards, HUD considered a State’s procurement process proficient if its procurement
standards operated in a manner that provided for full and open competition. Because of the disagreement, OIG
rejected the Deputy Assistant Secretary’s request to close the recommendations.
In response to another recommendation, OIG rejected it because the proposed corrective action did not directly
address improving controls by having HUD personnel who specialize in procurement evaluate the proficiency of
State grantee procurement processes for those States that select the equivalency option to ensure that the State
processes fully align with, or meet the intent of, each of the Federal procurement standards at 2 CFR 200.318
through 200.326.
In response to the remaining recommendation, OIG rejected it because the proposed guidance and training did not
include State grantees that chose to certify that their procurement processes and standards were equivalent to the
Federal procurement standards at 2 CFR 200.318 through 200.326.
OIG referred the recommendations to the Assistant Secretary for Community Planning and Development on January
25, 2018. The Assistant Secretary did not respond. OIG referred these recommendations to the Deputy Secretary
on March 16, 2018, and as of March 31, 2018, had not received a response. (Audit Report: 2017-PH-0002)
HUD COULD IMPROVE ITS CONTROLS OVER THE DISPOSITION OF PROPERTIES
ASSISTED WITH CDBG FUNDS, ISSUE DATE: SEPTEMBER 29, 2017
HUD OIG audited HUD’s oversight of the disposition of real properties assisted with CDBG funds. OIG’s
objective was to determine whether HUD had adequate controls over the disposition of real properties assisted with
CDBG funds.
OIG found that HUD could improve its oversight of the disposition of real properties assisted with CDBG funds.
Although HUD’s drawdown and reporting system allowed grantees to enter identifying information for assisted
properties and its field offices performed risk-based monitoring of grantees, HUD’s controls were not always
sufficient to ensure that grantees (1) entered addresses of assisted properties into its system, (2) provided proper
notice to affected citizens before changing the use of assisted properties, (3) adequately determined the fair market
value of assisted properties at the time of disposition, and (4) properly reported program income from the
disposition of the properties. Further, HUD did not fully implement guidance related to the applicability of change
of use requirements after voluntary grant reductions. OIG attributed these deficiencies to HUD’s lack of emphasis
on verifying address information, its field office staff’s not being adequately trained to use data to monitor HUD’s
interest in properties, and the Milwaukee field office’s incorrectly interpreting program requirements. As a result,
HUD could not track and monitor its interest in the properties and did not have assurance that grantees properly
handled changes in use and properly reported program income.
OIG recommended that the Deputy Assistant Secretary for Grant Programs develop a process to ensure that grantees
properly report the addresses of assisted properties in HUD’s Integrated Disbursement and Information System
(IDIS) and properly calculate and report program income from the disposition of these properties regularly. OIG
stated that this process could include but is not limited to developing a process to extract data reported in IDIS on
activities with the matrix codes related to real property and training and instructing CPD’s field office staff to
extract these data and manually check for address and program income data on grantees’ activities, particularly
activities that are completed but have properties that could still be subject to program income requirements.
37
SEMIANNUAL REPORT TO CONGRESS
The Deputy Assistant Secretary for Grant Programs proposed a management decision in January 2018, which OIG
rejected. OIG referred this recommendation to the Assistant Secretary for Community Planning and Development
on February 6, 2018, and to the Deputy Secretary on March 26, 2018. In an attempt to reach agreement, OIG held
discussions with CPD officials on February 13 and March 8, 2018. On March 28, the Deputy Assistant Secretary
for Grant Programs submitted a revised proposal. It proposed to (1) ensure that staff is aware of a recent CPD
notice; (2) ensure that staff and grantees are aware of the record retention requirements related to change-of-use and
reversion-of-asset requirements; (3) present a webinar for field staff on the importance of requirements related to
real property, especially those related to program income involving the acquisition and disposition of real
properties, and to discuss the requirement to maintain inventories of real property; (4) identify, create, or revise a
report that lists acquisition-related activities or that includes addresses and accomplishment data for staff to use for
monitoring; and (5) evaluate the adequacy of several sections of the CDBG Single Audit Compliance Supplement to
include reviews for real property acquisition and disposition and related to program income issues.
On March 28, 2018, HUD proposed a management decision, which OIG rejected for several reasons. For example,
HUD’s proposal (1) did not clearly cover all categories of activities related to real property assisted with CDBG
funds but, rather, focused on those specifically related to acquisitions and dispositions and (2) did not commit to
changes that would result in a process to ensure that grantees properly report the addresses of properties assisted
with CBDG funds and properly calculate and report program income from the disposition of these properties
regularly. While the proposal alluded to a report that could be used by field staff to prepare for monitoring, it did
not state that its monitoring process would be updated to require field offices to consider the relevant information.
Further, while HUD committed to reviewing the CDBG Single Audit Compliance Supplement requirements, it did
not commit to this review, resulting in a process to ensure that grantees properly report the addresses of properties
assisted with CDBG funds and that grantees properly calculate and report program income from the disposition of
these properties. As of March 31, 2018, OIG had not reached a management decision. (Audit Report: 2017-NY-
0002)
EVALUATION REPORTS ISSUED BEFORE START OF PERIOD WITH NO MANAGEMENT
DECISION AS OF MARCH 31, 2018
RISK-BASED ENFORCEMENT COULD IMPROVE PROGRAM EFFECTIVENESS, ISSUE
DATE: FEBRUARY 12, 2016
HUD OIG evaluated the effectiveness of the Departmental Enforcement Center (DEC). Historically, HUD program
managers have not wanted to enforce program requirements. That reluctance increases the risk that program funds
will not provide maximum benefits to recipients and allows serious noncompliances to go unchecked. When it was
created, DEC had independent enforcement authority, but it lost that authority when it moved from the Deputy
Secretary’s office to the Office of General Counsel (OGC). DEC lost control of funding and staffing levels and
contended with inadequate IT systems and support. Although program offices were asking for more DEC financial
analyses, they did not consistently use enforcement actions to remedy noncompliances. Further, managers’
reluctance to enforce program requirements limited DEC’s effectiveness in most programs. Turnover, retirements,
and hiring limitations could leave DEC without enough skilled staff to support future workloads needed to service
HUD programs and enforce program requirements. Risk-based monitoring and enforcement offer the opportunity
to provide quality, affordable rental housing, improve the quality of life, and build strong, resilient communities.
OIG made eight recommendations, all of which remain open. In general, OGC initially disagreed that DEC could
be more effective if it had more authority and independence. OIG met with the General Counsel on December 9,
2015, to discuss the findings, recommendations, and OGC’s response. Following the meeting, OGC generally
agreed with the recommendations. To date, HUD has agreed with three of the recommendations but has not
concurred or nonconcurred with the remaining five. Further, HUD has not provided action plans or estimated
38
SEMIANNUAL REPORT TO CONGRESS
completion dates for final action on any of the recommendations. In March 2018, OIG formally requested such
information. HUD’s response is due by April 18, 2018. (Evaluation Report: 2014-OE-0002)
COMPREHENSIVE STRATEGY NEEDED TO ADDRESS HUD ACQUISITION CHALLENGE,
ISSUE DATE: FEBRUARY 2, 2016
HUD OIG evaluated the Office of the Chief Procurement Officer’s (OCPO) acquisition improvement initiatives.
HUD has faced many acquisition challenges over the years, and OIG found that HUD had not made progress in
addressing those challenges. OIG observed that HUD had not developed a sound, cohesive strategy to address
improvement initiatives, offices did not communicate or coordinate effectively, and offices did not agree on the best
way to address acquisition challenges.
OIG made 10 recommendations, 1 of which remains open. The open recommendation requires OCPO to reach
agreement on the staffing model and resources needed to implement the contracting officer’s representative
professionalization initiative. OCPO concurred but has not provided OIG with an estimated completion date for
final action. OCPO said it has developed the professionalization initiative as part of a greater reform plan, but HUD
senior leadership has not implemented it. OCPO could not estimate when it may be implemented. (Evaluation
Report: 2015-OE-0004)
DEPARTMENT APPROACH NEEDED TO ADDRESS HUD CONTRACTOR EMPLOYEE
SECURITY RISKS, ISSUE DATE: MARCH 30, 2016
HUD OIG evaluated security policies and operations for contractor employees performed primarily by HUD’s
Office of the Chief Human Capital Officer. OIG reviewed HUD’s progress in addressing previously identified
background investigation issues. The Personnel Security Division had reduced the backlog of suitability
adjudication cases, but on average, it took about four times longer than the Office of Personnel Management
standard of 90 days to complete a case—resulting in several hundred contractor employees working at HUD without
a final suitability determination. The Personnel Security Division had not issued comprehensive policies and
procedures or implemented an automated case management system. Administrative and program offices within
HUD that were responsible for personnel, physical, and information security did not collaborate effectively at the
policy-making level. During the evaluation, the Office of Administration established a security council to identify
and address cross-HUD security issues. OIG identified successful practices of other Federal agencies that would
address HUD’s contractor employee security risks and made recommendations to improve the timeliness and
reliability of security processes.
OIG made nine recommendations, two of which remain open. HUD did not comment on the recommendations in
its response to the draft report. Rather, HUD provided additional information on process improvements or actions it
planned to initiate. HUD has not formally concurred with OIG’s recommendations or provided a necessary
estimated completion date for final action.
One recommendation requires the Personnel Security Division to develop a comprehensive policy and clear
guidance for all HUD personnel with roles and responsibilities related to contractor employee security. HUD has
drafted a handbook for this purpose, but its ability to release the handbook depends on resolving a bargaining unit
issue. HUD officials told OIG they could not estimate when the bargaining unit issue would be resolved or when
the handbook would be released to close the recommendation.
39
SEMIANNUAL REPORT TO CONGRESS
The other recommendation requires the Personnel Security Division to take steps to reduce the employee suitability
adjudication backlog and implement an automated case management system. The Personnel Security Division
intends to implement the system within the next reporting period. (Evaluation Report: 2015-OE-0008)
OPPORTUNITIES FOR IMPROVEMENT WITHIN CPD’S RISK MANAGEMENT PROCESS
FOR HURRICANE SANDY GRANTS, ISSUE DATE: MARCH 29, 2017
HUD OIG evaluated the risk analysis process for Hurricane Sandy grants performed by HUD CPD. CPD uses a
risk analysis process to rank grantees that pose the greatest risk to the integrity of its programs. According to CPD,
the risk analysis results guide how the monitoring phase of the risk management process is conducted. After CPD
management certifies the risk analysis results, management develops a monitoring strategy. By monitoring
grantees, CPD aims to ensure that a grantee performs and delivers on the terms of the grant while reducing the
possibility of fraud, waste, and mismanagement.
OIG observed that (1) CPD’s 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 made five recommendations, four of which remain open. To date, CPD actively disagrees with two of the
recommendations. OIG has attempted to meet and discuss the recommendations with CPD officials on multiple
occasions but remains at an impasse. OIG will elevate these recommendations to senior officials with the goal of
reaching management decisions.
The Disaster Response and Special Issues Division concurred with the remaining two recommendations but has not
provided a complete action plan with estimated completion dates for final action. (Evaluation Report: 2016-OE-
0004S)
SIGNIFICANTLY REVISED MANAGEMENT DECISIONS
Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information concerning the
reasons for any significantly revised management decisions made during the reporting period. During the current
reporting period, there were no significantly revised management decisions.
SIGNIFICANT MANAGEMENT DECISION WITH WHICH OIG DISAGREES
Section 5(a)(12) of the Inspector General Act, as amended, requires that OIG report information concerning any
significant management decision with which the Inspector General disagrees. During the reporting period, OIG did
not disagree with any significant management decision.
FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996
Section 804 of 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
40
SEMIANNUAL REPORT TO CONGRESS
(1) Federal financial management system requirements, (2) Federal accounting standards, and (3) the USSGL at the
transaction level.
In fiscal year 2017, OIG noted continued noncompliance with the three section 803(a) elements of FFMIA within
HUD’s financial management system. HUD’s continued noncompliance is due to a high volume of material
weaknesses, ineffective internal controls over financial reporting, and longstanding issues related to legacy
component and program office system weaknesses that remain unresolved.
