SIGTARP-16-004 September 9, 2016 

SIGTARP OFFICE OF THE SPECIAL 

INSPECTOR GENERAL FOR 

THE TROUBLED ASSET 

RELIEF PROGRAM 

Waste and Abuse in the Hardest Hit Fund 

in Nevada 

Audit Report
Office of the special inspector general 

 For the Troubled Asset Relief Program 

1801 L Street, NW, 4th Floor 

Washington, D.C. 20220 

SIGTARP-16-004 September 9, 2016 

 September 9, 2016 

MEMORANDUM FOR: Honorable Jacob J. Lew – Secretary of the Treasury 

 

/Signed/ 

FROM: Honorable Christy Goldsmith Romero – Special Inspector 

General for the Troubled Asset Relief Program 

SUBJECT: Waste and Abuse in the Hardest Hit Fund Nevada 

(SIGTARP 16-004) 

We are providing this report for your information and use. It discusses waste and abuse of TARP 

funds identified in the Hardest Hit Fund program in Nevada. 

The Office of the Special Inspector General for the Troubled Asset Relief Program conducted this 

audit (engagement code 033) under the authority of the Emergency Economic Stabilization Act of 

2008 and Public Law 110-343, as amended, which also incorporates the duties and 

responsibilities of inspectors general under the Inspector General Act of 1978, as amended. 

We considered comments from the Department of the Treasury when preparing the report. 

Treasury’s comments are addressed in the report, where applicable, and a copy of Treasury’s 

response is included in its entirety. 

We appreciate the courtesies extended to our staff. For additional information on this report, 

please contact Ms. Jenniffer F. Wilson, Deputy Special Inspector General for Audit and 

Evaluation (Jenniffer.Wilson@treasury.gov /202-622-4633); or Mr. Chris Bosland, Assistant 

Deputy Special Inspector General for Audit and Evaluation (Christopher.Bosland@treasury.gov

/202-927-9321). 

 
SIGTARP-16-004 September 9, 2016 

Summary

Treasury’s	Housing	Finance	Agency	Innovation	Fund	

for	the	Hardest	Hit	Housing	Markets	(the	“Hardest	

Hit	Fund”	or	“HHF”)	program	provides	Troubled	

Asset	Relief	Program	(“TARP”)	dollars	to	

homeowners	in	19	states	to	prevent	foreclosures.	

This	includes	homeowners	in	Nevada.	HHF	is	largely	

targeted	at	unemployment	and	underwater	homes.			

Rather	than	Treasury	giving	these	rescue	funds	

directly	to	homeowners,	Treasury	entered	into	a	

contract	with	each	state’s	housing	finance	agency	to	

make	decisions	on	which	homeowners	are	admitted	

into	the	program	and	be	the	conduit	for	these	funds	

from	Treasury	to	homeowners.		Treasury	contracted	

with	Nevada’s	housing	finance	agency,	the	Nevada	

Housing	Division	(“NHD”),	who	outsourced	HHF	to	

what	was	its	component	entity	at	the	time,	the	

Nevada	Affordable	Housing	Assistance	Corporation	

(“NAHAC”).	At	the	time,	NHD	officials	comprised	a	

majority	of	the	Executive	Committee	of	NAHAC’s	

board.	Given	that	NHD	is	the	agency	responsible	

under	Treasury’s	contract,	SIGTARP	refers	to	both	

as	the	“state	agency.”		

Treasury	will	pay	only	those	expenses	of	the	state	

agency	necessary	to	provide	the	HHF	services.	In	

2015,	SIGTARP	reported	that	homeowners	in	

Nevada	were	not	receiving	HHF	funds.	This	led	

SIGTARP	to	open	a	forensic	audit	of	spending	of	

Hardest	Hit	Fund	dollars	in	Nevada.		

What SIGTARP Found

SIGTARP	found	widespread	waste	and	abuse	in	

spending,	and	that	the	Nevada	state	agency	abused	

the	Hardest	Hit	Fund	with,	seemingly,	a	sense	of	

entitlement	and	no	appreciation	for	the	fact	that	it	

was	taking	funds	for	itself	from	the	homeowners	the	

program	intended	to	help.			

The	Nevada	state	agency	took	TARP	dollars	from	

Treasury	for	its	expenses	($16.6	million)	while	it	

significantly	decreased	performing	its	job	to	

distribute	these	rescue	funds	to	homeowners.	This	is	

waste—spending	with	no	purpose.	SIGTARP	

determined	that	$8.2	million	of	the	$16.6	million	in	

TARP	funds	the	Nevada	state	agency	received	for	its	

expenses	constitute	waste	and	should	be	repaid.	

Each	dollar	not	repaid	is	one	less	dollar	available	to	

homeowners.	

The	Nevada	state	agency	all	but	stopped	

letting	people	into	the	program	to	receive	these	

funds,	but	it	continued	to	take	TARP	money	for	

itself.	Already	low	numbers	of	Nevada	homeowners	

admitted	to	HHF	plummeted	by	94%	from	2013	to	

2015.	From	the	2,111	Nevada	homeowners	it	

admitted	to	HHF	in	2013,	the	Nevada	state	agency	

only	admitted	541	homeowners	to	HHF	in	2014,	to	

just	117	homeowners	in	2015.	In	2015,	the	Nevada	

state	agency	kept	nearly	one	TARP	dollar	for	itself	

for	every	TARP	dollar	it	provided	to	a	homeowner.	

For	six	months	in	that	year,	it	kept	more	in	TARP	

money	for	itself	than	it	distributed	to	homeowners.		

It	was	not	necessary	to	spend	more	in	

administrative	expenses	per	homeowner	admitted	

to	HHF	in	2015	than	in	2013.	Therefore,	Treasury	

should	disallow	and	require	the	Nevada	state	agency	

to	repay	$2,241,396	in	wasted	administrative	

expenses	during	2015	that	exceed	the	per	

homeowner	administrative	expense	cost	in	2013.	

Given that the Nevada state agency was not spending

the money on Nevada homeowners, SIGTARP

conducted a forensic audit to see where the money

went.		

First,	SIGTARP	found	that	the	Nevada	state	agency	

used	TARP	rescue	funds	to	treat	their	employees	—

$500	a	month	car	allowance	to	the	CEO	who	drove	a	

Mercedes	Benz,	holiday	parties	at	a	casino	and	

country	club,	holiday	gifts,	a	company	picnic,	a	

massage	gift	certificate,	a	baby	gift,	gift	certificates	

for	movies	and	restaurants,	Amazon	gift	cards,	

regular	lunches	and	food,	birthday	cakes,	a	

retirement	cake,	an	expensive	fruit	basket,	even	a	

“manager	outing”	at	an	establishment	dubbed	the	

nation’s	best	high	volume	cocktail	bar,	and	moving	

to	the	gleaming	$130	million	City	Hall	building	in	

North	Las	Vegas,	described	as	the	“Taj	Mahal”	in	the	

New York Times,	nearly	doubling	the	rent	it	paid	for	

even	more	space	than	it	needed,	and	a	bonus	and	

later	a	2	month	severance	package	for	a	non‐

performing	CEO—all	charged	to	the	Hardest	Hit	

Fund.	All	of	these	expenses	were	completely	

unnecessary	to	distribute	foreclosure	prevention	

funds	to	unemployed,	underemployed,	and	

underwater	homeowners,	and	constitute	waste	and	

abuse.	

Second,	the	Nevada	state	agency	charged	the	

Hardest	Hit	Funds	for	its	violation	of	federal	labor	

laws	and	lawsuits/claims	of	discrimination.	Careless	

record	keeping	led	to	the	accounting	books	being	

such	a	mess	that	accountants	and	auditors	had	to	

recreate	them,	with	their	fees	charged	to	HHF.		
SIGTARP-16-004 September 9, 2016 

Third,	SIGTARP	found	that	although	the	Nevada	

state	agency	was	originally	chosen	to	be	a	conduit	of	

TARP	funds	from	Treasury	to	Nevada	homeowners,	

the	state	agency	used	those	dollars	to	fund	nearly	its	

entire	business	—not	just	to	pay	for	costs	necessary	

to	carry	out	HHF.	TARP	essentially	funded	the	state	

agency,	including	rent	on	two	offices	and	the	salaries	

of	employees,	for	an	agency	who	did	not	perform	

under	their	contract	with	Treasury.	The	state	agency	

dropped	homeowner	admissions	to	the	program	to	

only	6%	of	admissions	at	its	peak	year,	but	still	

sought	100%	of	their	overhead	from	TARP.	The	

agency	should	repay	$7.4	million	in	rent,	utilities,	

and	payroll.	

This	is	not	a	case	of	mistake	or	negligence.	SIGTARP	

found	a	deliberate	attempt	by	the	Nevada	state	

agency	to	charge	the	Hardest	Hit	Fund	for	every	

expense	it	could,	all	while	it	denied	Nevada	

homeowners	admission	to	the	program.		

Sometime	over	the	last	three	years,	this	state	agency	

lost	sight	of	the	fact	that	it	is	only	in	this	program	to	

be	the	conduit	through	which	Treasury	provides	

TARP	rescue	funds	to	Nevada	homeowners	to	help	

them	stay	in	their	homes.	The	Hardest	Hit	Fund	was	

not	intended	to	be	a	cash	cow	for	participating	state	

agencies.	NAHAC	stopped	performing	under	

Treasury’s	contract,	and	the	Nevada	State	Housing	

Division	allowed	that	to	continue.	Both	state	

agencies	seemingly	had	no	regard	for	the	

squandered	opportunity	to	help	Nevada	

homeowners.	As	a	result,	Nevada	homeowners	have	

not	had	fair	access	to	these	Federal	funds.	They	have	

been	treated	differently	and	unfairly	than	

homeowners	in	other	participating	states,	all	

because	of	a	low‐performing	state	agency	that	

engaged	in	waste	and	abuse.		

What SIGTARP Recommends

First	and	foremost,	Treasury	should	prohibit	this	

company	who	NHD	outsourced	the	work	to	

(NAHAC)	from	receiving	HHF	dollars	and	working	

on	HHF.	Because	SIGTARP	identified	waste	over	a	

large	timeframe	during	which	multiple	CEOs	served,	

the	termination	of	the	most	recent	CEO	is	not	

sufficient	protection.	Given	that	Treasury	recently	

extended	the	program	an	additional	three	years,	it	is	

worth	it	to	Nevada	homeowners	to	take	the	time	to	

set	up	effective	administration	of	HHF	in	Nevada.	

