oversight

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)

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)




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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.




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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.




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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)




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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)




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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




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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.




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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.




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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




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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




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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.




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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.




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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)




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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




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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




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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