HUD has struggled for more than a decade to modernize outdated legacy financial systems. While HUD expected
its fiscal year 2016 transition to an FSSP to remediate instances of FFMIA noncompliance, significant financial
management and IT governance weaknesses hindered planned gains. 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 2017, HUD took the important step of restarting
FFMIA system compliance reviews. The compliance reviews, however, identified additional FFMIA
noncompliance within three Office of Housing systems and one additional CPD system.
During fiscal year 2017, HUD made limited progress in addressing a multitude of material weaknesses from HUD
OIG’s fiscal year 2016 financial statement audit. HUD’s material weaknesses include issues related to information
processing and the completeness and accuracy of data among HUD’s environment, OCFO’s NCIS, and the FSSP
environment. HUD’s implementation of OMB A-123, appendix A, review results from fiscal year 2017 concluded
that unresolved material weaknesses previously cited by OIG require a statement of “no assurance” that internal
controls are in place and operating effectively. HUD will need to address weaknesses related to its IT governance
and project management practices to remediate system noncompliance with FFMIA.
Additional unremediated prior-year noncompliance with FFMIA requirements is related to CPD’s use of the first-in,
first-out method to account for grant disbursements within the IDIS application. CPD has yet to complete system
configuration changes that will partially address FFMIA noncompliance. While CPD completed system
configuration updates in October 2017, full remediation may not be possible for a number of years due to
management’s decision to implement correct grant accounting prospectively, thereby enabling continued
noncompliance with laws and regulations.
As of September 30, 2017, OIG noted continuing FFMIA noncompliance within HUD’s Ginnie Mae component.
Ginnie Mae’s continued noncompliance is due primarily to unremediated material weaknesses in internal control
over financial reporting, its inability to properly account for its defaulted issuer loan portfolio, and its inability to
implement effective controls over budgetary accounting.
In addition to the specific financial system weaknesses identified above, unremediated material weaknesses
stemming from a lack of systems and deficiencies related to manual processes continue to exist.
41
SEMIANNUAL REPORT TO CONGRESS
CHAPTER 8 – WHISTLEBLOWER OMBUDSMAN
Whistleblowers play a critical role in keeping our government programs 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 also investigates complaints of
whistleblower retaliation by government contractors and grantees.
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.
The mandatory whistleblower training is presented in conjunction with the OIG annual ethics training. The 2018
training will be presented in the fall. It will be presented live, with an interactive training posted on HUD OIG’s
website for employees who cannot attend in person.
In October 2017, Congress enacted the Dr. Chris Kirkpatrick Whistleblower Protection Act of 2017, which contains
new training and performance standards for supervisors regarding the handling of whistleblowers. HUD OIG is
participating with the Inspector General community to develop consistent, new training and supervisor requirements
in conjunction with the Office of Special Counsel and the Office of Personnel Management. HUD OIG plans to
have the new elements and training in place by the end of the fiscal year.
The Whistleblower Ombudsman meets with HUD employees individually upon request. Generally, HUD OIG will
refer HUD employees with whistleblower retaliation complaints to the Office of Special Counsel. HUD OIG does
not track these matters unless the Office of Special Counsel requests HUD OIG assistance in investigating a
complaint. During this semiannual reporting period, HUD OIG did not substantiate any whistleblower retaliation
complaints against HUD employees.
HUD OIG did receive a number of complaints filed under 41 U.S.C. (United States Code) 4712. In December
2016, Congress passed the Enhancement of Whistleblower Protection Act. It made the whistleblower protections
under 41 U.S.C. 4712 permanent. Section 4712 extends whistleblower protection to employees of Federal
contractors, subcontractors, grantees, and subgrantees. If the employee of a grantee or contractor believes he or she
has been retaliated against for whistleblowing, he or she may file a complaint with OIG, and OIG will investigate
the complaint. OIG is required to complete its investigation within 180 days, unless the complainant agrees to an
extension. The chart below provides further information on those complaints.
42
SEMIANNUAL REPORT TO CONGRESS
Number of complainants asserting
28
whistleblower status 11
Complaints referred for investigation to the
15
HUD OIG Office of Investigation (OI)
Complaint investigations opened by OI 15
Complaints declined by OI 0
Complaints currently under review by OI 10
Employee complaint investigations closed by
5
OI
11
Thirteen cases were referred to the hotline and determined to not have whistleblower status. Many complainants raise questions
regarding treatment by public housing agencies (PHA) following alleging wrongdoing by the same PHA. They define themselves as
whistleblowers but are not employees of the PHA. These complaints are referred to OIG’s hotline for appropriate referral and
disposition. Not all complainants are found to be whistleblowers under Section 4712. For example, many complainants raise
questions regarding treatment by PHAs following their alleged disclosures of wrongdoing by the same PHA. They claim to be
whistleblowers, but they are not employees of the grantee. These complaints are referred to OIG’s hotline for appropriate referral and
disposition.
43
SEMIANNUAL REPORT TO CONGRESS
APPENDIX 1 – PEER REVIEW REPORTING
BACKGROUND
The Dodd-Frank Wall Street Reform and Consumer Protection Act (No. 111-203), section 989C, requires inspectors
general to report the latest peer review results in their semiannual reports to Congress. The purpose in doing so is to
enhance transparency within the government. Both the Office of Audit and Office of Investigation are required to
undergo a peer review of their individual organizations every 3 years. The purpose of the review is to ensure that
the work completed by the respective organizations meets the applicable requirements and standards. The following
is a summary of the status of the latest round of peer reviews for the organization.
OFFICE OF AUDIT
PEER REVIEW CONDUCTED ON HUD OIG BY TIGTA
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 (TIGTA) 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 on September 22, 2015. USPS OIG received a peer review rating of pass. A copy of the
external quality control review report can be viewed at https://www.uspsoig.gov/sites/default/files/document-
library-files/2015/2015_HUD-OIG_System_Review_Report.pdf.
OFFICE OF INVESTIGATION
PEER REVIEW CONDUCTED ON HUD OIG BY DHS OIG
The U.S. Department of Homeland Security (DHS) OIG conducted a peer review of the HUD OIG, Office of
Investigation, and issued a final report on July 3, 2017. DHS 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.
PEER REVIEW CONDUCTED BY HUD OIG ON USDA OIG
HUD OIG conducted an external peer review of the U.S. Department of Agriculture (USDA) OIG, Office of
Investigation, and issued a final report on October 4, 2016. HUD OIG determined that USDA OIG was in
compliance with the quality standards established by the Council of the Inspectors General on Integrity and
Efficiency.
44
SEMIANNUAL REPORT TO CONGRESS
APPENDIX 2 – AUDIT REPORTS ISSUED
Internal Reports
AUDIT REPORTS
CHIEF FINANCIAL OFFICER
HUD’s Office of the Chief Financial Officer Did Not Comply With the Digital Accountability and
2018-FO-0001
Transparency Act of 2014, 11/03/2017.
Additional Details To Supplement Our Fiscal Years 2017 and 2016 (Restated) U.S. Department of
2018-FO-0004 Housing and Urban Development Financial Statement Audit, 11/15/2017. Better use:
$978,360,226.
HUD’s Fiscal Years 2017 and 2016 (Restated) Consolidated Financial Statements Audit,
2018-FO-0005
11/16/2017.
CHIEF INFORMATION OFFICER
Fiscal Year 2017 Review of Information Systems Controls in Support of the Financial Statements
2018-DP-0003
Audit, 03/09/2018.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
2018-DP-0001 Information System Controls Over the Ginnie Mae Financial Accounting System, 12/15/2017.
Audit of the Government National Mortgage Association’s Financial Statements for Fiscal Years
2018-FO-0002
2017 and 2016 (Restated), 11/14/2017.
HOUSING
HUD Needs To Improve Its Oversight of Grants Funded Through Its Resident Home-Ownership
2018-CH-0001
Program, 12/22/2017.
Review of Selected FHA Information Systems and Credit Reform Estimation and Reestimation
2018-DP-0002
Process Applications, 02/13/2018.
Fiscal Years 2017 and 2016 (Restated) Financial Statements Audit, 11/15/2017. Better use:
2018-FO-0003
$270,747,281.
FHA Insured $1.9 Billion in Loans to Borrowers Barred by Federal Requirements, 03/26/2018.
2018-KC-0001
Better use: $1,905,340,944.
HUD’s Use of Nonpayment Orders Adequately Prevented Claims on FHA Loans From Being
2018-LA-0001
Paid, 02/27/2018.
45
SEMIANNUAL REPORT TO CONGRESS
AUDIT-RELATED MEMORANDUMS 12
CHIEF FINANCIAL OFFICER
2018-KC-0801 Risk Assessment of Fiscal Year 2016 HUD Charge Card Programs, 02/05/2018.
HOUSING
Management Alert: HUD Did Not Provide Acceptable Oversight of the Physical Condition of
2018-CF-0801
Residential Care Facilities, 01/05/2018.
2018-KC-0802 Limited Review of HUD Multifamily Waiting List Administration, 03/22/2018.
PUBLIC AND INDIAN HOUSING
HUD’s Office of Public Housing Did Not Clearly Define or Provide Guidance for Public Housing
2018-FW-0801
Agency Certifications, 11/06/2017.
External Reports
AUDIT REPORTS
COMMUNITY PLANNING AND DEVELOPMENT
The Commonwealth of Kentucky Generally Administered Its Neighborhood Stabilization Program
2018-AT-1001 in Accordance With HUD Requirements, 12/21/2017. Questioned: $53,760. Unsupported:
$53,760.
The Municipality of San Juan, PR, Did Not Always Administer Its Emergency Solutions Grants
2018-AT-1002 Program in Accordance With HUD Requirements, 12/29/2017. Questioned: $47,720.
Unsupported: $47,720.
Jefferson Parish, Jefferson, LA, Did Not Always Properly Administer Its Rehabilitation Program,
2018-FW-1001
01/29/2018. Questioned: $1,029,970. Unsupported: $1,020,121. Better use: $216,663.
The Town of Apple Valley, CA, Administered Its Community Development Block Grant Program
2018-LA-1001
in Accordance With HUD Requirements, 01/05/2018.
The County of San Diego, San Diego, CA, Did Not Support Continuum of Care Match and Payroll
2018-LA-1002 Costs in Accordance With Requirements, 02/23/2018. Questioned: $66,582. Unsupported:
$66,582.
12
The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted
government auditing standards; to close out assignments with no findings and recommendations; to respond to requests for
information; or to report on the results of a survey, attestation engagement, or civil actions or settlements.
46
SEMIANNUAL REPORT TO CONGRESS
The City of South Gate, CA, Did Not Administer Its Community Development Block Grant
2018-LA-1003 Program in Accordance With HUD Requirements, 03/29/2018. Questioned: $1,096,821.
Unsupported: $1,096,821.
Hudson County, NJ, Generally Committed and Disbursed HOME Program Funds in Accordance
2018-NY-1001
With HUD and Federal Requirements, 01/12/2018.
HOUSING
The Riverside Health and Rehabilitation Center, East Hartford, CT, Was Not Operated Under the
2018-BO-1001 Required Controlling Documents of the Section 232 Program, 11/13/2017. Questioned:
$2,666,082. Unsupported: $2,666,082.
Villa Main Apartments, Port Arthur, TX, Subsidized Nonexistent Tenants, Unsupported Tenants,
2018-FW-1002
and Uninspected Units, 01/31/2018. Questioned: $1,630,105. Unsupported: $1,095,364.
CitiMortgage, Inc., O’Fallon, MO, Improperly Filed for FHA-HAMP Partial Claims Before
2018-KC-1001 Completing the Loan Modifications and Reinstating the Loans, 03/05/2018. Questioned:
$1,053,688.
PUBLIC AND INDIAN HOUSING
The Housing Authority of the City of New Haven, CT, Made Ineligible Housing Assistance
2018-BO-1002
Payments From Its Housing Choice Voucher Program, 11/16/2017. Questioned: $314,611.
Glen Cove Housing Authority, Glen Cove, NY, Did Not Always Use Property Disposition
2018-NY-1002 Proceeds in Accordance With Requirements, 01/19/2018. Questioned: $996,177. Unsupported:
$985,004. Better use: $1,074,979.
The Housing Authority of the City of Asbury Park, NJ, Did Not Always Administer Its Operating
2018-NY-1003 and Capital Funds in Accordance With Requirements, 02/08/2018. Questioned: $1,921,965.
Unsupported: $1,846,243. Better use: $18,913.