Second,	SIGTARP	recommends	that	Treasury	seek	

repayment	of	$8.2	million	in	abused	and	wasted	

TARP	dollars	including:	

 $11,000.00 for the CEO’s car

allowance

 $10,963.68 spent on employee bonuses,

employee gifts, employee outings, staff

lunches and other employee perks

 $5,811.27 spent for holiday parties and

gifts

 $100,385.20 wasted on excessive rent,

relocation and related costs

 $184,319.21 spent on legal expenses to

defend violations and alleged violations of

the law

 $26,395.70 to pay for forensic auditors to

reconcile its books

 $10,812.00 for the independent auditor to

reconcile non‐HHF bank accounts

 $19,874.75 paid for the terminated CEO’s

severance package

 $10,840.18 spent on non‐HHF expenses

identified by Treasury

 $23,838.25 identified by Treasury for

unsupported and non‐HHF expenses

 $2,241,396 in wasted excessive

administrative expenses during 2015 which

exceeded the per‐homeowner‐cost in 2013,

and		

 $7,459,626.22 in overhead.1

In	commenting	on	a	draft	of	this	report,	Treasury	

stated	that	it	will	look	at	SIGTARP’s	

recommendation	at	a	later	date.

 

1 To	the	extent	that	an	expense	in	one	category	could	

be	put	into	two	categories,	SIGTARP	only	counted	

that	expense	one	time	for	Treasury	to	seek	

reimbursement.	
SIGTARP-16-004 September 9, 2016 

Table of Contents 

Summary ............................................................................................................................. ii

Table of Contents .............................................................................................................. iv

Introduction ........................................................................................................................ 1

Background ........................................................................................................................ 2

The Nevada State Agency Abused and Wasted $11,000 in TARP Dollars by 

Charging the Hardest Hit Fund a Car Allowance of $500 per Month for the 

CEO Who Drove a Mercedes, Rather Than Provide Those Funds to 

Homeowners ................................................................................................................. 3

The Nevada State Agency Abused and Wasted TARP Funds By Improperly 

Charging the Hardest Hit Fund More Than $10,000 for a Manager Outing at 

a Cocktail Bar, a Country Club Lunch, A Company Picnic, A Massage and a 

Baby Gift for Employees, Regular Staff Lunches and Perks and a Bonus for 

the CEO–All While the Number of Homeowners Admitted to the Program 

Plummeted .................................................................................................................... 4

The Nevada State Agency Abused and Wasted Hardest Hit Funds by Paying 

for Employee Holiday Parties, at a Casino and a Country Club, Charging 

American Taxpayers for Meals, Party Favors, a Disc Jockey, and Gift Cards 

Given to Employees—All While the Number of Homeowners Admitted to 

the Program Plummeted .............................................................................................. 9

At the Same Time It All But Stopped Helping Homeowners and Reduced its 

Workforce, the Nevada State Agency Abused and Wasted Hardest Hit 

Funds by Moving to a Much Nicer & Bigger Office with One of the Highest 

Lease Rates Around, Doubling the Rent Charged to the Hardest Hit Fund........... 14

Precipitous Drop in The Nevada State Agency’s Admission of Homeowners into HHF 

Prior to Office Move to Much Nicer Space ............................................................................ 16

Decrease in Homeowners Admitted to HHF Nevada While the Nevada State Agency 

Maintained an Office in Much Nicer Space Than It Had For the Prior 4 Years ..................... 16

During 6 Months in 2015, the Nevada State Agency Spent More TARP Funds 

on Itself than on Helping Homeowners Which Resulted in Waste of Federal 

Funds ........................................................................................................................... 19

For the Entire Year 2015, the Nevada State Agency Kept Nearly Half of All 

TARP Funds for Itself, While Admitting Only 117 Homeowners into the 

Program ....................................................................................................................... 21

In 2014 and 2015, the Number of Homeowners Helped by HHF Nevada 

Plummeted, Even as Nevada Homeowners Continued to Suffer from High 

Unemployment and the Worst Underemployment Problem in the Nation ............. 23

The Nevada State Agency Significantly Reduced the Percentage of Applying 

Homeowners Who Were Admitted into the Program ............................................................ 23

Treasury Approved HHF Nevada to Stop Accepting Applications for All of Its HHF 

Programs, Including the Two Largest Programs ................................................................... 24
SIGTARP-16-004 September 9, 2016 

Treasury Allowed HHF Nevada to Divert Funds from the Two Largest Programs 

(Unemployment and Principal Reduction) to Two Programs that Never Helped a 

Single Homeowner ................................................................................................................ 24

TARP Dollars Paid for Violations of the Law and Alleged Violations of the Law 

Which Amounts to Waste ........................................................................................... 25

The Nevada State Agency’s Careless Recordkeeping Resulted in Additional 

Waste of Over $26,000 in TARP Dollars Paid to a Forensic Auditor to 

Reconstruct the Financial Books .............................................................................. 27

The Nevada State Agency’s Careless Recordkeeping Resulted in Additional 

Waste of Nearly $11,000 Paid to an Independent Auditor to Reconcile Bank 

Accounts Including Non-HHF Accounts ................................................................... 28

The Nevada State Agency Wasted TARP Dollars by Paying the Recently 

Terminated CEO a 2-Month Full Pay and Benefit Severance Package .................. 29

The Nevada State Agency Has Committed Waste by Using Hardest Hit Funds 

to Pay for Non-Hardest Hit Fund Expenses .............................................................. 30

The Nevada State Agency’s Careless Recordkeeping Resulted in Additional 

Waste of Nearly $25,000 in Travel, Entertainment, and Unsupported Credit 

Card Charges .............................................................................................................. 32

The Nevada State Agency Committed Waste by Using Hardest Hit Funds to 

Pay 100% of its Overhead Costs Including Rent and Payroll Even Though It 

Works on Non-Hardest Hit Fund Activities ............................................................... 33

Conclusion ........................................................................................................................ 36

Recommendations ........................................................................................................... 42

Management Comments and SIGTARP’s Response ..................................................... 46

Appendix A – Objectives, Scope, and Methodology ..................................................... 47

Limitations on Data ..................................................................................................................... 47

Use of Computer-Processed Data .............................................................................................. 48

Internal Controls: ......................................................................................................................... 48

Prior Coverage ............................................................................................................................ 48

Appendix B – Acronyms and Abbreviations .................................................................. 49

Appendix C – Audit Team Members ............................................................................... 49

Appendix D – Management Comments .......................................................................... 50
SIGTARP-16-004 1 September 9, 2016 

Introduction 

SIGTARP’s	recent	audits	highlight	ineffectiveness	in	TARP’s	Hardest	Hit	Fund	by	

identifying	obstacles	to	homeowners	receiving	Hardest	Hit	funds	and	making	

recommendations	to	improve	the	program.	Because	of	the	critical	importance	of	

this	TARP	program	to	unemployed	and	underemployed	homeowners,	SIGTARP	

has	scrutinized	low	performing	state	housing	finance	agencies	that	make	this	

program	ineffective.	These	state	agencies,	chosen	for	their	knowledge	of	local	

problems,	are	responsible	for	serving	as	conduits	to	flow	TARP	dollars	from	

Treasury	to	homeowners.2	Low	performing	state	agencies	stop	the	flow	of	TARP	

dollars	to	homeowners.	State	agencies	should	only	facilitate	the	distribution	of	

these	rescue	funds	to	homeowners,	and	never	serve	as	obstacles	to	TARP	funds	

reaching	the	homeowners	this	program	intended	to	help.	

One	of	the	low	performing	state	agencies	in	the	Hardest	Hit	Fund	is	in	Nevada.	

Nevada	is	an	important	state	to	the	Hardest	Hit	Fund.	It	was	one	of	the	first	five	

states	deemed	to	be	“hardest	hit”	by	Treasury,	and	President	Obama	announced	

the	creation	of	the	Hardest	Hit	Fund	from	Las	Vegas.	The	number	of	

homeowners	Nevada	estimated	it	would	help	has	already	fallen	66%	(from	

23,556	homeowners	to	8,026).	SIGTARP	became	concerned	when	the	number	of	

Nevada	homeowners	being	admitted	to	the	program	plummeted	from	the	peak	

1,015	in	the	first	quarter	of	2013	to	212	homeowners	one	year	later.	That	

dropped	in	2015	even	further	to	117	homeowners	for	the	entire	year,	raising	

serious	concerns.	

While	focused	on	the	huge	drop	in	performance	of	the	program	in	Nevada,	

SIGTARP	became	aware	of	certain	spending	of	TARP	funds	by	the	state	agency.	

This	led	SIGTARP	to	open	a	forensic	audit	of	spending	of	Hardest	Hit	dollars	in	

Nevada.	The	objective	of	this	audit	was	to	review	Hardest	Hit	Fund	(“HHF”)	

Nevada’s	use	of	TARP	funds	for	administrative	and	other	costs.	SIGTARP	

conducted	this	audit	in	accordance	with	generally	accepted	government	

auditing	standards	established	by	the	U.S.	Government	Accountability	Office.	For	

a	complete	discussion	of	the	audit	scope	and	methodology,	see	Appendix	A.	

 

2	The	housing	finance	agencies	of	18	states	and	the	District	of	Columbia	participate	in	the	Hardest	Hit	Fund,	

and	have	signed	contracts	with	Treasury	governing	their	participation	in	the	program.	
SIGTARP-16-004 2 September 9, 2016 

Background 

Treasury	pays	certain	administrative	expenses	of	the	state	housing	finance	

agencies	out	of	Hardest	Hit	Fund	dollars	set	aside	to	help	homeowners.	Treasury	

limits	those	expenses	to	those	“necessary	to	carry	out	the	services.”	State	

agencies	submit	a	budget	of	administrative	expenses	to	Treasury	for	approval.	

Treasury	approves	all	disbursements	of	HHF	dollars	for	these	administrative	

expenses	and	receives	a	quarterly	report	on	spending.	Treasury	conducts	on‐

site	compliance	reviews	on	a	sample	basis.	

Treasury	entered	into	a	contract	with	the	state	housing	finance	agency	in	

Nevada,	which	is	called	the	Nevada	Housing	Division.	Treasury	requires	that	

each	state	agency	designate	a	financial	institution	to	receive	the	funds,	referred	

to	as	an	“eligible	entity.”	The	Nevada	housing	finance	agency	received	Treasury	

permission	to	have	one	of	its	components	called	the	Nevada	Affordable	Housing	

Assistance	Corporation	(“NAHAC”)	serve	as	the	eligible	entity.	

Information	on	HHF	appears	on	the	Nevada	Housing	Division’s	website,	but	it	

outsourced	the	administration	of	the	Hardest	Hit	Fund	to	its	pre‐existing	

component	entity,	NAHAC,	which	also	provided	other	non‐HHF	services.3	This	is	

rare	in	HHF,	as	most	state	housing	agencies	in	the	Hardest	Hit	Fund	administer	

the	program,	either	themselves	or	through	a	special‐purpose	eligible	entity	

created	specifically	for	HHF.	Nevada’s	proposal	to	Treasury	said,	“Program	

leadership	will	come	from	the	NAHAC	Executive	Committee....The	Nevada	[state	

housing	finance	agency’s]	Executive	Director,	Chief	Financial	Officer	and	Chief	of	

Federal	Programs	constitute	the	Executive	Committee....”4

	Given	that	the	Nevada	

Housing	Division	served	as	the	agency	responsible	under	Treasury’s	HHF	

contract,	SIGTARP	will	refer	to	both	NHD	and	NAHAC	as	“the	state	agency”	or	

“Nevada	agency”	or	“state	housing	finance	agency.”		

Treasury	has	obligated	$202	million	for	the	Hardest	Hit	fund	in	Nevada,	55%	of	

which	had	been	drawn	down	as	of	June	30,	2016.	Treasury	has	paid	$16.6	

million	of	these	drawn	down	funds	for	administrative	expenses.	

NAHAC	has	experienced	a	high	rate	of	executive‐level	and	board	turnover.	

NAHAC	changed	its	CEO	four	times	in	the	last	three	years,	essentially	

terminating	the	most	recent	CEO	in	May	2016.	A	number	of	other	senior	

executives	have	also	left	or	been	terminated	during	this	period,	including	the	

Controller	(several	times)	and	the	Senior	Compliance	Officer. By	mid‐2013,	

NAHAC’s	executive	committee	was	no	longer	comprised	of	NHD	executives,	as	

was	proposed	to	Treasury	at	the	start	of	the	program.5

 

3	When	it	launched	HHF	in	2010,	NHD	officials	comprised	a	majority	of	the	Executive	Committee	of	NAHAC’s	

board.	In	2013,	NHD	approved	changes	to	the	make‐up	of	NAHAC’s	board	that	reduced	its	influence	over	

NAHAC	and	spun	off	NAHAC	as	a	component.	 4	The	proposal	is	published	on	Treasury’s	website	at	https://www.treasury.gov/initiatives/financial‐

stability/programs/housing‐programs/hhf/Documents/NV.pdf.

5	NAHAC’s	Executive	Committee	was	eliminated	altogether	in	2013,	along	with	the	Board	seats	reserved	for	

NHD	executives.	In	2016,	after	Treasury	directed	NAHAC	in	December	2015	to	increase	the	HHF	assistance	
SIGTARP-16-004 3 September 9, 2016 

The Nevada State Agency Abused and 

Wasted $11,000 in TARP Dollars by Charging 

the Hardest Hit Fund a Car Allowance of $500 

per Month for the CEO Who Drove a 

Mercedes, Rather Than Provide Those Funds 

to Homeowners 

SIGTARP	found	that	from	October	2014	to	July,	2016,	the	Nevada	state	agency	

abused	and	wasted	$11,000	in	TARP	dollars	by	charging	the	Hardest	Hit	Fund	

$500	per	month	for	a	car	allowance	for	the	former	CEO	who	drove	a	Mercedes.	

This	constitutes	waste	which	the	Government	Accountability	Office	(“GAO”)	

defines	as	“the	act	of	using	or	expending	resources	carelessly,	extravagantly,	or	

to	no	purpose,”	in	its	Standards for Internal Control in the Federal Government

(the	Green	Book).	GAO	has	also	described	waste	as:	“...taxpayers	do	not	receive	

reasonable	value	for	money	in	connection	with	any	government‐funded	activity	

due	to	inappropriate	acts	or	omissions	by	officials	with	control	over	or	access	to	

government	resources.”6		

This	spending	also	constitutes	abuse.	GAO	defines	abuse	as	“behavior	that	is	

deficient	or	improper	when	compared	with	behavior	that	a	prudent	person	

would	consider	reasonable	and	necessary....	This	includes	the	misuse	of	

authority	or	position	for	personal	gain	or	for	the	benefit	of	another.”	Both	types	

of	abuse	are	present	here.	

A	private	company	or	a	state	agency	can	choose	to	pay	a	state	employee	a	car	

allowance	but	that	does	not	mean	those	should	be	expensed	to	the	Hardest	Hit	

Fund.	A	car	allowance	is	not	necessary	to	administer	HHF.	Any	official	travel	by	

car	related	to	HHF	can	be	reimbursed	through	a	standard	mileage

reimbursement.		

Treasury should disallow and require the Nevada state agency to repay $11,000

for abuse and waste in charging the Hardest Hit Fund for the CEO’s $500 per

month car allowance. Treasury should determine whether HHF Nevada spent

additional Hardest Hit Fund dollars on car allowances and seek repayment of

those expenses. Treasury should also determine whether any other state agency is

charging the Hardest Hit Fund for a car allowance and seek repayment of those

expenses.

 

provided	to	homeowners,	NAHAC’s	board	structure	was	changed	again,	restoring	control	of	a	majority	of	

seats	to	NHD	and	its	parent	state	organization	(Nevada	Department	of	Business	and	Industry).	 6	Statement	of	David	M.	Walker,	Testimony	before	the	U.S.	Senate	Committee	on	Appropriations,	“Stabilizing	

and	Rebuilding	Iraq:	Actions	Needed	to	Address	Inadequate	Accountability	over	U.S.	Efforts	and	

Investments,”	GAO‐08‐568T,	March	11,	2008,	http://www.gao.gov/new.items/d08568t.pdf	(accessed	

07/13/2016).	
SIGTARP-16-004 4 September 9, 2016 

The Nevada State Agency Abused and 

Wasted TARP Funds By Improperly Charging 

the Hardest Hit Fund More Than $10,000 for a 

Manager Outing at a Cocktail Bar, a Country 

Club Lunch, A Company Picnic, A Massage 

and a Baby Gift for Employees, Regular Staff 

Lunches and Perks and a Bonus for the CEO–

All While the Number of Homeowners Admitted 

to the Program Plummeted 

SIGTARP	found	that	the	Nevada	state	agency	abused	and	wasted	$10,963.68	in	

Hardest	Hit	funds	by	charging	taxpayers	for	gifts	for	employees,	employee	perks	

and	office	catering/refreshments,	and	a	$4,500	bonus	for	the	CEO,	rather	than	

spending	those	funds	on	Nevada	homeowners.	Hardest	Hit	Fund	dollars	were	

spent	on	a	massage	and	baby	gift	for	employees,	a	company	picnic,	regular	staff	

pizza	days,	staff	lunches,	coffee	in	the	office,	and	birthday/retirement	cakes.		

These	expenses	were	in	addition	to	any	meals	and	entertainment	expenses	

associated	with	travel.	These	expenses	are	also	in	addition	to	holiday	parties	for	

employees	held	every	December	that	were	paid	for	with	HHF	dollars,	which	will	

be	addressed	in	the	next	section.	

These	expenses	were	not	necessary	for	the	Hardest	Hit	Fund,	as	shown	by	the	

fact	that	the	Nevada	state	agency	provided	HHF	help	to	homeowners	in	past	

years	without	buying	meals	and	drinks	and	gifts	for	employees.	SIGTARP	found	

that	the	Nevada	state	agency	increased	spending	on	wining	and	dining	and	

freebies	for	employees,	at	the	same	time	it	decreased	the	number	of	

homeowners	admitted	to	the	Hardest	Hit	Fund,	as	shown	in	the	following	figure:	

Figure 1: Spending by Hardest Hit Fund Nevada Compared to Homeowners Approved for HHF 

Source: SIGTARP analysis of HHF funds spent on perks in comparison to homeowners approved for HHF. 

 ‐

500

1,000

1,500

2,000

2,500

3,000

2013 2014 2015

$, Homeowners

HHF Dollars Spent on Gifts, Pizza, Cakes, 

Picnic & Office Refreshments

Homeowners Admitted to HHF
SIGTARP-16-004 5 September 9, 2016 

The	precipitous	drop	in	Nevada	homeowners	being	admitted	to	the	program	

also	shows	that	the	$4,500	bonus	to	the	CEO	of	the	Nevada	state	agency	paid	in	

July	2015	amounts	to	waste.	It	had	no	purpose	in	HHF	and	was	certainly	not	

necessary	to	administer	HHF.		

The	more	than	$10,000	in	Hardest	Hit	Fund	dollars	wasted	on	Nevada	state	

agency	employees	could	have	helped	some	Nevada	homeowners	pay	their	

mortgages—the	people	these	funds	were	intended	to	reach.	This	state	agency	

acted	like	a	private	company	in	providing	perks	and	gifts	to	employees,	but	then	

charging	those	costs	to	Federal	bailout	funds.	The	American	taxpayers	are	

providing	these	Federal	rescue	funds	to	homeowners	to	stave	off	foreclosure,	

not	to	provide	gifts,	perks,	and	a	bonus	for	state	employees	such	as:		

1. $900 in Hardest Hit Funds wasted on a company picnic		

The	Nevada	state	agency	charged	$903.84	to	the	Hardest	Hit	Fund	to	pay	

for	the	company’s	picnic	including	supplies	in	June	2015.

2. More than $200 Hardest Hit funds wasted on a “manager outing” at Herbs &

Rye, named the nation’s best high volume cocktail bar

On	July	23,	2015,	the	Nevada	state	agency	expensed	to	the	Hardest	Hit	

Fund	$210	charged	to	the	corporate	credit	card	for	a	“manager	outing”	

at	Herbs	&	Rye.	According	to	the	local	ABC	affiliate,	Herbs	&	Rye	has	

been	named	the	best	high	volume	cocktail	bar	in	the	nation:	

http://www.ktnv.com/positivelylv/business/spirited‐awards‐honors‐

las‐vegas‐herbs‐rye‐as‐best‐high‐volume‐cocktail‐bar.