The Fairmont-Morgantown Housing Authority, Fairmont, WV, Did Not Always Administer Its
2018-PH-1001 Housing Choice Voucher Program in Accordance With Applicable Program Requirements,
02/12/2018. Questioned: $4,940,205. Unsupported: $4,920,685.
The Fairmont-Morgantown Housing Authority, Fairmont, WV, Did Not Always Ensure That Its
2018-PH-1002 Program Units Met Housing Quality Standards and That It Accurately Calculated Housing
Assistance Payment Abatements, 02/16/2018. Questioned: $33,048. Better use: $1,241,817.
The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer Its Housing Choice
2018-PH-1003 Voucher Program, 03/30/2018. Questioned: $416,685. Unsupported: $280,561. Better use:
$984.
47
SEMIANNUAL REPORT TO CONGRESS
AUDIT-RELATED MEMORANDUMS 13
COMMUNITY PLANNING AND DEVELOPMENT
Interim Memorandum Special Review, Office for the Socioeconomic and Community
2018-AT-1801
Development, San Juan, PR, State Block Grant Disaster Recovery Program, 11/17/2017.
GENERAL COUNSEL
MetLife Home Loans, LLC, and a Borrower’s Son Settled Allegations of Failing To Comply With
2018-CF-1801 HUD’s Federal Housing Administration HECM Loan Requirements, 03/23/2018. Questioned:
$5,500. Better use: $95,769.
Independent Public Accountant Debarred for Violating Federal Housing Administration
2018-CF-1802
Requirements for Multifamily Properties, 03/23/2018.
Southern Blvd I, L.P., Settled Allegations of Making False Certifications Related to Section 8
2018-CF-1803
Housing Assistance Payments, 03/30/2018. Questioned: $40,000.
HOUSING
Yabucoa Housing Project, Yabucoa Volunteers of America Elderly Housing, Inc., Yabucoa, PR,
2018-AT-1802 Section 202 Supportive Housing for the Elderly Program, 12/29/2017. Questioned: $1,197,467.
Better use: $1,440,165.
13
The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted
government auditing standards; to close out assignments with no findings and recommendations; to respond to requests for
information; or to report on the results of a survey, an attestation engagement, or civil actions or settlements.
48
SEMIANNUAL REPORT TO CONGRESS
APPENDIX 3 – TABLES
TABLE A
AUDIT REPORTS ISSUED BEFORE START OF PERIOD WITH NO MANAGEMENT
DECISION AT 3/31/2018
*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 7, page 25 12/16/2013
(Restated) Financial Statements
* 2014-FO-0004 HUD’s Fiscal Year 2013
Compliance With the Improper Payments Elimination See chapter 7, page 26 04/15/2014
and Recovery Act of 2010
* 2014-LA-0005 HUD Did Not Always Recover FHA
Single-Family Indemnification Losses and Ensure See chapter 7, page 27 08/08/2014
That Indemnification Agreements Were Extended
* 2015-FO-0003 Audit of the Government National
Mortgage Association’s Financial Statements for See chapter 7, page 28 02/27/2015
Fiscal Years 2014 and 2013
* 2016-FO-0001 Audit of Fiscal Years 2015 and 2014
See chapter 7, page 28 11/13/2015
(Restated) Financial Statements
* 2016-FO-0003 Additional Details To Supplement
Our Fiscal Years 2015 and 2014 (Restated) U.S.
See chapter 7, page 29 11/18/2015
Department of Housing and Urban Development
Financial Statement Audit
* 2016-PH-0001 HUD Did Not Always Provide
Adequate Oversight of Property Acquisition and See chapter 7, page 30 06/30/2016
Disposition Activities
* 2016-PH-0005 HUD Did Not Always Provide
Accurate and Supported Certifications of State See chapter 7, page 31 09/29/2016
Disaster Grantee Procurement Processes
* 2017-FO-0001 Audit of Fiscal Years 2016 and 2015
See chapter 7, page 32 11/14/2016
(Restated) Financial Statements
* 2017-FO-0003 Additional Details To Supplement
Our Fiscal Years 2016 and 2015 (Restated) U.S.
See chapter 7, page 33 11/15/2016
Department of Housing and Urban Development
Financial Statement Audit
49
SEMIANNUAL REPORT TO CONGRESS
REASON FOR LACK OF MANAGEMENT
REPORT NUMBER AND TITLE ISSUE DATE
DECISION
* 2017-DP-0001 HUD’s Transition to a Federal
See chapter 7, page 33 02/01/2017
Shared Service Provider Failed To Meet Expectations
2017-FW-0001 HUD’s Office of Community
Planning and Development Did Not Appropriately
See chapter 7, page 34 07/10/2017
Assess State CDBG Grantees’ Risk to the Integrity of
CPD Programs or Adequately Monitor Its Grantees
2017-CF-0801 HUD Needs To Clarify Whether
Illegal-Undocumented Aliens Are Eligible for
See chapter 7, page 35 08/21/2017
Assistance Under the Housing Opportunities for
Persons With AIDS Program
* 2017-PH-0002 HUD Did Not Provide Sufficient
Guidance and Oversight To Ensure That State
See chapter 7, page 36 09/22/2017
Disaster Grantees Followed Proficient Procurement
Processes
* 2017-NY-0002 HUD Could Improve Its Controls
Over the Disposition of Real Properties Assisted With See chapter 7, page 37 09/29/2017
Community Development Block Grant Funds
EVALUATION REPORTS ISSUED BEFORE START OF PERIOD WITH NO MANAGEMENT
DECISION AT 3/31/2018
REASON FOR LACK OF MANAGEMENT
REPORT NUMBER AND TITLE ISSUE DATE
DECISION
2014-OE-0002 Risk Based Enforcement Could
See chapter 7, page 38 2/12/2016
Improve Program Effectiveness
2015-OE-0004 Comprehensive Strategy Needed To
See chapter 7, page 39 2/2/2016
Address HUD Acquisition Challenges
2015-OE-0008 Department Approach Needed To
See chapter 7, page 39 3/20/2016
Address HUD Contractor Employee Security Risks
2016-OE-0004S Opportunities for Improvement
Within CPD’s Risk Management Process for See chapter 7, page 40 3/29/2017
Hurricane Sandy Grants
50
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
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
Corporacion para el Fomento Economico de la
Ciudad Capital, San Juan, Puerto Rico, Did
2005-AT-1013 09/15/2005 01/11/2006 Note 1
Not Administer Its Independent Capital Fund
in Accordance With HUD Requirements
The Cathedral Foundation of Jacksonville, FL,
2007-AT-1010 Used More Than $2.65 Million in Project 08/14/2007 12/03/2007 Note 2
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
HUD Lacked Adequate Controls to Ensure the
2009-AT-0001 Timely Commitment and Expenditure of 09/28/2009 03/18/2011 Note 1
HOME funds
The Housing Authority of Whitesburg
2010-AT-1003 04/28/2010 08/26/2010 11/29/2035
Mismanaged Its Operations, Whitesburg, KY
Sasha Bruce Youthwork, Incorporated, Did
2010-PH-1008 Not Support More Than $1.9 Million in 05/11/2010 11/03/2010 Note 2
Expenditures, Washington, DC
The DuPage Housing Authority
2010-CH-1008 Inappropriately Administered Its Section 8 06/15/2010 10/08/2010 04/18/2018
Project-Based Voucher Program, Wheaton, IL
Additional Details To Supplement Our Report
2011-FO-0003 on HUD’s Fiscal Years 2010 and 2009 11/15/2010 08/08/2011 Note 1
Financial Statements
The District of Columbia Did Not Administer
2011-PH-1005 Its HOME Program in Accordance With 12/23/2010 04/22/2011 Note 1
Federal Requirements, Washington, DC
The DuPage Housing Authority
Inappropriately Administered Its Section 8
2011-CH-1006 03/23/2011 07/28/2011 04/18/2018
Housing Choice Voucher Program, Wheaton,
IL
51
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The City of Buffalo Did Not Always
2011-NY-1010 Administer Its CDBG Program in Accordance 04/15/2011 01/25/2012 Note 2
With HUD Requirements, Buffalo, NY
The Municipality of San Juan Did Not
2011-AT-1018 Properly Manage Its HOME Investment 09/28/2011 01/12/2012 09/12/2018
Partnerships Program, San Juan, PR
The City of New York Charged Questionable
2012-NY-1002 10/18/2011 02/16/2012 Note 1
Expenditures to Its HPRP, New York, NY
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
HUD Did Not Adequately Support the
2012-LA-0001 Reasonableness of the Fee-for-Service 11/16/2011 03/27/2012 Note 2
Amounts or Monitor the Amounts Charged
The Municipality of Bayamón Did Not Always
Ensure Compliance With HOME Investment
2012-AT-1009 05/23/2012 09/18/2012 Note 1
Partnerships Program Requirements,
Bayamon, PR
Prince George’s County Generally Did Not
2012-PH-1011 Administer Its HOME Program in Accordance 08/03/2012 11/30/2012 Note 1
With Federal Requirements, Largo, MD
The Saginaw Housing Commission Did Not
Always Administer Its Section 8 Housing
2012-CH-1012 Choice Voucher Program in Accordance With 09/27/2012 01/07/2013 01/01/2023
HUD’s and Its Own Requirements, Saginaw,
MI
The Flint Housing Commission Did Not
Always Administer Its Grants in Accordance
2012-CH-1013 09/27/2012 01/24/2013 Note 2
With Recovery Act, HUD’s, and Its Own
Requirements, Flint, MI
Luzerne County Did Not Properly Evaluate,
2013-PH-1001 Underwrite, and Monitor a High-Risk Loan, 10/31/2012 01/31/2013 Note 1
Wilkes-Barre, PA
Additional Details To Supplement Our Report
2013-FO-0003 on HUD’s Fiscal Years 2012 and 2011 11/15/2012 05/15/2013 Note 1
Financial Statements
52
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
Bay Vista Methodist Heights Violated Its
2013-LA-1003 Agreement With HUD When Administering 03/14/2013 05/15/2013 Note 1
Its Trust Funds, San Diego, CA
The Municipality of Arecibo Did Not Always
2013-AT-1003 Ensure Compliance With CDBG Program 03/22/2013 06/14/2013 Note 1
Requirements, Arecibo, PR
Nassau County Did Not Administer It’s
HOME Investment Partnerships Program in
2013-NY-1006 05/13/2013 09/06/2013 Note 1
Accordance With HUD Requirements, Nassau
County, NY
HUD Did Not Enforce the Reporting
Requirements of Section 3 of the Housing and
2013-KC-0002 06/26/2013 10/24/2013 Note 1
Urban Development Act of 1968 for Public
Housing Authorities
The City of Hawthorne Inappropriately Used
2013-LA-1009 Nearly $1.6 Million in HOME Funds for 09/13/2013 01/06/2014 Note 1
Section 8 Tenants, Hawthorne, CA
The City of Hawthorne Did Not Administer Its
CDBG Program Cost Allocations in
2013-LA-1010 09/20/2013 01/06/2014 Note 1
Accordance With HUD Rules and
Requirements, Hawthorne, CA
The Malakoff Housing Authority Did Not
Have Sufficient Controls Over Its Public
2013-FW-1805 09/26/2013 12/19/2013 04/30/2036
Housing Programs, Including Its Recovery Act
Funds, Malakoff, TX
The City of Auburn Did Not Always
2013-NY-1010 Administer Its CDBG Program in Accordance 09/26/2013 01/24/2014 Note 1
With HUD Requirements, Auburn, NY
The Flint Housing Commission Did Not
Always Administer Its Grant in Accordance
2013-CH-1009 09/27/2013 01/14/2014 04/30/2018
With Recovery Act, HUD’s, and Its Own
Requirements, Flint, MI
The Michigan State Housing Development
Authority Did Not Follow HUD’s
2013-CH-1011 09/30/2013 01/15/2014 07/31/2029
Requirements Regarding the Administration of
Its Program, Lansing, MI
53
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The Hamtramck Housing Commission Did Not
Administer Its Grant in Accordance With
2013-CH-1012 09/30/2013 01/21/2014 04/30/2018
Recovery Act, HUD’s, and Its Own
Requirements, Hamtramck, MI
The Jefferson County Housing Authority Did
2013-DE-1005 Not Properly Use Its Disposition Sales 09/30/2013 01/24/2014 02/28/2020
Proceeds, Wheat Ridge, CO
The Municipality of Arecibo Did Not Properly
2014-AT-1001 12/03/2013 01/24/2014 Note 1
Administer Its HOME Program
Government National Mortgage Association
2014-FO-0001 Fiscal Years 2013 and 2012 Financial 12/06/2013 05/02/2014 Note 1
Statements Audit
Additional Details To Supplement Our Report
2014-FO-0003 On HUD’s Fiscal Years 2013 and 2012 12/16/2013 07/09/2014 Note 3
(Restated) Financial Statements
The City of Norfolk Generally Failed To
2014-PH-1001 12/17/2013 04/16/2014 11/01/2018
Justify Its CDBG Activities, Norfolk, VA
The State of Mississippi Did Not Ensure That
Its Subrecipient and Appraisers Complied
2014-AT-1004 With Requirements, and It Did Not Fully 12/30/2013 04/15/2014 Note 1