3. Nearly $300 in Hardest Hit Funds wasted on a massage for an

employee, Edible Arrangement for the accounting staff, and a baby

blanket from FTD		

The	Nevada	state	agency	used	TARP	funds	to	buy	gifts	for	employees	

including	a	$72	baby	blanket	from	FTD.com,	a	$99.98	gift	from	Massage	

Envy,	and	$125	for	an	Edible	Arrangement	for	the	accounting	staff.		
SIGTARP-16-004 6 September 9, 2016 

4. Hardest Hit Funds wasted on lunch for the CEO at a country club,

employee lunches, cakes to celebrate staff birthdays/retirement,

office donuts, pizza, sandwiches, and coffee		

SIGTARP	found	that,	in	2014	and	2015,	the	Nevada	state	agency	

regularly	treated	its	employees	to	breakfast,	coffee,	lunches,	and	

celebratory	birthday	cakes,	and	then	charged	all	of	it	to	the	Hardest	Hit	

Fund.	For	example,	on	June	1,	2014,	the	Nevada	state	agency	spent	$210	

on	pizza	for	the	staff	on	the	corporate	credit	card,	and	then	paid	the	

credit	card	with	Hardest	Hit	Fund	dollars	without	reimbursement.	Cakes	

were	frequently	purchased	for	the	staff	to	celebrate	birthdays	and	

charged	to	HHF.	A	retirement	cake	was	charged	to	HHF.	A	$105	lunch	at	

a	country	club	by	the	CEO,	and	other	lunches,	were	all	expensed	to	HHF.	

A	$20	tip	to	an	employee	at	a	casino	was	also	charged	to	HHF.	More	than	

$250	for	Bring	Your	Children	to	Work	day	was	charged	to	the	Hardest	

Hit	Fund.	Sodas,	coffee,	bottled	water,	donuts,	sandwiches,	meat	and	

cheese	platters,	were	all	charged	to	the	Hardest	Hit	Fund.	

Charging	these	costs	to	the	Hardest	Hit	Fund	constitutes	abuse	and	waste.	None	

of	these	costs	were	necessary	to	administer	HHF.	These	costs	have	no	purpose	

in	HHF.	Instead,	the	Nevada	state	agency	abused	HHF	by	spending	these	rescue	

dollars	on	its	own	employees	like	a	private	company,	but	making	HHF	foot	the	

bill.		

These	costs	were	not	mistakenly	charged	to	HHF.	The	state	agency	had	to	take	

an	action	to	have	HHF	pay	these	expenses.	Employees	filled	out	an	expense	form	

that	was	then	drawn	on	the	HHF	bank	account,	or	employees	put	the	costs	on	a	

credit	card	and	used	HHF	funds	to	pay	off	the	credit	card	bill.				

SIGTARP found that each month, the Nevada state agency paid its corporate

credit card bill using a check drawn on the Hardest Hit Fund account

without reimbursing for non‐HHF expenses

The	Nevada	state	agency	paid	its	entire	corporate	credit	card	by	using	a	check	

drawn	from	the	Hardest	Hit	Fund,	even	if	the	bill	contained	expenses	unrelated	

to	HHF.	The	Nevada	state	agency	had	two	bank	accounts,	the	first	through	

Nevada	State	Bank	and	the	second	with	the	Bank	of	New	York	Mellon	account,	in	

which	Treasury	deposited	Hardest	Hit	funds.	The	corporate	credit	card	was	

issued	by	the	Nevada	State	Bank.	Rather	than	allocate	expenses	and	draw	from	

both	accounts	to	pay	the	credit	card	bill	based	on	what	the	charge	related	to,	the	

Nevada	state	agency	each	month	paid	the	bill	solely	from	the	Treasury‐funded	

bank	account.	The	following	example	(see	Figure	2)	shows	a	corporate	credit	

card	bill	that	included	the	manager	outing	to	the	cocktail	bar,	and	the	check	

from	the	HHF	account	paying	that	bill.	There	was	no	reimbursement	to	HHF.		
SIGTARP-16-004 7 September 9, 2016 

Figure 2: Nevada State Agency’s Credit Card Statement Paid with Hardest Hit Fund Bank of 

New York Mellon Checking Account

Source: SIGTARP analysis of Nevada state agency’s credit card charges and payments from its Hardest Hit Fund 

bank account. 

The	Nevada	state	agency	routinely	charged	non‐HHF	expenses	on	a	corporate	

credit	card,	paid	the	credit	card	bill	with	a	check	drawn	on	the	TARP‐funded	

account,	and	failed	to	reimburse	these	funds	to	the	HHF	account.			
SIGTARP-16-004 8 September 9, 2016 

Particularly	troubling	is	the	fact	that	the	Nevada	state	agency	had	cut	back	the	

services	they	provided	homeowners	in	HHF.	This	same	agency	kept	decreasing	

the	number	of	homeowners	it	admitted	in	the	program,	as	shown	in	Figure	3	

below,	while	it	expensed	these	wasted	costs	to	the	program.		

Figure 3: Nevada Homeowners Approved for HHF, By Quarter 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports to Treasury. 

SIGTARP	found	that	the	Nevada	state	agency	increased	spending	on	perks	that	

only	benefitted	its	own	employees	using	Hardest	Hit	funds,	while	it	was	denying	

homeowners	who	applied	for	those	funds,	and	while	other	homeowners	were	

waiting	to	hear	if	they	would	receive	the	funds.	

Treasury should disallow and require the Nevada state	agency	to repay

$10,963.68 for waste of Hardest Hit funds paid to the CEO for a bonus, gifts,

employee perks, office refreshments and employee meals. Treasury should conduct

an in‐depth review of all administrative expenses incurred by the Nevada state	

agency	and the other 18 state housing finance agencies participating in the

Hardest Hit Fund to determine whether there are additional employee perks and

gifts to employees paid for with Hardest Hit funds over the lifetime of the program

and, if found, require that those funds be repaid to Treasury. Treasury should put a

moratorium on all spending of Hardest Hit funds for employee bonuses, employee

gifts, alcohol, and office refreshments at every participating state agency.

1

114

333

234 209

372

556

964

1,015

550

246

300

212

119 122 88 55 24 14 24 38

0

200

400

600

800

1,000

1,200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2011 2012 2013 2014 2015 2016
SIGTARP-16-004 9 September 9, 2016 

The Nevada State Agency Abused and 

Wasted Hardest Hit Funds by Paying for 

Employee Holiday Parties, at a Casino and a 

Country Club, Charging American Taxpayers 

for Meals, Party Favors, a Disc Jockey, and 

Gift Cards Given to Employees—All While the 

Number of Homeowners Admitted to the 

Program Plummeted 

SIGTARP	found	that	the	Nevada	state	agency	used	$5,811.27	in	Hardest	Hit	

funds	in	December	2013,	2014,	and	2015,	to	pay	for	holiday	parties	and	holiday	

gifts	for	employees.	SIGTARP	found	that	this	spending	amounts	to	waste	and	

abuse.	Under	GAO’s	definition	of	waste	as:	“...taxpayers do not receive reasonable

value for money in connection with any government‐	funded activity due to

inappropriate acts or omission by officials with control over or access to

government resources,”this	spending	had	no	purpose	to	HHF.		

This	spending	also	constitutes	abuse,	as	it	is	both	“behavior	that	is	deficient	or	

improper	when	compared	with	behavior	that	a	prudent	person	would	consider	

reasonable	and	necessary,	and	the	misuse	of	authority	or	position	for	personal	

gain	or	for	the	benefit	of	another.”		

Additionally,	this	spending	was	not	necessary	for	administering	HHF,	the	

standard	under	Treasury’s	contract.	Although	$5,800	may	not	seem	like	a	large	

sum	of	money,	it	could	have	helped	some	Nevada	homeowners	pay	their	

mortgage—the	people	these	funds	intended	to	help.	The	question	is	not	whether	

a	state	agency	should	have	a	holiday	party,	but	instead	who	should	pay	for	it.	

The	American	taxpayers	are	providing	these	Federal	rescue	funds	to	

homeowners	to	stave	off	foreclosure,	not	to	pay	for	holiday	parties	and	provide	

gifts	for	state	employees.		

The	worst	part	of	this	spending	was	that,	while	continuing	to	throw	a	party	each	

December,	this	same	agency	kept	decreasing	the	number	of	homeowners	it	

admitted	in	the	program.		

SIGTARP	found	that	the	Nevada	state	agency	expensed	the	following	holiday	

costs	to	the	American	taxpayers	by	using	Hardest	Hit	funds,	while	it	was	

denying	homeowners	who	applied	for	those	funds,	and	while	other	homeowners	

were	waiting	to	hear	if	they	would	receive	the	funds:	
SIGTARP-16-004 10 September 9, 2016 

Table 1: Nevada Holiday Party Expenses Paid by the Hardest Hit Fund 

Event Description Expensed 

2013 Employee Winter Social Brentwood Café & Tavern, Las Vegas (Dinner for 45 

employees, $138 gratuity and $150 for a DJ) $1,052.70 

2013 Holiday Luncheon Gift cards at PF Chang’s for Reno Employees $140.00 

2013 Amazon Gift Cards 6 gifts cards for $20 each in lieu of spouses/significant others 

of Reno staff $120.00 

2014 Deposit for NAHAC Holiday 

Party Gold Coast Hotel & Casino, Las Vegas $500.00 

2014 NAHAC Holiday Party Gold Coast Hotel & Casino, Las Vegas (Dinner for 35 

employees, $220.50 gratuity, $150 service fees) $1,095.50 

2014 Employee Per Diems Reno Employees Per Diem to Attend 2014 Holiday Party in 

Las Vegas $247.70 

2014 Holiday Gift Bags Gift Bags for Employees ($391 in gift cards, $90 in holiday 

craft bags & candy) $479.91 

2015 Deposit for Employee Holiday 

Party Gathering Dragon Ridge Country Club & Golf Course, Las Vegas $250.00 

2015 Employee Holiday Party 

Gathering Dragon Ridge Country Club & Golf Course, Las Vegas $1,430.00 

2015 Holiday Gathering Expenses Dragon Ridge Country Club & Golf Course, Las Vegas $119.99 

2015 Reno Employee Holiday Party Holiday Gifts and Reno Gift Card $284.79 

2015 Holiday Department Lunch Holiday Department Lunch $61.70 

2015 Holiday Favors Favors for the 2015 Holiday party $28.98 

TOTAL Expensed to HHF $5,811.27 

Source: SIGTARP analysis of the Nevada state agency’s general ledgers, Board minutes and other bank records. 