Implement Adequate Procedures for Its
Disaster Infrastructure Program, Jackson, MS
The City of Detroit Lacked Adequate Controls
Over Its Neighborhood Stabilization Program-
2014-CH-1002 Funded Demolition Activities Under the 01/06/2014 05/05/2014 Note 2
Housing and Economic Recovery Act of 2008,
Detroit, MI
The Boston Office of Public Housing Did Not
Provide Adequate Oversight of Environmental
2014-FW-0001 Reviews of Three Housing Agencies, 02/07/2014 03/17/2015 12/31/2018
Including Reviews Involving Recovery Act
Funds
HUD Did Not Provide Effective Oversight of
2014-NY-0001 02/19/2014 06/10/2014 Note 1
Section 202 Multifamily Project Refinances
Violations Increased the Cost of Housing’s
2014-AT-0001 03/14/2014 07/11/2014 Note 1
Administration of Its Bond Refund Program
54
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
HUD’s Fiscal Year 2013 Compliance With the
2014-FO-0004 Improper Payments Elimination and Recovery 04/15/2014 01/07/2015 Note 3
Act of 2010
The Hamtramck Housing Commission Did Not
Always Administer Its Grant in Accordance
2014-CH-1003 04/30/2014 08/08/2014 04/30/2018
With Recovery Act, HUD’s, or Its Own
Requirements, Hamtramck, MI
Improvements Are Needed Over
2014-FW-0002 Environmental Reviews of Public Housing and 05/12/2014 03/17/2015 12/31/2018
Recovery Act Funds in the Kansas City Office
The City of Huntsville, Community
Development Department, Did Not Adequately
2014-AT-1005 05/29/2014 09/23/2014 Note 1
Account for and Administer the Mirabeau
Apartments Project, Huntsville, AL
HUD Could Not Support the Reasonableness
of the Operating and Capital Fund Programs’
2014-LA-0004 06/30/2014 10/20/2014 Note 2
Fees and Did Not Adequately Monitor Central
Office Cost Centers
The Data in CAIVRS Did Not Agree With the
2014-KC-0002 07/02/2014 10/27/2014 10/12/2018
Data in FHA’s Default and Claims Systems
Palladia, Inc., Did Not Administer Its
2014-NY-1008 Supportive Housing Program in Accordance 07/25/2014 11/21/2014 Note 1
With HUD Requirements, New York, NY
The Municipality of Carolina Did Not Properly
2014-AT-1007 08/08/2014 12/05/2014 Note 1
Administer Its HOME Program, Carolina, PR
HUD Did Not Always Recover FHA Single-
Family Indemnification Losses and Ensure
2014-LA-0005 08/08/2014 12/03/2014 Note 3
That Indemnification Agreements Were
Extended
The Goshen Housing Authority Failed To
Follow HUD’s and Its Own Requirements
2014-CH-1006 08/14/2014 01/21/2015 Note 2
Regarding the Administration of Its Program,
Goshen, IN
55
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The State of New Jersey Did Not Fully
Comply With Federal Procurement and Cost
2014-PH-1008 08/29/2014 09/02/2015 Note 1
Principle Requirements in Implementing Its
Tourism Marketing Program
Asset Repositioning Fees for Public Housing
Authorities With Units Approved for
2014-NY-0003 09/04/2014 12/29/2014 12/31/2020
Demolition or Disposition Were Not Always
Accurately Calculated
Miami-Dade County Did Not Always Properly
2014-AT-1010 09/11/2014 12/11/2014 Note 1
Administer Its HOME Program, Miami, FL
The City of Jersey City’s HOME Investment
Partnerships Program Administration Had
2014-NY-1009 09/18/2014 01/13/2015 Note 1
Financial and Administrative Controls
Weaknesses, City of Jersey City, NJ
Improvements Are Needed Over
2014-FW-0005 Environmental Reviews of Public Housing and 09/24/2014 03/17/2015 12/31/2018
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
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 Administration’s
2015-FO-0001 Financial Statements for Fiscal Years 2014 and 11/14/2014 04/14/2015 Note 1
2013
The City of New York Did Not Always
Disburse CDBG Disaster Recovery Assistance
2015-NY-1001 11/24/2014 03/23/2015 Note 1
Funds to Its Subrecipient in Accordance With
Federal Regulations, New York, NY
Interim Report on HUD’s Internal Controls
2015-FO-0002 12/08/2014 09/28/2015 Note 2
Over Financial Reporting
56
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
Final Civil Action: Court Ordered a Former
Executive Director of the Philadelphia
2015-PH-1804 Housing Authority To Pay Civil Penalties for 02/19/2015 09/13/2016 Note 1
Violating Federal Lobbying Disclosure
Requirements and Restrictions
The Chicago Housing Authority Moving to
2015-CH-1001 Work Housing Choice Voucher Program, 02/24/2015 06/10/2015 04/30/2019
Chicago, IL
Audit of the Government National Mortgage
2015-FO-0003 Association’s Financial Statements for Fiscal 02/27/2015 06/25/2015 Note 3
Years 2014 and 2013
HUD’s Office of Community Planning and
Development Did Not Always Pursue
2015-AT-0001 Remedial Actions but Generally Implemented 03/31/2015 08/28/2015 Note 1
Sufficient Controls for Administering Its
Neighborhood Stabilization Program
Veterans First, Santa Ana, CA, Did Not
2015-LA-1002 Administer and Spend Its HUD Funding in 04/16/2015 08/14/2015 10/12/2018
Accordance With HUD Requirements
The City of Paterson, NJ’s HOME Investment
2015-NY-1005 Partnerships Program Controls Did Not Ensure 04/30/2015 06/03/2015 Note 1
Compliance With Regulations
Compliance With the Improper Payments
2015-FO-0005 05/15/2015 10/02/2015 Note 2
Elimination and Recovery Act
First Niagara Bank, Lockport, NY, Did Not
Always Properly Implement HUD’s Loss
2015-NY-1006 05/22/2015 11/19/2015 Note 1
Mitigation Requirements in Servicing FHA-
Approved Mortgages
The Housing Authority of the County of San
Bernardino, San Bernardino, CA, Used Shelter
2015-LA-1004 05/29/2015 09/16/2015 Note 2
Plus Care Program Funds for Ineligible and
Unsupported Participants
The State of New Jersey Did Not Comply With
Federal Procurement and Cost Principle
2015-PH-1003 06/04/2015 10/02/2015 Note 1
Requirements in Implementing Its Disaster
Management System
57
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
HUD Did Not Adequately Implement or
Provide Adequate Oversight To Ensure
2015-FW-0001 06/16/2015 10/07/2015 Note 1
Compliance With Environmental
Requirements
HUD Did Not Provide Adequate Oversight of
2015-LA-0002 the Section 184 Indian Home Loan Guarantee 07/06/2015 10/28/2015 Note 2
Program
NOVA Financial & Investment Corporation’s
FHA-Insured Loans With Downpayment
2015-LA-1005 07/09/2015 09/11/2015 Note 1
Assistance Gifts Did Not Always Meet HUD
Requirements
HUD Did Not Always Provide Adequate
2015-CH-0001 Oversight of Its Section 203(k) Rehabilitation 07/31/2015 11/27/2015 Note 2
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 1
Application of Match Reductions Was Not
Always Correct
HUD’s Office of Multifamily Asset
Management and Portfolio Oversight Did Not
2015-AT-0002 08/21/2015 12/16/2015 Note 1
Comply With Its Requirements for Monitoring
Management Agents’ Costs
New York State Did Not Always Administer
Its Rising Home Enhanced Buyout Program in
2015-NY-1010 09/17/2015 03/01/2016 Note 1
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 1
Recovery Program Funds Were Always
Disbursed for Eligible Costs
Veterans First Did Not Administer or Spend Its
2015-LA-1802 Supportive Housing Program Grants in 09/24/2015 10/29/2015 04/02/2018
Accordance With HUD Requirements
58
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The Housing Authority of the City of South
Bend, IN, Did Not Always Comply with HUD
2015-CH-1008 Requirements and Its Own Policies Regarding 09/25/2015 01/22/2016 06/30/2018
the Administration of Its Section 8 Housing
Choice Voucher Program
The State of Illinois’ Administrator Lacked
Adequate Controls Over the State’s
2015-CH-1009 09/30/2015 01/28/2016 Note 2
Community Development Block Grant
Disaster Recovery Program-Funded Projects
loanDepot’s FHA-Insured Loans With
2015-LA-1009 Downpayment Assistance Funds Did Not 09/30/2015 01/12/2016 Note 2
Always Meet HUD Requirements
loanDepot’s FHA-Insured Loans With Golden
State Finance Authority Downpayment
2015-LA-1010 09/30/2015 01/12/2016 Note 2
Assistance Gifts Did Not Always Meet HUD
Requirements
The City of Richmond, CA, Did Not
Adequately Support Its Use of HUD-Funded
2015-LA-1803 09/30/2015 01/08/2016 12/31/2018
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 1
Statements Audit
Additional Details To Supplement Our Fiscal
Years 2015 and 2014 (Restated) U.S.
2016-FO-0003 11/18/2015 03/22/2016 Note 3
Department of Housing and Urban
Development Financial Statement Audit
Review of Information System Controls Over
2016-DP-0801 the Government National Mortgage 11/30/2015 03/30/2016 Note 1
Association
The Municipality of Toa Alta, PR, Did Not
2016-AT-1002 Properly Administer Its Section 108 Loan 12/17/2015 04/12/2016 Note 2
Guarantee Program
Single Family Insurance System and Single
2016-DP-0002 12/21/2015 03/31/2016 Note 2
Family Insurance Claims Subsystem
59
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The City of Rochester, NY, Did Not Always
Administer Its Community Development
2016-NY-1003 02/05/2016 06/17/2016 Note 2
Block Grant Program in Accordance With
HUD Requirements
HUD Lacked Adequate Oversight of Public
2016-CH-0001 Housing Agencies’ Compliance With Its 02/26/2016 06/20/2016 10/01/2019
Declaration of Trust Requirements
Homewood Terrace, Auburn, WA, Did Not
Always Conduct Timely Reexaminations,
2016-SE-1001 03/09/2016 07/06/2016 Note 2
Properly Request Assistance Payments, or
Verify Income Information
New York State Did Not Always Disburse
Community Development Block Grant
2016-NY-1006 03/29/2016 07/27/2016 09/30/2018
Disaster Recovery Funds in Accordance With
Federal and State Regulations
HUD Did Not Effectively Negotiate, Execute,
2016-FW-0001 or Manage Its Agreements Under the 03/30/2016 05/04/2017 10/02/2018
Intergovernmental Personnel Act
The City of Jersey City, NJ’s Community
Development Block Grant Program Had
2016-NY-1007 03/30/2016 06/08/2016 Note 2
Administrative and Financial Control
Weaknesses
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 Revise
2016-AT-0001 Its Underwriting Requirements for Multifamily 05/20/2016 09/16/2016 Note 2
Accelerated Processing Loans
The Richmond Housing Authority, Richmond,
2016-LA-1006 06/03/2016 09/21/2016 04/01/2018
CA, Mismanaged Its Financial Operations
The City of Miami Beach Did Not Always
2016-AT-1006 06/17/2016 10/05/2016 Note 2
Properly Administer Its HOME Program
The State of Connecticut Did Not Always
Administer Its Neighborhood Stabilization
2016-BO-1003 06/28/2016 10/25/2016 Note 2
Program in Compliance With HUD
Regulations
60
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
HUD Did Not Always Provide Adequate
2016-PH-0001 Oversight of Property Acquisition and 06/30/2016 02/16/2017 Note 3
Disposition Activities
The Members and Operator Did Not Comply
With the Executed Regulatory Agreement and
2016-AT-1009 08/02/2016 11/30/2016 Note 2
HUD’s Requirements for Saltillo Assisted
Living, Saltillo, MS
The Jefferson Metropolitan Housing Authority,
Steubenville, OH, Failed To Manage Its
2016-CH-1005 08/03/2016 11/17/2016 08/31/2019
Procurements and Contracts in 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 11/30/2018
and Occupy One-Third of Its Public Housing
Units
The State of New York Had Weaknesses in Its
2016-NY-1009 Administration of the Tourism and Marketing 08/12/2016 12/09/2016 Note 2
Program
HUD Did Not Collect an Estimated 1,361
2016-KC-0001 Partial Claims Upon Termination of Their 08/17/2016 12/09/2016 Note 2
Related FHA-Insured Mortgages
The Richmond Redevelopment and Housing
Authority, Richmond, VA, Did Not Always
2016-PH-1005 08/17/2016 12/13/2016 11/01/2075
Charge Eligible and Reasonable Central Office
Cost Center Fees
Independent Attestation Review: U.S.