December 2013 Holiday Party at a Restaurant 

In	December	2013,	as	shown	in	Table	1,	the	Nevada	state	agency	spent	

$1,192.70	in	Hardest	Hit	funds	on	a	holiday	party	at	Brentwood	Café	and	Tavern	

for	employees	in	Las	Vegas	and	a	holiday	lunch	at	P.F.	Chang’s	for	employees	in	

Reno.	It	also	expensed	$120	for	gift	cards	to	employees’	spouses/significant	

others	to	this	TARP	rescue	program.	This	spending	occurred	during	a	quarter	in	

which	this	state	agency	turned	down	200	Nevada	homeowners	for	the	program,	

and	437	homeowners	were	“in	process”	waiting	for	Federal	dollars.		

December 2014 Holiday Party at a Casino 

In	December	of	the	following	year,	2014,	the	Nevada	state	agency	spent	more	

than	$1,095.50+	$500	deposit	in	Hardest	Hit	funds	on	a	holiday	party	for	

employees	at	the	Gold	Coast	Hotel	and	Casino	in	Las	Vegas.		
SIGTARP-16-004 11 September 9, 2016 

Gold Coast Hotel and Casino, Las Vegas, Nevada.7

Hardest	Hit	funds	also	paid	$247.70	for	Reno	employees’	per	diem	costs	to	

attend	the	party	at	the	casino	in	Las	Vegas.	In	connection	with	the	party,	the	

state	agency	expensed	to	the	Hardest	Hit	Fund	nearly	$400	in	gift	cards	for	

employees,	and	almost	$100	in	gift	bags	filled	with	candy.	There	were	15	gift	

cards	valued	at	$25	each	(plus	tax),	including	MasterCard,	Visa,	Outback	

Steakhouse,	Regal	Cinemas,	Shell,	Panda	Express,	and	Starbucks.		

This	spending	occurred	in	a	quarter	when	this	state	agency	was	decreasing	the	

number	of	people	that	received	Hardest	Hit	funds.	In	the	fourth	quarter	of	2014,	

the	state	agency	admitted	only	88	new	homeowners	to	the	program,	far	less	

than	the	300	homeowners	admitted	in	the	same	quarter	the	prior	year.	The	

state	agency	turned	down	109	homeowners	for	the	program	and	69	

homeowners	were	“in	process”	waiting	for	Federal	dollars.		

December 2015 Holiday Party at a Country Club 

Again	in	November/December	2015,	the	Nevada	state	agency	spent	more	than	

$1,430	+	$250	deposit	in	Hardest	Hit	funds	for	its	holiday	party,	this	time	at	the	

Dragon	Ridge	Country	Club	and	Golf	Course,	Las	Vegas,	pictured	below	and	

described	on	its	website	as	follows:		

 

7 https://media‐cdn.tripadvisor.com/media/photo‐o/09/8e/2a/e8/gold‐coast‐hotel‐and.jpg	(accessed	

08/12/16).	
SIGTARP-16-004 12 September 9, 2016 

“Welcome	to	DragonRidge	Country	Club	

Elevate Your Surroundings

Championship Golf, Luxurious Amenities and Elegant

Service Delivered at a Breathtaking Altitude”8

The	Nevada	state	agency	used	Hardest	Hit	funds	to	buy	$284.79	in	gift	cards	for	

employees	and	$28.98	in	holiday	favors,	all	expensed	to	the	Hardest	Hit	Fund.	

This	spending	on	employees	occurred	while	the	number	of	homeowners	

admitted	to	the	program	decreased	to	dismal	levels.	In	the	4th	quarter	of	2015,	

this	state	agency	admitted	only	24	new	homeowners	to	the	program—only	8%	

of	the	number	of	homeowners	admitted	in	the	fourth	quarter	of	2013.	That	

quarter,	the	state	agency	turned	down	201	homeowners	for	the	program	and	84	

homeowners	were	“in	process”	waiting	for	Federal	dollars.	Treasury	sent	the	

Nevada	state	agency	an	action	memorandum	in	the	same	month	of	this	holiday	

party,	December	2015,	requiring	it	to	come	up	with	a	strategy	to	increase	the	

number	of	homeowners	in	HHF.	

Charging	party	costs	and	employee	gift	cards	to	a	foreclosure	rescue	program,	

given	the	struggle	of	the	homeowners	who	are	the	intended	recipients	of	these	

rescue	funds,	constitutes	waste	and	abuse.	Treasury	is	responsible	for	ensuring	

that	each	TARP	program	is	free	from	waste,	including	Hardest	Hit	Fund	Nevada.	

Treasury	certifies	annually	to	GAO	that	its	internal	controls	are	designed	to,	

among	other	things,	ensure	programs	and	resources	are	free	from	fraud,	waste,	

and	mismanagement.	One	of	Treasury’s	management	objectives	is	to	ensure	that	

TARP	programs	and	resources	are	free	from	waste,	fraud	and	mismanagement.9

 

8https://www.google.com/search?q=dragon+ridge+country+club+las+vegas&biw=1152&bih=586&source=l

nms&tbm=isch&sa=X&ved=0ahUKEwjf08Ski8vOAhVJMyYKHQl3BZ8Q_AUIBigB#imgrc=yxs9jnDvGRqeYM

%3A	(accessed	08/11/2016).	 9	Treasury,	“Agency	Financial	Report:	Office	of	Financial	Stability–Troubled	Asset	Relief	Program,”	Fiscal	Year	

2015.	
SIGTARP-16-004 13 September 9, 2016 

Treasury should disallow and require the Nevada state agency to repay

$5,811.27 for waste and abuse in holiday parties and holiday gifts to employees.

Treasury should conduct an in‐depth review of all administrative expenses

incurred by the Nevada state agency and the other 18 state agencies participating

in the Hardest Hit Fund to determine whether there are additional employee

parties or gifts to employees paid for with Hardest Hit funds over the lifetime of the

program and, if found, require that those funds be repaid to Treasury. Treasury

should put a moratorium on all spending of Hardest Hit funds for employee parties

(or social gatherings) and employee gifts at every participating state agency.
SIGTARP-16-004 14 September 9, 2016 

At the Same Time It All But Stopped Helping 

Homeowners and Reduced its Workforce, the 

Nevada State Agency Abused and Wasted 

Hardest Hit Funds by Moving to a Much Nicer 

& Bigger Office with One of the Highest Lease 

Rates Around, Doubling the Rent Charged to 

the Hardest Hit Fund 

SIGTARP	found	that	at	the	same	time	the	Nevada	state	agency	all	but	stopped	

admitting	new	homeowners	into	the	program	and	was	reducing	its	workforce,	it	

moved	its	office	to	what	an	agency	official	referred	to	as	“...much	nicer	space...,”	

nearly	doubling	the	rent,	all	charged	to	the	Hardest	Hit	Fund.	Despite	being	in	

the	same	office	for	four	years,	in	July	2014,	the	Nevada	state	agency	moved	its	

Las	Vegas	office	to	the	fairly	new	North	Las	Vegas	City	Hall.	The	state	agency	

entered	into	a	three‐year	lease,	at	one	of	the	“...highest	lease	rate	around...,”	

according	to	the	former	CEO	of	the	state	agency.	With	this	move,	the	Nevada	

state	agency	nearly	doubled	its	monthly	rent	(from	approximately	$6,000	to	

approximately	$11,200),	and	increased	its	office	space	by	41%,	charging	it	all	to	

the	Hardest	Hit	Fund.	The	Nevada	state	agency	was	leasing	more	space	than	was	

necessary	to	administer	HHF,	at	the	highest	lease	rate	in	the	area	(according	to	

the	former	CEO),	and	for	space	that	was	not	suited	to	its	needs.		

The	New	York	Times	ran	a	story	on	November	19,	2011,	criticizing	city	officials	

for	moving	into	this	new	building	derided	by	residents	still	suffering	from	the	

economy	as	“a	Taj	Mahal,”	http://www.nytimes.com/2011/11/20/us/in‐north‐

las‐vegas‐new‐city‐hall‐is‐a‐reminder‐of‐flush‐days.html?_r=0.

10	The	New	York	

Times	described	the	North	Las	Vegas	City	Hall	building	as	having	a	view	that	

stretches	for	miles,	marble	floors,	granite	tabletops,	a	parking	lot	covered	with	

solar	panels	to	keep	cars	cool	in	the	Vegas	heat,	a	wellness	center	including	

fitness	equipment,	and	an	outdoor	concert	plaza.	Given	that	one‐third	of	the	

homes	in	North	Las	Vegas	were	in	foreclosure,	and	that	houses	that	were	

occupied	were	worth	less	than	half	the	value	from	two	years	prior,	the	New	York	

Times	reported	one	resident	who	lost	his	job	as	saying	about	the	City	Building,	

“It’s	just	disrespectful	–	like	they	have	no	idea	of	what	people	are	going	

through.”	

 

10	Jennifer	Medina,	“In	Nevada,	a	City	Hall	Is	a	Reminder	of	Flush	Days,”	The New York Times,	Nov.	19,	2011.	
SIGTARP-16-004 15 September 9, 2016 

North Las Vegas City Hall Building11

SIGTARP	found	that	this	created	waste	because	it	served	no	purpose	for	the	

program.	According	to	internal	communications	of	the	Nevada	state	agency,	the	

factors	considered	in	making	the	move	were:	1)	to	be	in	the	location	near	the	

hardest	hit;	2)	a	“much	more	professional	office	space;”	(3)	a	“much	nicer	

space;”	4)	rebranding	the	state	agency	as	a	leader;	and	5)	employee	morale.	The	

Nevada	state	agency’s	affiliate	moved	to	the	same	building,	signing	a	lease	at	the	

same	time.		

Only	one	of	those	factors	(location)	relates	to	the	Hardest	Hit	Fund,	and	that	

appears	to	be	window	dressing	because	the	Nevada	state	agency	had	been	on	a	

decline	in	admitting	homeowners	into	the	Hardest	Hit	Fund,	a	decline	that	

would	come	just	short	of	grinding	to	a	complete	halt	while	it	occupied	this	much	

nicer	space.	In	addition,	the	building	was	not	open	to	the	public	on	Fridays	and	

had	no	mail	delivery	on	Fridays,	which	according	to	the	CEO	of	the	Nevada	state	

agency	created	problems	with	homeowner’s	getting	access	to	Nevada	state	

agency	employees	and	with	payments	and	documents	arriving.		

In	the	year	before	the	office	move,	the	number	of	new	homeowners	admitted	to	

the	program	had	dropped	precipitously	each	quarter	and,	as	shown	in	Table	2,	

the	Nevada	state	agency	had	stopped	accepting	new	homeowners	into	four	of	its	

five	programs.	In	May	2013,	the	state	agency	decided	to	reduce	staff	from	56	to	

35	people	and	further	reduce	staff	as	necessary	going	forward.	

 

11	Associated	Press	Photo,	http://lasvegas.cbslocal.com/2016/07/26/house‐members‐discuss‐red‐tape‐on‐

vegas‐area‐federal‐lands/	(accessed	8/11/16).	
SIGTARP-16-004 16 September 9, 2016 

Precipitous Drop in The Nevada State Agency’s Admission of 

Homeowners into HHF Prior to Office Move to Much Nicer Space 

Table 2: HHF Nevada Program-by-Program Activity by Quarter, Q1 2013—Q2 2014 

HHF Nevada Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 

Principal Reduction Program 417 274 80 31 5 0 

Second Mortgage Reduction Program 38 11 50 12 2 0 

Short Sale Acceleration Program 1 0 0 0 0 0 

Mortgage Assistance Program 520 244 114 256 205 113 

Mortgage Assistance Program Alternative 54 21 2 1 0 0 

TOTAL Homeowners per Program 1,030 550 246 300 212 113 

Total Unique Homeowners 1,015 550 246 300 212 119 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports to Treasury. 

This	decrease	in	help	to	homeowners	only	got	worse.	During	the	time	that	the	

Nevada	state	agency	was	in	this	new	office	building	(July	2014	through	June	

2015),	as	shown	in	Table	3	no	new	homeowners	were	admitted	into	the	main	

principal	reduction	program,	the	second‐lien	program,	the	short	sale	program,	

or	an	alternative	unemployment	program.		

Decrease in Homeowners Admitted to HHF Nevada While the 

Nevada State Agency Maintained an Office in Much Nicer Space 

Than It Had For the Prior 4 Years 

Table 3: HHF Nevada Program-by-Program Activity by Quarter, Q3 2014—Q2 2015 

 Q3-2014 Q4-2014 Q1-2015 Q2-2015 

Principal Reduction Program 0 0 0 0 

Second Mortgage Reduction Program 0 0 0 0 

Short Sale Acceleration Program 0 0 0 0 

Mortgage Assistance Program 122 88 67 24 

Mortgage Assistance Program Alternative 0 0 0 0 

TOTAL Homeowners per Program 122 88 67 24 

Total Unique Homeowners 122 88 55 24 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports to Treasury. 
SIGTARP-16-004 17 September 9, 2016 

During	the	time	the	state	agency	charged	the	Hardest	Hit	Fund	for	this	“much	

nicer	space,”	it	all	but	stopped	admitting	new	homeowners	into	the	program,	

despite	being	in	a	building	in	a	location	amongst	hardest	hit	homeowners.	

After	a	year,	the	Nevada	state	agency	determined	that	new	office	was	not	

necessary,	the	rent	was	too	high,	and	the	space	too	large.	The	then‐CEO	of	the	

state	agency	said	that	the	agency	needed	to	reduce	rent,	and	that	the	state	

agency	only	needed	75%	of	the	space	it	was	leasing.	The	CEO	said,	“The	building	

was	running	$11,200	per	month	for	a	little	over	6000	square	feet	when	only	

about	4500	square	feet	is	needed”—approximately	what	the	Nevada	state	

agency	had	previously	rented.	The	Nevada	state	agency	broke	the	lease	after	

making	the	June	2015	payment,	and	entered	into	a	significantly	lower	lease	in	

June	2015	costing	$6,658.40	per	month,	but	did	not	reimburse	HHF	for	the	prior	

excessive	rent	spent	the	last	year.		

Nevada State Agency Used Hardest Hit Funds to Pay Rent on Two Office

Buildings in Las Vegas in June 2015

For	the	month	of	June	2015,	the	Nevada	state	agency	charged	the	Hardest	Hit	

Fund	for	rent	on	two	offices—the	new	office	it	moved	to	and	the	office	where	it	

broke	the	lease.	Double	rent	served	no	purpose	to	the	Hardest	Hit	Fund	and	

constitutes	waste.		

Nevada State Agency Used Hardest Hit Funds to Pay Moving Costs to the New,

More Affordable Office Building & For New Furniture in June 2015

The	Nevada	state	agency	charged	the	Hardest	Hit	Fund	approximately	$20,000	

for	moving	costs	to	move	out	of	the	“much	nicer	space”	into	a	more	affordable,	

smaller	office	and	to	buy	new	office	furniture.		

Nevada State Agency Used Hardest Hit Funds to Pay $19,140 for Lawyer’s

Fees Related to Moving		

The	state	agency	incurred	legal	fees	of	$19,140	in	both	moves	related	to	

entering	into	and	terminating	leases.	Lawyers’	fees	related	to	moving	were	

block‐billed	(the	combination	of	different	types	of	activities	in	one	entry	on	the	

invoice).		

As	result,	for	one	year	while	the	Nevada	state	agency	stopped	taking	

homeowner	applications	in	4	of	5	HHF	programs	and	did	very	little	to	admit	

new	homeowners	into	the	one	open	program,	it	used	Hardest	Hit	funds	to	pay	

rent	for	a	“much	nicer	space”	at	the	“highest	lease	rate	around”	and	double	rent	

for	June	2015,	when	they	moved	out—a	total	of	$61,245.20,	as	shown	in	Table	4.	

The	Nevada	state	agency	also	used	Hardest	Hit	funds	to	pay	$39,140	in	related	

moving	costs	and	lawyers’	fees.		
SIGTARP-16-004 18 September 9, 2016 

Table 4: Excessive Rent – Las Vegas Office 

Old Monthly Rent 

(July 2014-June 2015) $11,207.30 

New Monthly Rent for “Much Nicer Space” in Excess of 

What was Needed (June-December 2015) $6,658.40 

Excessive Rent per Month $4,548.90 

Wasted Rent 

($4,548.9 x 11 months—July 2014-May 2015) $50,037.90 

Rent for Old Space While Also Paying Rent for New 

Office Space (June 2015) $11,207.30 

Wasted Excess Rent $61,245.20 

Source: SIGTARP’s analysis of the Nevada state agency’s Las Vegas office lease agreements and general 

ledgers through December 31, 2015. 

SIGTARP	also	found	that	these	charges	constitute	abuse	as	it	is	deficient	or	

improper	when	compared	with	behavior	that	a	prudent	person	would	consider	

reasonable	and	necessary.	It	is	also	abuse	because	it	is	a	misuse	of	authority	or	

position	for	the	benefit	of	the	state	agency,	not	for	the	benefit	of	homeowners	in	

HHF.	

Treasury should disallow and require the Nevada state agency to repay

$100,385.20 for abuse and wasted rent for its Las Vegas office space, and related

expenses.		
SIGTARP-16-004 19 September 9, 2016 

During 6 Months in 2015, the Nevada State 

Agency Spent More TARP Funds on Itself than 

on Helping Homeowners Which Resulted in 

Waste of Federal Funds 

SIGTARP	found	that	for	six	months	last	year,	the	Nevada	state	agency	spent	

more	on	its	own	administrative	expenses	than	on	helping	homeowners.	

Between	April	and	September	2015,	the	Nevada	state	agency	spent	$1.2	million	

in	Federal	TARP	funds	to	pay	for	its	own	administrative	expenses—almost	

$250,000	more	than	it	provided	to	struggling	Nevada	homeowners	seeking	help	

from	HHF	(Figure	4).	In	each	of	those	two	quarters,	the	Nevada	state	agency	

spent	more	Hardest	Hit	funds	on	its	own	overhead	such	as	salaries,	rent	and	

equipment	and	to	pay	lawyers	and	accountants,	than	it	provided	to	

homeowners.		

Figure 4: Hardest Hit Fund Nevada Spending April through September 2015 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports reported to 

Treasury. 

During	these	six	months,	the	Nevada	state	agency	admitted	only	38	Nevada	

homeowners	into	the	program	as	shown	in	Figure	5.	

$491,899 $449,727

$660,054

$530,084

$‐

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Q2 Q3

2015

Homeowner Assistance

Administrative Expenses
SIGTARP-16-004 20 September 9, 2016 

Figure 5: Nevada Homeowners Approved for HHF By Quarter 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports reported to Treasury. 

Spending	more	on	administrative	expenses	than	is	spent	fulfilling	the	purpose	of	

the	program	to	help	homeowners	amounts	to	waste.		

Under	Treasury’s	contract	with	the	Nevada	state	agency,	administrative	

expenses	are	allowed	if	they	are	“necessary	to	carry	out	the	services”	under	the	

Hardest	Hit	Fund.12	According	to	Treasury’s	website,	Hardest	Hit	Fund	Nevada’s	

purpose	is	to	provide	“assistance	that	will	help	prevent	avoidable	foreclosures	

and	keep	Nevada	homeowners	in	their	homes.”13	Therefore,	there	should	be	a	

corresponding	relationship	between	TARP	assistance	provided	to	homeowners	

and	the	support	services	necessary	to	provide	that	assistance.	Otherwise,	the	

spending	is	careless,	extravagant,	or	with	no	purpose.		

Treasury	is	aware	of	the	Nevada	state	agency’s	spending	and	the	low	number	of	

homeowners	admitted	to	the	Nevada	state	agency	in	2015.	Treasury	requires	

that	state	agencies	provide	a	detailed	budget	to	Treasury	of	administrative	

expenses	for	HHF	for	Treasury’s	approval.	Treasury	approves	the	administrative	

cost	budget	and	all	disbursements	of	Hardest	Hit	funds	to	state	agencies.	

Treasury	also	conducts	on‐site	reviews	of	state	agency	administrative	expenses.	