Department of Housing and Urban
2016-FO-0802 08/26/2016 03/29/2018 09/30/2018
Development, DATA Act Implementation
Efforts
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 Note 2
Regulatory Agreement and HUD
Requirements
61
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The City and County of Honolulu, HI, Did Not
Administer Its Community Development
2016-LA-1009 08/26/2016 12/12/2016 06/15/2018
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 Note 2
Program Requirements
Additional Review of Information System
2016-DP-0003 08/31/2016 12/22/2016 Note 2
Controls Over FHA Information Systems
The State of Louisiana’s Subrecipient Did Not
Always Comply With Its Agreement and HUD
2016-FW-1006 08/31/2016 12/16/2016 Note 2
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 Note 2
FHA Origination Regulations
Operating Fund Calculations Were Not
2016-NY-0001 09/12/2016 12/22/2016 10/31/2018
Always Adequately Verified
HUD Rushed the Implementation of Phase 1
2016-DP-0004 09/20/2016 01/10/2017 Note 2
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 Note 2
Securities Pools
The Housing Authority of the City of
2016-PH-1007 Annapolis, MD, Did Not Always Follow 09/27/2016 01/25/2017 05/31/2018
Applicable Procurement Requirements
P.K. Management Group, Inc., Doral, FL, Did
Not Always Provide Property Preservation and
2016-CH-1008 Protection Services in Accordance With Its 09/29/2016 01/20/2017 04/30/2018
Contract With HUD and Its Own
Requirements
Folts, Inc., Herkimer, NY, Did Not Administer
the Folts Adult Home and Folts Home Projects
2016-NY-1010 09/29/2016 03/28/2017 12/31/2018
in Accordance With Their Regulatory
Agreements
62
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
The Condominium Association and
Management Agent Lacked Adequate Controls
2016-CH-1009 09/30/2016 01/25/2017 08/15/2018
Over the Operation of West Park Place
Condominium, Chicago, IL
The State of Oklahoma Did Not Obligate and
Spend Its Community Development Block
2016-FW-1010 09/30/2016 01/17/2017 Note 2
Grant Disaster Recovery Funds in Accordance
With Requirements
The State of New Jersey Did Not Disburse
Disaster Funds to Its Contractor in Accordance
2016-PH-1009 09/30/2016 01/27/2017 Note 2
With HUD, Federal, and Other Applicable
Requirements
The State of Connecticut Did Not Always
2017-BO-1001 Comply With CDBG Disaster Recovery 10/12/2016 02/01/2017 Note 2
Assistance Requirements
FHA Paid Claims for an Estimated 239,000
2017-KC-0001 Properties That Servicers Did Not Foreclose 10/14/2016 02/28/2017 02/24/2019
Upon or Convey on Time
The City of Springfield, MA, Needs To
Improve Its Compliance With Federal
2017-BO-1002 10/17/2016 01/04/2017 01/11/2019
Regulations for Its CDBG Disaster Recovery
Assistance Grant
HUD Needs To Improve Its Oversight of
Funds Covered Under the Low-Income
2017-CH-0001 10/25/2016 02/22/2017 Note 2
Housing Preservation and Resident
Homeownership Act of 1990
The City of New York, NY, Implemented
Policies That Did Not Always Ensure That
2017-NY-1001 CDBG Disaster Recovery Funds Were 11/02/2016 05/08/2017 05/08/2018
Disbursed in Accordance With Its Action Plan
and Federal Requirements
Audit of Fiscal Years 2016 and 2015
2017-FO-0001 11/14/2016 04/06/2017 Note 3
(Restated) Financial Statements
Audit of the Federal Housing Administration’s
2017-FO-0002 Financial Statements for Fiscal Years 2016 and 11/14/2016 07/13/2017 06/20/2018
2015 (Restated)
63
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
Additional Details To Supplement Our Fiscal
Years 2016 and 2015 (Restated) U.S.
2017-FO-0003 11/15/2016 09/13/2017 Note 3
Department of Housing and Urban
Development Financial Statement Audit
Majestic Management, LLC, a Multifamily
Housing Management Agent in St. Louis, MO,
2017-KC-1001 12/16/2016 04/14/2017 04/30/2018
Did Not Always Comply With HUD’s
Requirements When Disbursing Project Funds
The City of New York, NY, Lacked Adequate
Controls To Ensure That the Use of CDBG-
2017-NY-1004 DR Funds Was Always Consistent With the 12/21/2016 04/17/2017 Note 2
Action Plan and Applicable Federal and State
Requirements
Final Civil Action: Borrower Settled Alleged
2017-PH-1801 Violations of Home Equity Conversion 01/06/2017 01/06/2017 Note 2
Mortgage Program
Union County, NJ’S HOME Investment
Partnerships Program Was Not Always
2017-NY-1005 01/13/2017 05/11/2017 05/07/2019
Administered in Compliance With Program
Requirements
The U.S. Department of Housing and Urban
Development Did Not Always Prevent
2017-KC-0002 01/20/2017 05/09/2017 12/31/2018
Program Participants From Receiving Multiple
Subsidies
The Port Huron Housing Commission, Port
2017-CH-1001 Huron, MI, Did Not Properly Implement Asset 01/24/2017 05/03/2017 05/03/2018
Management
HUD Failed To Follow Departmental
2017-LA-0002 Clearance Protocols for FHA Programs, 01/25/2017 09/22/2017 05/31/2018
Policies, and Operations
HUD’s Transition to a Federal Shared Service
2017-DP-0001 02/01/2017 05/25/2017 Note 3
Provider Failed To Meet Expectations
Review of Information Systems Controls Over
FHA’s Single Family Premiums Collection
2017-DP-0002 02/09/2017 06/12/2017 06/12/2018
Subsystem – Periodic and the Single Family
Acquired Asset Management System
64
SEMIANNUAL REPORT TO CONGRESS
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
Final Action Memorandum: Purchaser of
HUD-Insured Single-Family Property Settled
2017-KC-1801 02/23/2017 02/23/2017 06/15/2021
Allegations of Causing the Submission of a
False Claim
HUD’s Fiscal Years 2016 and 2015 (Restated)
2017-FO-0005 Consolidated Financial Statements Audit 03/01/2017 07/03/2017 Note 2
(Reissued)
Independent Attestation Review: U.S.
Department of Housing and Urban
2017-FO-0801 03/02/2017 06/19/2017 06/19/2018
Development, DATA Act Implementation
Efforts
HUD Failed To Adequately Oversee FHA-
2017-LA-0003 Insured Loans With Borrower-Financed 03/03/2017 06/22/2017 06/15/2019
Downpayment Assistance
The Irvington, NJ, Housing Authority Did Not
Always Administer Its Public Housing
2017-NY-1008 03/10/2017 07/07/2017 07/07/2018
Program in Accordance With Program
Requirements
HUD’s OCPO Did Not Always Comply With
2017-BO-0001 Acquisition Requirements When Planning and 03/22/2017 06/28/2017 04/30/2018
Monitoring Major Service Contracts
The City of Pittsburgh, PA, Did Not Always
2017-PH-1001 Administer Its CDBG Program in Accordance 03/22/2017 07/19/2017 07/19/2018
With HUD and Federal Requirements
United Shore Financial Services, LLC, Settled
Allegations of Failing To Comply With HUD’s
2017-CF-1803 03/29/2017 03/29/2017 03/27/2022
Federal Housing Administration Loan
Requirements
Final Civil Action: Judgment Imposed on the
Former President and Founder of MDR
2017-CH-1801 Mortgage Corporation Regarding Allegations 03/31/2017 08/31/2017 08/21/2018
of Failing To Comply With HUD’s Federal
Housing Administration Requirements
65
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 03/31/2018
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
St. Tammany Parish, Mandeville LA, Did Not
Always Administer Its CDBG Disaster Recovery
2017-FW-1004 04/06/2017 08/02/2017 04/02/2018
Grant in Accordance With HUD Requirements
or as Certified
Clark County, NV, Did Not Always Use
2017-LA-1001 Community Development Block Grant Funds in 04/13/2017 08/03/2017 05/31/2018
Accordance With HUD Requirements
HUD’s Oversight of Section 108 Loans Was Not
2017-AT-0001 Adequate To Ensure Compliance With Program 04/27/2017 10/06/2017 09/30/2018
Requirements
HUD Did Not Comply With the Improper
2017-FO-0006 05/11/2017 03/27/2018 01/15/2019
Payments Elimination and Recovery Act of 2010
HUD PIH’s Required Conversion Program Was
2017-NY-0001 05/18/2017 09/15/2017 12/31/2018
Not Adequately Implemented
HUD Did Not Ensure That Lenders Properly
Processed Voluntary Terminations of Insurance
2017-KC-0003 Coverage on FHA Loans and Disclosed All 05/22/2017 09/19/2017 11/01/2019
Implications of the Terminations to the
Borrowers
The Yorkville Cooperative, Fairfax, VA, Did
Not Administer Its HUD-Insured Property and
2017-PH-1003 05/22/2017 09/19/2017 09/21/2018
Housing Assistance Contract According to
Applicable Requirements
The Housing Authority of DeKalb County,
Decatur, GA, Generally Administered RAD
2017-AT-1006 06/09/2017 10/05/2017 10/04/2018
Appropriately but Did Not Accurately Report on
Its Capital Fund Program
Owners of Cooperative Housing Properties
2017-KC-0005 Generally Charged More for Their Section 8 06/12/2017 10/06/2017 09/14/2018
Units Than for Their Non-Section 8 Units
66
SEMIANNUAL REPORT TO CONGRESS
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
Cypress Meadows Assisted Living, Antioch,
CA, Was Not Administered in Accordance With
2017-LA-1004 06/13/2017 09/29/2017 09/28/2018
Its Regulatory Agreement and HUD
Requirements
The City of Huntington Park, CA, Did Not
Administer Its Community Development Block
2017-LA-1005 06/16/2017 10/17/2017 10/13/2018
Grant Program in Accordance With
Requirements
Beverly Place Apartments, Groves, TX,
Subsidized Nonexistent Tenants, Unqualified
2017-FW-1009 06/29/2017 10/20/2017 09/01/2018
Tenants, and Tenants With Questionable
Qualifications
The Youngstown Metropolitan Housing
Authority, Youngstown, OH, Did Not Always
2017-CH-1002 Comply With HUD’s and Its Own Requirements 07/07/2017 11/03/2017 11/03/2018
Regarding the Administration of Its Housing
Choice Voucher Program
HUD Did Not Conduct Rulemaking or Develop
2017-KC-0006 Formal Procedures for Its Single-Family Note 07/14/2017 10/19/2017 09/30/2019
Sales Program
The Louisville Metro Housing Authority,
Louisville, KY, Did Not Comply With HUD’s
2017-AT-1010 08/04/2017 12/01/2017 08/02/2018
and Its Own Section 8 Housing Choice Voucher
Program Requirements
The City of Fresno, CA, Did Not Administer Its
2017-LA-1006 Community Development Block Grant in 08/09/2017 11/21/2017 05/15/2018
Accordance With HUD Requirements
The State of New Jersey Did Not Always
Disburse Disaster Funds for Its Sandy
2017-PH-1005 08/14/2017 11/15/2017 05/01/2018
Homebuyer Assistance Program To Assist
Eligible Home Buyers
The City of Albuquerque, NM, Did Not
Administer Its Community Development Block
2017-FW-1010 08/16/2017 11/14/2017 02/28/2019
Grant Program in Accordance With
Requirements
67
SEMIANNUAL REPORT TO CONGRESS
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
The West Warwick Housing Authority, West