State	housing	finance	agencies	also	report	to	Treasury	on	the	numbers	of	

homeowners	admitted	to	the	program	each	quarter.	SIGTARP	will	address	the	

calculation	of	waste	for	these	six	months	within	a	larger	calculation	of	waste	

during	2015	in	the	next	section.

 

12	In	addition,	according	to	Treasury’s	contract	with	the	Nevada	state	agency,	“all	administrative	expenses	

paid	with	HHF	Program	funds	shall	be	accounted	for	and	are	subject	to	OMB	Circular	A‐87	(revised	

5/10/2004),	which	can	be	found	at	http://www.whitehouse.gov/omb/rewrite/circulars/a087/a087‐

all.html.	 13	Nevada	Hardest	Hit	Fund	Brochure,	no	date,	https://www.treasury.gov/initiatives/financial‐

stability/TARP‐Programs/housing/Documents/NHHF%20Brochure_9x12.pdf	(accessed	07/06/2016).	

1

114

333

234 209

372

556

964

1,015

550

246

300

212

119 122 88 55 24 14 24 38

0

200

400

600

800

1,000

1,200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2011 2012 2013 2014 2015 2016
SIGTARP-16-004 21 September 9, 2016 

For the Entire Year 2015, the Nevada State 

Agency Kept Nearly Half of All TARP Funds for 

Itself, While Admitting Only 117 Homeowners 

into the Program 

SIGTARP	found	that	during	2015	the	Nevada	state	agency	kept	nearly	half	of	

every	TARP	dollar	for	itself	($2.4	million	out	of	approximately	$5	million).	The	

Nevada	state	agency	admitted	only	117	Nevada	homeowners	into	the	program	

in	2015,	a	nearly	95%	decrease	from	2012	and	2013.14	Despite	this	dramatic	

decrease	in	the	number	of	homeowners	admitted	into	the	program,	the	Nevada	

state	agency	continued	to	spend	approximately	the	same	amount	on	

administrative	expenses	as	in	the	prior	year.	

Of	the	$2.4	million	in	TARP	funds	that	the	Nevada	state	agency	kept	for	itself	in	

2015,	it	spent	more	than	$1.4	million	on	its	own	salaries.	The	Nevada	agency	

paid	more	than	$280,000	to	law	firms,	and	nearly	$200,000	to	auditors.		

The	Nevada	state	agency	still	had	almost	$100	million	($94.6	million)	in	unspent	

TARP	funds	available	for	struggling	homeowners	at	the	start	of	2015,	but	

provided	less	than	3	percent	of	that	to	Nevada	homeowners.	Nevada	

homeowners	continue	to	need	assistance	from	the	Hardest	Hit	Fund,	but	the	

Nevada	state	agency	is	not	addressing	that	need.	In	2015,	85%	of	the	805	

homeowners	who	applied	for	HHF	assistance	did	not	receive	assistance.		

Figure 6: Homeowners Applying to HHF Nevada in 2015 

Source: SIGTARP analysis of the Nevada state agency’s Quarterly Performance Reports 

reported to Treasury in 2015. 

 

14	According	to	HHF	Nevada’s	Quarterly	Performance	Reports	to	Treasury,	there	were	2,101	homeowners	

admitted	to	HHF	Nevada	in	2012,	and	2,111	homeowners	admitted	in	2013.	Only	541	homeowners	were	

admitted	in	2014.	
SIGTARP-16-004 22 September 9, 2016 

As	shown	in	Figure	6,	in	the	third	quarter	of	2015,	the	Nevada	state	agency	

admitted	only	14	new	homeowners;	in	the	second	and	fourth	quarters	of	2015,	

the	Nevada	state	agency	admitted	only	24	new	homeowners.	In	the	fourth	

quarter	of	2015,	less	than	7%	of	homeowners	who	applied	were	admitted	(24	of	

350	Nevada	homeowners).		

The	Nevada	state	agency’s	spending	on	its	own	administrative	costs	at	

essentially	the	same	rate	as	in	prior	years	while	dramatically	decreasing	the	

number	of	homeowners	admitted	to	the	program	results	in	waste	that	Treasury	

should	disallow	and	seek	repayment.	The	fact	that	only	117	homeowners	

received	TARP	funds	from	the	Nevada	state	agency	in	2015,	while	the	state	

agency	kept	nearly	half	of	TARP	funds,	is	known	to	Treasury.	Treasury	reviews	

and	approves	the	administrative	budget	and	expenses	for	each	state	agency	in	

the	Hardest	Hit	Fund.	Treasury	receives	quarterly	updates	on	the	numbers	of	

homeowners	helped.	The	Nevada	state	agency’s	continuing	to	incur	

administrative	costs	nearly	dollar‐for‐dollar	with	its	program	assistance	over	a	

whole	year	raises	serious	red	flags.	Treasury	issued	a	directive	to	the	Nevada	

state	agency	in	December	2015	to	increase	the	number	of	homeowners	helped,	

but	continued	to	approve	the	Nevada	state	agency’s	administrative	costs.	Two	

months	later,	Treasury	announced	an	allocation	of	an	additional	$8.9	million	in	

TARP	funds	to	the	Nevada	state	agency.	

SIGTARP	has	determined	that	solely	based	on	the	dollar	amount	of	expenses	and	

the	number	of	homeowners	admitted	into	the	program,	in	2015	the	Nevada	

state	agency	spent	$20,527	in	administrative	costs	per	new	homeowner	

admitted—nearly	15 times	the	$1,370	per	homeowner	it	spent	on	

administrative	costs	in	the	first	quarter	of	2013	(the	year	the	Nevada	state	

agency	admitted	the	peak	number	of	homeowners),	amounting	to	wasted	

expense	of	$2,241,396.		

Because it was not necessary to administer the Hardest Hit Fund for the Nevada

state agency to spend more in administrative expenses per homeowner admitted

to the Hardest Hit Fund in 2015 (when it accepted only 117 homeowners into the

program) than at its peak in 2013 (when it accepted 2,111 homeowners into the

program), Treasury should disallow and require the Nevada state agency to repay

$2,241,396 in wasted administrative expenses during 2015 that exceed the per

homeowner administrative expense cost in 2013.
SIGTARP-16-004 23 September 9, 2016 

In 2014 and 2015, the Number of 

Homeowners Helped by HHF Nevada 

Plummeted, Even as Nevada Homeowners 

Continued to Suffer from High Unemployment 

and the Worst Underemployment Problem in 

the Nation 

The	problems	facing	Nevada	homeowners	at	the	start	of	HHF	still	persist	today.	

Nevada	homeowners	have	suffered,	and	continue	to	suffer	from	high	

unemployment,	high	underemployment,	and	high	numbers	of	underwater	

mortgages.	Although	Nevada’s	unemployment	rate	has	improved,	it	remains	

high	at	6.4%	according	to	the	Bureau	of	Labor	Statistics.	In	Clark	County	alone,	

the	home	of	Las	Vegas,	73,399	people	remained	unemployed	as	of	June	2016.	

Underemployment	continues	to	plague	Nevada	homeowners	at	13.1%,	the	

highest	rate	in	the	nation.15	There	were	more	than	100,000	homes	in	Nevada	

underwater	at	the	end	of	2015,	according	to	CoreLogic.		

Despite	the	fact	that	demand	for	Hardest	Hit	Fund	programs	is,	and	has	been,	

high,	Nevada	homeowners	are	having	a	very	hard	time	getting	into	the	program.	

The	Nevada	state	agency’s	largest	programs	are	a	mortgage	payment	assistance	

program	for	unemployed	and	underemployed	homeowners,	and	a	principal	

reduction	program	for	underwater	homeowners.		

After	2013,	despite	continuing	high	unemployment,	high	underemployment,	and	

large	numbers	of	underwater	homes,	the	number	of	Nevada	homeowners	who	

successfully	got	into	HHF	plummeted.	Compared	to	2,111	homeowners	

admitted	into	the	program	in	2013	(the	peak),	the	Nevada	state	agency	admitted	

only	541	homeowners	in	2014,	and	only	117	homeowners	in	2015.	

SIGTARP found that several factors led to the dramatic fall‐off in

the number of homeowners helped by HHF Nevada:		

The Nevada State Agency Significantly Reduced the Percentage 

of Applying Homeowners Who Were Admitted into the Program 

The	homeowner	admission	rate	into	the	Hardest	Hit	Fund	Nevada	was	far	lower	

in	2015	than	in	prior	years.	Some	26%	of	homeowners	who	applied	got	into	

HHF	Nevada	in	2012,	and	30%	of	homeowners	who	applied	in	each	of	2013	and	

2014,	were	admitted	into	the	program.	In	2015,	more	than	85%	of	homeowners	

who	sought	HHF	assistance	did	not	get	into	the	program—a	14.5%	homeowner	

admission	rate.		

 

15	The	Bureau	of	Labor	Statistics	calculates	the	underemployment	rate	(the	“U‐6”	labor	underutilization	rate)	

as	including	unemployed	workers,	part‐time	workers	who	want	to	work	full	time	but	their	hours	were	cut	

back	or	they	were	unable	to	fund	a	full‐time	job,	marginally	attached	workers	who	want	to	work	but	are	

not	looking	for	work,	and	discouraged	workers,	a	who	believe	there	are	no	jobs	available	to	them	and	have	

given	up	looking	as	a	result.	http://www.bls.gov/lau/stalt.htm	(accessed	08/18/2016).	
SIGTARP-16-004 24 September 9, 2016 

Treasury Approved HHF Nevada to Stop Accepting 

Applications for All of Its HHF Programs, Including the Two 

Largest Programs 

In	late	2012,	Treasury	approved	HHF	Nevada	to	close	all	of	its	HHF	programs	to	

new	homeowners,	including	the	two	largest	programs.	For	approximately	eight	

months	(until	August	2013),	the	Nevada	state	agency	did	not	accept	any	new	

applications	from	homeowners	seeking	help	from	its	largest	HHF	program,	the	

Mortgage	Assistance	Program	(unemployment).	Although	they	continued	to	

approve	previously‐received	applications,	HHF	Nevada’s	other	programs	

remained	closed	to	new	homeowners.	For	more	than	an	entire	year	(second	

quarter	2014	through	second	quarter	2015),	no	new	homeowners	were	

admitted	into	the	main	principal	reduction	program,	the	second‐lien	program,	

the	short	sale	program,	or	an	alternative	unemployment	program.		