Warwick, RI, Needs To Improve Its Compliance
2017-BO-1006 08/18/2017 12/15/2017 12/31/2018
With Federal Regulations for Its Housing Choice
Voucher and Public Housing Programs
The Lexington Housing Authority, Lexington,
2017-AT-1011 NC, Did Not Administer Its RAD Conversion in 08/21/2017 12/11/2017 08/21/2018
Accordance With HUD Requirements
Final Civil Action: Prospect Mortgage, LLC,
2017-AT-1801 Settled Alleged Violations of Federal Housing 08/21/2017 08/21/2017 Note 2
Administration Loan Requirements
The Chukchansi Indian Housing Authority,
Oakhurst, CA, Did Not Always Follow HUD’s
2017-LA-1007 08/24/2017 11/15/2017 10/15/2018
Requirements for Its Indian Housing Block
Grant Program
BLM Companies LLC Failed To Ensure That It
2017-FW-1011 Protected and Preserved HUD Properties Under 08/29/2017 12/26/2017 11/30/2018
Its Field Service Manager Contract for Area 1D
The Cooperative and Management Agent Lacked
2017-CH-1006 Adequate Controls Over the Operation of 09/05/2017 12/19/2017 09/01/2018
Lakeview East Cooperative
The City of New Orleans, New Orleans, LA, Did
2017-FW-1012 Not Always Properly Administer Its HOME 09/06/2017 12/19/2017 11/30/2018
Program
HUD Subsidized 10,119 Units for Tenants Who
2017-KC-0007 09/12/2017 12/01/2017 12/31/2018
Were Undercharged Flat Rents
HUD Did Not Have Adequate Controls To
2017-LA-0004 Ensure That Servicers Properly Engaged in Loss 09/14/2017 01/11/2018 12/14/2018
Mitigation
The State of New York Did Not Show That
Disaster Recovery Funds Under Its Non-Federal
2017-NY-1010 09/15/2017 01/12/2018 08/31/2018
Share Match Program Were Used for Eligible
and Supported Costs
The Housing Authority of the City of Hartford,
2017-BO-1007 CT, Did Not Always Comply With Procurement 09/21/2017 12/19/2017 12/07/2018
Requirements
68
SEMIANNUAL REPORT TO CONGRESS
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
Ginnie Mae Did Not Adequately Respond to
2017-KC-0008 09/21/2017 01/18/2018 01/02/2019
Changes in Its Issuer Base
HUD Did Not Always Follow Applicable
2017-LA-0005 Requirements When Forgiving Debts and 09/21/2017 01/17/2018 09/28/2018
Terminating Debt Collections
HUD Did Not Administer Economic
Development Initiative – Special Project and
2017-LA-0006 09/21/2017 01/18/2018 01/03/2019
Neighborhood Initiative Congressional Grants in
Accordance With Program Requirements
The Owner of Schwenckfeld Manor, Lansdale,
PA, Did Not Always Manage Its HUD-Insured
2017-PH-1006 09/25/2017 01/23/2018 01/21/2019
Property in Accordance With Applicable HUD
Requirements
Majestic Management, LLC, St. Louis, MO, a
Management Agent for the East St. Louis
2017-KC-1003 09/26/2017 01/12/2018 06/15/2018
Housing Authority, Mismanaged Its Public
Housing Program
Final Civil Action: PHH Corporation Settled
Allegations of Failing To Comply With HUD’s
2017-CF-1806 09/28/2017 09/28/2017 Note 2
Federal Housing Administration Loan
Requirements
Residential Home Funding Corp. Settled
Allegations of Failing To Comply With HUD’s
2017-CF-1807 09/28/2017 09/28/2017 09/30/2021
Federal Housing Administration Loan
Requirements
The Menard County Housing Authority,
Petersburg, IL, Did Not Comply With HUD’s
2017-CH-1007 and Its Own Requirements Regarding the 09/28/2017 01/25/2018 01/24/2019
Administration of Its Housing Choice Voucher
Program
Travelers Aid Society of Metropolitan Detroit,
Detroit, MI, Did Not Always Administer Its
2017-CH-1008 09/28/2017 02/15/2018 06/30/2018
Continuum of Care Program in Accordance With
Federal Regulations
New Core Project: Although Transaction
2017-DP-0003 Processing Had Improved Weaknesses 09/28/2017 01/25/2018 09/28/2018
Remained
69
SEMIANNUAL REPORT TO CONGRESS
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
RMS & Associates, Las Vegas, NV, Improperly
2017-LA-1803 Originated FHA-Insured Loans With Restrictive 09/28/2017 01/05/2018 12/28/2018
Covenants
The New Brunswick Housing Authority, NJ, Did
Not Always Administer Its Operating and
2017-NY-1013 09/28/2017 01/26/2018 12/28/2018
Capital Funds In Accordance With HUD
Requirements
The Chester Housing Authority, Chester, PA,
2017-PH-1007 Did Not Always Ensure That Its Program Units 09/28/2017 12/22/2017 07/31/2018
Met Housing Quality Standards
HUD Could Improve Its Controls Over the
2017-NY-0002 Disposition of Real Properties Assisted With 09/29/2017 01/26/2018 Note 3
Community Development Block Grant Funds
HUD Did Not Provide Sufficient Guidance and
2017-PH-0003 Oversight To Ensure That FHA-Insured 09/29/2017 01/26/2018 07/19/2019
Properties Nationwide Had Safe Water
The Owner and Management Agents Lacked
2017-CH-1009 Adequate Controls Over the Operation of Mary 09/30/2017 01/26/2018 06/30/2019
Scott Nursing Center, Dayton, OH
BLM Companies LLC, Hurricane, UT, Did Not
Provide Property Preservation and Protection
2017-CH-1011 09/30/2017 01/25/2018 01/10/2019
Services in Accordance With Its Contract With
HUD and Its Own Requirements
Audits excluded:
87 audits under repayment plans
35 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
70
SEMIANNUAL REPORT TO CONGRESS
SIGNIFICANT EVALUATION REPORTS FOR WHICH FINAL ACTION HAD NOT BEEN
COMPLETED WITHIN 12 MONTHS AFTER THE DATE OF THE INSPECTOR GENERAL’S
REPORT
DECISION
REPORT NUMBER REPORT TITLE ISSUE DATE FINAL ACTION
DATE
FY 2013 Federal Information Security
2013-ITED-0001 11/29/2013 11/29/2013 TBD 14
Management Act (FY13 FISMA)
HUD Cybersecurity Privacy Programs
2014-ITED-0001 4/30/2014 4/30/2014 TBD
(Privacy)
FY 2014 Federal Information Security
2014-OE-0003 11/15/2014 11/15/2014 TBD
Modernization Act (FY14 FISMA)
FY 2015 Federal Information Security
2015-OE-0001 11/15/2015 11/15/2015 TBD
Modernization Act (FY15 FISMA)
2015-OE-0002 HUD IT Modernization 9/28/2015 9/25/2015 TBD
Records Management in the Office of Hospital
2016-OE-0001 9/23/2016 11/3/2016 4/11/2018
Facilities Needs Improvement
CIGIE Web Application Security Cross-
2016-OE-0002 6/6/2017 6/2/2017 TBD
Cutting
FY 16 Federal Information Security
2016-OE-0006 11/10/2016 11/10/2016 TBD
Modernization Act of 2014 (FY16 FISMA)
FY 17 Federal Information Security
2017-OE-0007 10/31/2017 12/4/2017 TBD
Modernization Act of 2014 (FY17 FISMA)
14
The final action date is currently listed as TBD because HUD discontinued the use of the centralized information security management
tool. OE is working with the Department to manually update the final action dates for these recommendations. The final action dates
will be reported in our next Semiannual Report.
71
SEMIANNUAL REPORT TO CONGRESS
SIGNIFICANT EVALUATION REPORTS ISSUED WITHIN THE PAST 12 MONTHS THAT
WERE DESCRIBED IN PREVIOUS SEMIANNUAL REPORTS FOR WHICH FINAL ACTION
HAD NOT BEEN COMPLETED AS OF 03/31/2018
REPORT NUMBER REPORT TITLE ISSUE DATE DECISION DATE FINAL ACTION
HUD Web Application Security Evaluation
2016-OE-0002 6/6/2017 6/2/2017 TBD 15
Report
Federal Information Security Modernization Act
2016-OE-0006 (FISMA) Fiscal Year 2016 Evaluation Report 11/10/2016 11/10/2016 TBD
(FY16 FISMA)
Assessing HUD Plans for Evaluating Urban
2016-OE-0010 Promise Zones and HUD Grant Programs 4/19/2017 3/27/2017 7/31/2018
Participating in Promise Zones
15 The final action date is currently listed as TBD because HUD discontinued the use of the centralized information security management
tool. OE is working with the Department to manually update the final action dates for these recommendations. The final action dates
will be reported in our next Semiannual Report.
72
SEMIANNUAL REPORT TO CONGRESS
TABLE C
INSPECTOR GENERAL-ISSUED REPORTS WITH QUESTIONED AND UNSUPPORTED
COSTS AT 3/31/2018 (IN THOUSANDS)
NUMBER OF
QUESTIONED UNSUPPORTED
AUDIT REPORTS AUDIT
COSTS COSTS
REPORTS
For which no management decision had been made by
A1 46 $137,986 $87,904
the beginning of the reporting period
For which litigation, legislation, or investigation was
A2 3 25,110 2,946
pending at the beginning of the reporting period
For which additional costs were added to reports in
A3 - 1,866 1,133
beginning inventory
A4 For which costs were added to noncost reports 0 0 0
B1 Which were issued during the reporting period 17 17,510 14,079
B2 Which were reopened during the reporting period 0 0 0
Subtotals (A+B) 66 182,472 106,062
For which a management decision was made during the
C 45 16 89,308 75,769
reporting period
(1) Dollar value of disallowed costs: 13 17 15,738 10,704
Due HUD
30 57,281 48,855
Due program participants
(2) Dollar value of costs not disallowed 8 18 16,289 16,210
For which a management decision had been made not to
D determine costs until completion of litigation, 3 25,110 2,946
legislation, or investigation
For which no management decision had made by the end 18 68,054 27,347
E
of the reporting period <33> 19 <31,192> 19 <14,079> 19
16
Twenty-seven audit reports also contain recommendations with funds to be put to better use.
17
Two audit reports also contain recommendations with funds due program participants.
18
Four audit reports also contain recommendations with funds agreed to by management.
19
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.
73
SEMIANNUAL REPORT TO CONGRESS
TABLE D
INSPECTOR GENERAL-ISSUED REPORTS WITH RECOMMENDATIONS THAT FUNDS BE
PUT TO BETTER USE AT 3/31/2018 (IN THOUSANDS)
NUMBER OF AUDIT
AUDIT REPORTS DOLLAR VALUE
REPORTS
For which no management decision had been made by the 39 $8,072,236
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 - 121
A3
inventory
A4 For which costs were added to noncost reports 0 0
B1 Which were issued during the reporting period 10 3,158,538
B2 Which were reopened during the reporting period 0 0
Subtotals (A+B) 50 11,232,589
For which a management decision was made during the reporting 33 20 452,957
C
period
(1) Dollar value of recommendations that were agreed to by
management: 15 396,201
Due HUD 20 56,756
Due program participants
(2) Dollar value of recommendations that were not agreed to by 0 0
management
For which a management decision had been made not to 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 16 10,777,938
E reporting period <13> 21 <7,192,394 > 21
20
Twenty-seven audit reports also contain recommendations with questioned costs.
21
The figures in brackets represent data at the recommendation level as compared to the report level. See the explanations of tables C
and D below.
74
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 these 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.
75
SEMIANNUAL REPORT TO CONGRESS
APPENDIX 4 – INSPECTOR GENERAL EMPOWERMENT
ACT
The Inspector General Empowerment Act (Public Law 114-317) (IGEA), enacted in December 2016, contains
several reporting requirements in the Offices of Inspector General’s (OIG) Semiannual Reports to Congress
(SAR). Below are the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD
OIG), statutory requirements as stipulated in the IGEA, with hyperlinks to the detailed information located on its
website at www.hudoig.gov.
Summary of Reports With No Establishment Comment
The IGEA requires OIGs to report on each audit and evaluation report for which the Department did not return
comments within 60 days of HUD OIG’s providing the report to the Department.
There are no instances to report this period.
Summary of Reports With Open Recommendations
The IGEA requires OIGs to report on each audit and evaluation report for which there are any outstanding
unimplemented recommendations, including the combined potential cost savings of these recommendations.
Summaries for the Office of Audit and Office of Evaluation are presented below.
The details of each open recommendation can be found on OIG’s website at https://www.hudoig.gov/open-
recommendations.
AUDIT
The Department currently has 2,028 outstanding (open) unimplemented recommendations with a combined
potential cost savings of more than $17 billion. The following list and table reflect the reasons the listed
recommendations remain unimplemented:
• 1,825 recommendations have active corrective action plans in place and valid repayment plans, but HUD has
not finished implementing the recommendation.
• 203 recommendations are currently without management decisions (agreement between the Department and
OIG). Fifty-one recommendations are beyond the 180-day statutory limit due to disagreement and were
reported in table A of this SAR. The remainder are within the 180-day limit, during which time management
and OIG can arrive at an agreed-upon corrective action plan.
• 416 open recommendations have management decisions in place but are currently under investigative,
legislative, or judicial action or under a valid repayment plan and are, therefore, suspended pending resolution.
76
SEMIANNUAL REPORT TO CONGRESS
OFFICE OF AUDIT OPEN RECOMMENDATIONS
Calendar year Number of open Cumulative estimated cost savings from
recommendations open recommendations
Pre-2001 6 $3,992,169
2001 1 320,000
2002 7 1,382,626
2003 14 1,901,072
2004 8 8,303,357
2005 5 3,148,423
2006 36 18,979,092
2007 27 6,227,340
2008 38 72,607,328
2009 33 80,067,611
2010 36 52,281,628
2011 61 108,254,076
2012 49 22,830,545
2013 136 439,127,593
2014 219 2,052,747,185
2015 213 1,375,845,544
2016 358 8,962,407,748
2017 667 2,011,997,984
2018 114 1,921,175,415
Total 2028 17,143,596,736
77
SEMIANNUAL REPORT TO CONGRESS
EVALUATION
The following table summarizes Office of Evaluation reports with open recommendations:
OFFICE OF EVALUATION OPEN RECOMMENDATIONS
Reporting period Number of open recommendations
Pre-2013 0
2013 11
2014 24
2015 25
2016 30
2017 25
2018 0
Total 115
The Office of Evaluation conducts evaluations focused on improving departmental processes and programs. Its
recommendations have not focused on producing direct cost savings but, rather, on improved program effectiveness
and a reduced likelihood of negative outcomes. For example, during this reporting period, some of the Office of
Evaluation’s recommendations addressed HUD’s ability to better estimate needs for consideration in future contract
award decisions.
Statistical Table Showing Investigative Report Metrics
The IGEA requires the SAR to include statistical tables and metrics for investigative cases. For the information
below, the data used in this statistical table were extracted from HUD OIG’s Case Management System (CMS).
CMS 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 CMS to meet business
requirements, such as the information used to create this statistical table. The table below provides additional
guidance pertaining to each requested category of information. HUD OIG’s CMS 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. HUD OIG is developing a solution to the system configuration to
allow a query to quantify persons referred for State and Federal prosecution.
78
SEMIANNUAL REPORT TO CONGRESS
OFFICE OF INVESTIGATION IGEA STATISTICAL TABLE
Requirement Total
A. Total number of investigative reports issued during the reporting period. 22 213
B. Total number of persons referred to the U.S. Department of Justice for criminal prosecution
148
during the reporting period. 23
C. Total number of persons referred to State and local prosecuting authorities for criminal
148
prosecution during the reporting period. 24
D. Total number of indictments and criminal informations during the reporting period that
124
resulted from any prior referral to prosecuting authorities. 25
Investigations of Senior Government Employees
The IGEA requires OIG to summarize in the SAR each investigation involving a senior government employee when
allegations of misconduct were substantiated. Listed below are the cases for this reporting period:
• It was alleged that a senior HUD official granted two separate time-off incentive awards in an attempt to
obtain concessions during union contract negotiations. HUD OIG referred the case to the United States
Attorney’s Office; however, the matter was declined for prosecution. The HUD official retired as a result
of the HUD OIG investigation.
• It was alleged that a former HUD OIG employee performed unauthorized searches using an agency
LexisNexis account. As a result of the investigation, it was determined that proper protocols were not
followed to ensure that the former employee’s access was revoked. HUD OIG referred the case to the
United States Attorney’s Office; however, the matter was declined for prosecution. Disciplinary action was
taken against a HUD OIG employee for failure to safeguard the security and confidentiality of records.
22
Includes approved reports of investigations
23
Includes total cases presented for prosecution. HUD OIG’s case management system is not currently configured to quantify persons
referred.
24
Includes total cases presented for prosecution. HUD OIG’s case management system is not currently configured to quantify persons
referred.
25
Includes all charging documents reported: criminal complaints, indictments, information, and superseding indictments
79
SEMIANNUAL REPORT TO CONGRESS
Instances of Whistleblower Retaliation
The IGEA requires OIG to include in the SAR a detailed description of any instance of whistleblower retaliation,
including information about the official found to have engaged in retaliation and what, if any, consequences the
establishment imposed to hold that official accountable.
INVESTIGATION
A former executive with HUD filed a whistleblower retaliation complaint after identifying instances of intentional
misapplication of generally accepted accounting practices to HUD OIG. The complainant alleged that he or she was
retaliated against for his or her protected disclosure to HUD OIG by being given a poor performance evaluation that
was based upon fabricated facts. The complainant claimed that he or she was isolated from others in the office by
not being included on emails or in meetings. The complainant’s employment was ultimately terminated. The
complainant claimed that the termination was also in retaliation by management in response to his or her protected
disclosures to HUD OIG. HUD OIG failed to substantiate the whistleblower allegations. It was further determined
that the employee’s employment would have been terminated during his or her probationary period regardless of a
protected disclosure.
OIG Independence
The IGEA requires OIG to include in the SAR 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.
Reports That Were Closed During the Period That Were Not Disclosed to the Public
Section 5(a)(22) of the Inspector General Empowerment Act, as amended, requires that OIG report on each audit
conducted by the office that is closed during the reporting period and was not disclosed to the public. During the
current reporting period, OIG had one report that was closed but not disclosed to the public.
AUDIT
LOAN ACCOUNTING SYSTEM, ISSUED: DECEMBER 9, 2014, CLOSED: JANUARY 16,
2018
This was a LIMITED DISTRIBUTION audit report. HUD OIG reviewed the general and application controls
over HUD’s Loan Accounting System (LAS) as part of the internal control assessments required for the fiscal year
2014 financial statement audit under the Chief Financial Officer’s Act of 1990. OIG’s objective was to focus on the
effectiveness of general and application controls over LAS for compliance with HUD information technology (IT)
policies and Federal information system security and financial management requirements. OIG focused its
assessment of business processing controls on the Emergency Homeowners Loan Program (EHLP).
The EHLP data in LAS were inaccurate and incomplete, the process used by HUD to correct the data for the direct
loan portion of the program did not result in accurate data, and internal control weaknesses in EHLP contributed to
the data inaccuracies. Controls over the data transfer process for EHLP loan data were not secure. While a secure
website was established for the fiscal agent and States to send EHLP loan information to the Offices of Housing and
the Chief Financial Officer, the fiscal agent and States were not required to transmit data via the secure website. In
80
SEMIANNUAL REPORT TO CONGRESS
addition, controls to lock out a user after three failed login attempts were not implemented. Further, data changes
were not adequately controlled in LAS. OIG also identified weaknesses in LAS access controls, an outdated
configuration management plan, and a lack of documentation of the interfaces for LAS.
OIG made recommendations to the Chief Financial Officer and the Acting Federal Housing Commissioner related
to the internal control weaknesses that led to the inaccurate data in LAS. OIG recommended (1) a third-party
verification of the EHLP data to verify the data received from the fiscal agent and State grantees, (2) the
implementation of a reconciliation process between the fiscal agent and State grantees with the original mortgage
companies before the EHLP loan termination and reporting of the final loan information to HUD, (3) an assessment
of the data transfer process for EHLP, (4) the creation of a formal data change process for LAS, and (5) that the
remaining internal control weaknesses identified be addressed. (Audit Report: 2015-DP-0004)
INVESTIGATION
During the current reporting period, OIG has seven investigative reports that were closed but not disclosed to the
public. The allegations include the following:
• A senior HUD official granted two separate time-off incentive awards in an attempt to obtain concessions
during union contract negotiations. HUD OIG referred the case to the United States Attorney’s Office;
however, the matter was declined for prosecution. The HUD official retired as a result of the HUD OIG
investigation. (This case was previously included under the Investigations of Senior Government
Employees section of this report.)
• A HUD administrative specialist mismanaged HUD funds, to include a HUD purchase card. The
investigation determined that the allegations were without merit and unfounded. As a result, this matter
was administratively closed.
• A former HUD OIG employee violated postemployment restrictions regarding a HUD matter due to the
employee’s previous involvement as a HUD OIG employee. The investigation failed to substantiate the
allegation that the former employee violated postemployment restrictions. HUD OIG referred the case to
the United States Attorney’s Office; however, the matter was declined for prosecution. This matter was
then closed.
• A former HUD OIG employee performed unauthorized searches using an agency LexisNexis account. As a
result of the investigation, it was determined that proper protocols were not followed to ensure that the
former employee’s access was revoked. HUD OIG referred the case to the United States Attorney’s Office;
however, the matter was declined for prosecution. Disciplinary action was taken against a HUD employee
for failure to safeguard the security and confidentiality of records. (This case was previously included
under the Investigations of Senior Government Employees section of this report.)
• A former HUD executive alleged that he or she was directed to withhold documents from a HUD OIG
audit. In addition, it was alleged that the executive was ordered to sign false representations. The
investigation failed to substantiate the allegations. As a result, the matter was administratively closed.
• A HUD employee may have violated the conflict-of-interest statute by steering HUD grants to a former
employer. In addition, it was alleged that another HUD employee may have steered HUD grants to a
prospective employer. The investigation failed to substantiate the allegations. As a result, the matter was
administratively closed.
• A HUD manager had been stalking him or her for a period of 2 years. It was further alleged that this
manager attempted to solicit information about this employee through outside sources. In addition, the
employee alleged that he or she was directed to mismanage files that contained personally identifiable
81
SEMIANNUAL REPORT TO CONGRESS
information. The investigation determined that the allegations were without merit. As a result, this matter
was administratively closed.
EVALUATION
FEDERAL INFORMATION SECURITY MODERNIZATION ACT REPORT FOR FISCAL YEAR
2017
This was a LIMITED DISTRIBUTION evaluation report. HUD OIG completed its annual evaluation of HUD’s
cybersecurity program, making 19 recommendations for improvement to the Department. HUD had made several
improvements in its overall information security program and had begun to implement several initiatives in
alignment with its cybersecurity framework strategy. HUD had also satisfied and closed eight total OIG IT Federal
Information Security Modernization Act (FISMA) evaluation recommendations from fiscal years 2013-2017 since
the last SAR. By addressing and closing recommendations, HUD strengthens its IT security posture. However, an
additional 95 OIG FISMA evaluation recommendations remain open, leaving deficiencies and undue risk to
fundamental components of an effective cybersecurity program. HUD lacked a consistent approach to monitoring
and communicating risk and IT security events and continues to lack effectiveness in risk management, governance,
and contractor oversight programs. Further, HUD continues to experience high turnover and position vacancies in
key IT positions. Significant risk will persist until these key deficiencies are addressed and plans, processes, and
capabilities are fully funded and implemented. (Evaluation Report: 2017-OE-0007)
82
OIG TELEPHONE DIRECTORY
OFFICE OF AUDIT
HEADQUARTERS OFFICE Washington, DC 202-708-0364
REGION 1 Boston, MA 617-994-8380
Hartford, CT 860-240-9739
REGION 2 New York, NY 212-264-4174
Buffalo, NY 716-551-5755
Newark, NJ 973-622-7900
REGION 3 Philadelphia, PA 215-656-0500
Baltimore, MD 410-962-2520
Pittsburgh, PA 412-644-6372
Richmond, VA 804-771-2100
REGION 4 Atlanta, GA 404-331-3369
Greensboro, NC 336-547-4001
Miami, FL 305-536-5387
San Juan, PR 787-766-5540
REGION 5 Chicago, IL 312-913-8499
Columbus, OH 614-280-6138
Detroit, MI 313-226-6190
83
REGION 6 Fort Worth, TX 817-978-9309
Baton Rouge, LA 225-448-3975
Houston, TX 713-718-3199
New Orleans, LA 504-671-3000
Albuquerque, NM 505-346-6463
Oklahoma City, OK 405-609-8606
San Antonio, TX 210-475-6800
REGION 7-8-10 Kansas City, KS 913-551-5870
St. Louis, MO 314-539-6339
Denver, CO 303-672-5452
Seattle, WA 206-220-5360
REGION 9 Los Angeles, CA 213-894-8016
Las Vegas, NV 702-366-2100
Phoenix, AZ 602-379-7250
San Francisco, CA 415-489-6400
OFFICE OF EVALUATION
HEADQUARTERS Washington, DC 202-708-0430
OFFICE OF INVESTIGATION
HEADQUARTERS Washington, DC 202-708-5998
REGION 1-2 New York, NY 212-264-8062
Boston, MA 617-994-8450
Hartford, CT 860-240-4800
Manchester, NH 603-666-7988
Newark, NJ 973-776-7347
84
REGION 3 Philadelphia, PA 215-430-6756
Baltimore, MD 410-209-6695
Pittsburgh, PA 412-644-2668
Richmond, VA 804-822-4890
REGION 4 Atlanta, GA 404-331-5001
Greensboro, NC 336-547-4000
Miami, FL 305-536-3087
San Juan, PR 787-766-5868
REGION 5 Chicago, IL 312-353-4196
Cleveland, OH 216-357-7800
Columbus, OH 614-469-5737
Detroit, MI 313-226-6280
Indianapolis, IN 317-957-7377
Minneapolis-St. Paul, MN 612-370-3130
REGION 6 Fort Worth, TX 817-978-5440
Baton Rouge, LA 225-448-3941
Houston, TX 713-718-3220
Little Rock, AR 501-918-5792
New Orleans, LA 504-671-3700
Oklahoma City, OK 405-609-8601
San Antonio, TX 210-475-6822
85
REGION 7-8-10 Denver, CO 303-672-5350
Billings, MT 406-247-4080
Kansas City, KS 913-551-5566
Salt Lake City, UT 801-524-6091
St. Louis, MO 314-539-6559
Seattle, WA 206-220-5380
REGION 9 Los Angeles, CA 213-534-2496
Las Vegas, NV 702-366-2144
Phoenix, AZ 602-379-7252
Sacramento, CA 916-930-5693
San Francisco, CA 415-489-6685
JOINT CIVIL FRAUD
Audit Kansas City, KS 913-551-5566
Investigation Kansas City, KS 913-551-5566
86
ACRONYMS AND ABBREVIATIONS LIST
ACD....................................................................... Accelerated Claims Disposition program
AFR........................................................................ agency financial report
ARC....................................................................... Administrative Resource Center
ASC....................................................................... Accounting Standards Codification
CAIVRS................................................................. Credit Alert Verification Reporting System
CDBG.................................................................... Community Development Block Grant
CDBG-DR............................................................. Community Development Block Grant Disaster Recovery
CFO....................................................................... chief financial officer
CFR....................................................................... Code of Federal Regulations
CIGIE.................................................................... Counsel of the Inspectors General on Integrity and Efficiency
CPD....................................................................... Office of Community Planning and Development
CMS...................................................................... Case Management System
CWCOT................................................................ Claims Without Conveyance of Title program
DATA Act.............................................................. Digital Accountability and Transparency Act of 2014
DEC....................................................................... Departmental Enforcement Center
DHS....................................................................... U.S. Department of Homeland Security
EHLP..................................................................... Emergency Homeowners Loan Program
ESI......................................................................... electronically stored information
FAST...................................................................... Fixing America’s Surface Transportation Act
FBI......................................................................... Federal Bureau of Investigation
FEMA..................................................................... Federal Emergency Management Agency
FFMIA.................................................................... Federal Financial Management Improvement Act of 1996
FHA....................................................................... Federal Housing Administration
FISMA................................................................... Federal Information Security Modernization Act
FOIA...................................................................... Freedom of Information Act
FSSP...................................................................... Federal shared service provider
GAAP..................................................................... generally accepted accounting principles
Ginnie Mae........................................................... Government National Mortgage Association
87
ACRONYMS AND ABBREVIATIONS LIST (CONTINUED)
GFAS..................................................................... Ginnie Mae Financial Accounting System
HECM.................................................................... home equity conversion mortgage
HOPWA................................................................ Housing Opportunities for Persons With AIDS
HUD...................................................................... U.S. Department of Housing and Urban Development
IDIS....................................................................... Integrated Disbursement and Information System
IG.......................................................................... Inspector General
IGEA...................................................................... Inspector General Empowerment Act
IPERA.................................................................... Improper Payments Elimination and Recovery Act of 2010
IT........................................................................... information technology
LAS........................................................................ Loan Accounting System
LOS....................................................................... Loan Origination System
MDD...................................................................... Major Disaster Declaration
MHI....................................................................... mortgage held for investment
MSS....................................................................... master subservicer
NCIS...................................................................... New Core Interface Solution
OA......................................................................... Office of Audit
OCFO.................................................................... Office of the Chief Financial Officer
OCIO..................................................................... Office of the Chief Information Officer
OCPO.................................................................... Office of the Chief Procurement Officer
OE......................................................................... Office of Evaluation
OGC...................................................................... Office of General Counsel
OI.......................................................................... Office of Investigation
OIG....................................................................... Office of Inspector General
OMB...................................................................... Office of Management and Budget
ONAP.................................................................... Office of Native American Programs
PDMA.................................................................... Presidentially Declared Major Disaster Area
PHA....................................................................... public housing agency
PIH........................................................................ Office of Public and Indian Housing
88
ACRONYMS AND ABBREVIATIONS LIST (CONTINUED)
PRWORA..............................................................Personal Responsibility and Work Opportunity Reconcilliation Act of
1996
REAC..................................................................... Real Estate Assessment Center
SAR....................................................................... Semiannual Report to Congress
SES........................................................................ Senior Executive Service
SF.......................................................................... standard form
TDHE..................................................................... tribally designated housing entity
U.S.C..................................................................... United States Code
USSGL................................................................... United States Standard General Ledger
89
REPORTING REQUIREMENTS
The specific reporting requirements as prescribed by the Inspector General Act of 1978, as amended by the
Inspector General Act of 1988, are listed below.
SOURCE-REQUIREMENT PAGES
Section 4(a)(2)-review of existing and proposed legislation and regulations. 3, 12
Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to the 1-20,
administration of programs and operations of the Department. 42-43
Section 5(a)(2)-description of recommendations for corrective action with respect to 25-45
significant problems, abuses, and deficiencies.
Section 5(a)(3)26-identification of each significant recommendation described in previous Appendix 3,
Semiannual Report on which corrective action has not been completed. Table B, 51
Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 1-20
prosecutions and convictions that have resulted.
Section 5(a)(5)-summary of reports made on instances where information or assistance No
was unreasonably refused or not provided, as required by Section 6(b)(2) of the Act. instances
Section 5(a)(6)-listing of each audit report completed during the reporting period, and for Appendix 2,
each report, where applicable, the total dollar value of questioned and unsupported costs 45
and the dollar value of recommendations that funds be put to better use.
Section 5(a)(7)-summary of each particularly significant report. 1-20
Section 5(a)(8)-statistical tables showing the total number of audit reports and the total Appendix 3,
dollar value of questioned and unsupported costs. Table C, 73
Section 5(a)(9)-statistical tables showing the total number of audit reports and the dollar Appendix 3,
value of recommendations that funds be put to better use by management. Table D, 74
Section 5(a)(10)-summary of each audit report issued before the commencement of the Appendix 3,
reporting period for which no management decision had been made by the end of the period. Table A, 49
Section 5(a)(11)-a description and explanation of the reasons for any significant revised Appendix 4,
management decisions made during the reporting period. 76
Section 5(a)(12)-information concerning any significant management decision with which 40
the Inspector General is in disagreement.
Section 5(a)(13)-the information described under section 05(b) of the Federal Financial 40
Management Improvement Act of 1996.
26
nsupported costs are a subset of questioned costs that the Inspector General Act requires be identified separately from the cumulative
U
questioned costs identified.
90
FRAUD ALERT
Every day, loan modification and foreclosure rescue scams rob vulnerable homeowners of their money and their
homes. The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG),
is the Department’s law enforcement arm and is responsible for investigating complaints and allegations of
mortgage fraud. Following are some of the more common scams.
COMMON LOAN MODIFICATION SCAMS
Phony counseling scams: The scam artist says that he or she can negotiate a deal with the lender to modify
the mortgage — for an upfront fee.
Phony foreclosure rescue scams: Some scammers advise homeowners to make their mortgage payments
directly to the scammer while he or she negotiates with the lender. Once the homeowner has made a few
mortgage payments, the scammer disappears with the homeowner’s money.
Fake “government” modification programs: Some scammers claim to be affiliated with or approved by the
government. The scammer’s company name and website may appear to be a real government agency, but
the website address will end with .com or .net instead of .gov.
Forensic loan audit: Because advance fees for loan counseling services are prohibited, scammers may sell
their services as “forensic mortgage audits.” The scammer will say that the audit report can be used to avoid
foreclosure, force a mortgage modification, or even cancel a loan. The fraudster typically will request an
upfront fee for this service.
Mass joinder lawsuit: The scam artist, usually a lawyer, law firm, or marketing partner, will promise that he
or she can force lenders to modify loans. The scammers will try to “sell” participation in a lawsuit against the
mortgage lender, claiming that the homeowner cannot participate in the lawsuit until he or she pays some
type of upfront fee.
Rent-to-own or leaseback scheme: The homeowner surrenders the title or deed as part of a deal that will let
the homeowner stay in the home as a renter and then buy it back in a few years. However, the scammer has
no intention of selling the home back to the homeowner and, instead, takes the monthly “rent” payments and
allows the home to go into foreclosure.
Remember, only work with a HUD-approved housing counselor to understand your options for assistance.
HUD-approved housing counseling agencies are available to provide information and assistance. Call
888-995-HOPE to speak with an expert about your situation. HUD-approved counseling is free of charge.
If you suspect fraud, call HUD OIG.
91
Diversity and Equal Oppurunity
The promotion of high standards and equal employment opportunity for
employees and job applicants at all levels. HUD OIG reaffirms its commitment
to nondiscrimination in the workplace and the recruitment of qualified employees
without prejudice regarding their gender, race, religion, color, national origin,
sexual orientation, disability, or other classification protected by law. HUD OIG
is committed and proactive in the prevention of discrimination and ensuring
freedom from retaliation for participating in the equal employment opportunity
process in accordance with departmental policies and procedures.
Report fraud, waste, and mismanagement
in HUD programs and operations by
Faxing the OIG hotline: 202-708-4829
Emailing the OIG hotline: hotline@hudoig.gov
Sending written information to
Department of Housing and Urban Development
Inspector General Hotline (GFI)
451 7th Street SW
Washington, DC 20410
Internet
https://www.hudoig.gov/report-fraud
ALL INFORMATION IS CONFIDENTIAL, AND
YOU MAY REMAIN ANONYMOUS.
U.S. DEPARTMENT
OF HOUSING
AND URBAN
DEVELOPMENT
Report Number 79
www.hudoig.gov
SAR 79 - Semiannual Report to Congress for the period Ending March 31, 2018
Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-06-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)