Treasury Allowed HHF Nevada to Divert Funds from the Two 

Largest Programs (Unemployment and Principal Reduction) to 

Two Programs that Never Helped a Single Homeowner 

Unemployed	and	underwater	homeowners	who	desperately	needed	HHF

Nevada	saw	resources	taken	away.	In	August	2013	and	in	2014,	Treasury	

allowed	the	Nevada	state	agency	to	divert	$75	million	from	all	of	its	existing	

HHF	programs,	including	the	two	largest	programs	(unemployment	and	

principal	reduction),	to	launch	new	programs.	These	new	programs	(a	mortgage	

modification	program	and	a	second	principal	reduction	program)	never	got	off	

the	ground.	No	one	applied.	Neither	program	would	ever	help	a	single	

homeowner.	Both	were	closed	and	defunded	in	2015.	Even	though	the	two	

largest	programs	stopped	accepting	applications,	and	with	fewer	and	fewer	

homeowners	provided	assistance,	the	Nevada	state	agency	continued	to	

increase	its	administrative	expenses.	

First Part of 2016:

In	December	2015,	Treasury	followed	SIGTARP’s	recommendation	by	assessing	

the	Nevada	state	agency’s	performance	and	sending	the	Nevada	state	agency	an	

action	memorandum	with	a	requirement	that	it	come	up	with	a	strategy	to	

increase	the	number	of	homeowners	in	HHF.16	In	the	first	quarter	2016,	an	

additional	38	homeowners	have	been	admitted	into	the	program	out	of	201	

applying	homeowners—a	19%	homeowner	admission	rate.	According	to	the	

Nevada	state	agency’s	latest	financials,	in	2016	(April	2016	latest	data	

available),	the	Nevada	state	agency	has	spent	35	cents	of	every	TARP	dollar	on	

administrative	expenses	($1.9	million	out	of	$5.3	million)	through	April.17	While	

 

16 See	SIGTARP,	“Factors	Impacting	the	Effectiveness	of	Hardest	Hit	Fund	Florida,”	October	6,	2015;	SIGTARP,	

“Factors	Affecting	Implementation	of	the	Hardest	Hit	Fund	Program,”	April	12,	2012.	 17	Nevada	Affordable	Housing	Assistance	Corporation,	April	2016	Financials,	provided	for	the	June	6,	2016	

Board	Meeting,	http://www.nevadahardesthitfund.nv.gov/uploads/April_2016_Financials.pdf	(accessed	

06/22/2016).	
SIGTARP-16-004 25 September 9, 2016 

this	is	a	trend	in	the	right	direction,	it	is	still	high	in	costs	and	low	in	

homeowner	admissions,	and	does	not	remove	the	need	to	repay	the	waste	spent	

on	administrative	expenses.		

TARP Dollars Paid for Violations of the Law 

and Alleged Violations of the Law Which 

Amounts to Waste 

Over	the	past	three	years,	the	Nevada	state	agency	used	Hardest	Hit	Fund	

dollars	that	would	otherwise	have	been	available	to	help	Nevada	homeowners	

to	instead	pay	lawyers	related	to	violations	of	the	law	and	alleged	violations	of	

the	law.	Treasury’s	contract	requires	the	Nevada	state	agency	to	perform	all	

services	in	compliance	with	all	Federal,	state,	and	local	laws.	Treasury	has	

therefore	recognized	that	violations	of	the	law	serve	no	purpose	in	the	Hardest	

Hit	Fund.	There	is	no	valid	purpose	to	the	Hardest	Hit	Fund	program	to	pay	

expenses	to	defend	a	violation	or	alleged	violation	of	the	law.	These	expenses	

constitute	waste.18		

 In 2013, the U.S. Department of Labor found that the Nevada state agency

violated Federal labor laws.

o SIGTARP	found	that	the	Nevada	state	agency	used	TARP	funds	to	

pay	$26,096	to	its	lawyers	to	defend	against	the	Department	of	

Labor’s	investigation	into	the	Nevada	state	agency’s	violation	of	

Federal	labor	laws	(these	amounts	were	“block	billed,”	

combining	different	types	of	activities	in	one	entry	on	the	

invoice).	

o SIGTARP	found	that	the	Nevada	state	agency	used	TARP	funds	to	

pay	the	entire	amount	of	$149,031.12	in	back	wages	arising	from

the	Department	of	Labor’s	finding	of	a	violation	of	the	law.		

 SIGTARP found that the Nevada state agency used TARP dollars to pay

lawyers to defend allegations by several former employees against

allegations of employment discrimination laws. The	lawyers’	bills	show	

charges	related	to	defending	against	these	discrimination	allegations	

that	are	“block	billed”	(the	combination	of	different	types	of	activities	in	

one	entry	on	the	invoice)	totaling	$123,217.96.

 The Nevada state agency used approximately $4,000 in TARP funds to

settle one of the former employee’s allegations.		

 

18	According	to	GAO’s	Standards for Internal Control in the Federal Government	issued	September	2014,	

“waste”	is	using	or	expending	resources	carelessly,	extravagantly,	or	to	no	purpose.	
SIGTARP-16-004 26 September 9, 2016 

 SIGTARP found that the Nevada state agency used TARP dollars to pay

lawyers to defend an investigation by the Nevada Commission on Ethics

into whether an officer violated certain state rules on conflicts and

spending.	The	lawyers’	bills	show	charges	related	to	defending	this	

investigation	that	are	“block	billed”	(the	combination	of	different	types	

of	activities	in	one	entry	on	the	invoice)	totaling	$18,160.

 The Nevada state agency used $12,845.25 in TARP dollars to pay its

lawyers, a private investigator and computer forensic expert to retrieve

and recover equipment and information from a terminated employee who

had previously alleged discrimination and ethics violations.

A	state	agency	can	certainly	incur	lawyer’s	fees,	but	that	does	not	mean	they	all	

should	be	paid	with	Hardest	Hit	funds.	Lawyers’	fees	should	not	be	paid	with	

Hardest	Hit	funds	where	they	are	incurred	to	defend	against	allegations	of	

violations	of	the	law.	This	wastes	TARP	funds	specifically	set	aside	to	support	

homeowners.	These	funds	should	have	come	from	non‐Hardest	Hit	Fund	sources.	

Table 5: Identified Wasteful Use of TARP Dollars Related to Violations and Alleged 

Violations of the Law 

Source: SIGTARP’s analysis of invoices for legal services rendered for violations and alleged violations.

Treasury should disallow and require the Nevada state agency to repay all

of these wasted expenses defending its violations of the law and alleged

violations of the law totaling $184,319.21, as shown in Table 5.19		

 

19	Because	many	of	the	time	entries	on	the	legal	invoices	were	“block	billed,”	some	portion	of	this	total	may	

include	charges	for	legitimate,	non‐wasteful	HHF	spending	that	SIGTARP	could	not	separate	based	on	the	

information	provided.	As	a	result,	SIGTARP	questioned	the	entire	amount	where	any	questionable	activities	

were	included.		

Legal fees related to defending U.S. Department 

of Labor investigation $26,096.00 

Legal fees related to defending former employees' 

employment discrimination challenges $123,217.96 

Settlement cost for one employment discrimination case $4,000.00 

Legal fees related to defending state Commission on 

Ethics investigation $18,160.00 

Legal, private investigator and computer forensic expert charges $12,845.25 

Total $184,319.21 
SIGTARP-16-004 27 September 9, 2016 

The Nevada State Agency’s Careless 

Recordkeeping Resulted in Additional Waste of 

Over $26,000 in TARP Dollars Paid to a 

Forensic Auditor to Reconstruct the Financial 

Books 

The	Nevada	state	agency’s	own	internal	compliance	auditors	found	numerous	

and	persistent	carelessness,	including	problems	with	improper	recordkeeping	

and	accounting	in	quarterly	audits	from	2013	through	2015,	including:	

 Lack	of	documented	accounting	procedures	for	classifying	the	Nevada	

state	agency	expenses	for	direct	and	indirect	costs	to	HHF	Nevada,	

including	salaries	and	benefits;	

 Lack	of	documentation	and	supervisory	approvals	to	support	

transactions;	

 Incorrect	postings	to	the	general	ledger	and	insufficient	detail	to	explain	

adjusting	journal	entries;		

 Insufficient	retention	of	supporting	Internal	Revenue	Service	tax	

documentation;	

 Failure	to	reconcile	customer	data	files	with	the	Nevada	state	agency’s	

accounting	systems;	

 Failure	to	perform	monthly	monitoring	of	cash	flows	compared	to

budgeted	amounts;	

 Lack	of	separation	of	duties	and	review	of	internal	controls;	

 Payments	sent	to	the	wrong	mortgage	servicers;		

 Understatement	of	liabilities;	

 Failure	to	properly	create	and	document	journal	entries;		

 Failure	to	properly	control	travel,	training,	and	credit	card	expenses;		

 Lack	of	evidence	that	remedial	actions	had	been	taken	to	address	

previously	identified	deficiencies.	

SIGTARP	found	that	the	Nevada	state	agency’s	careless	recordkeeping	resulted	

in	additional	waste	of	$26,395.70	in	TARP	funds	paid	to	a	forensic	accountant	to	

reconstruct	the	financial	books,	which	were	riddled	with	serious	problems	as	to	

the	integrity	of	the	financial	data. These	funds	are	not	allowed	under	Treasury’s	

contract	with	the	state	agency,	which	provides	that	the	Nevada	state	agency	will	

perform	the	services	“in	accordance	with	the	practices,	high	professional	

standards	of	care,	and	degree	of	attention	used	in	a	well‐managed	operation.”	

The	Nevada	state	agency’s	internal	auditors	in	2014	found	that	“...serious	

problems	exist	in	the	integrity	[of	the	state	agency’s]	financial	data.”		
SIGTARP-16-004 28 September 9, 2016 

This	auditor	finding	shows	that	the	Nevada	state	agency	did	not	perform	

services	under	Treasury’s	contract	with	high	professional	standards	of	care	used	

in	a	well‐managed	operation.	According	to	the	internal	auditor,	Treasury	told	it	

to	hire	a	forensic	accountant	to	reconstruct	the	state	agency’s	books	back	to	

2010.20

Just	because	Treasury	directed	the	hiring	of	a	forensic	accountant	does	not	

mean	that	TARP	funds	should	pay	for	it.	No	forensic	accountant	would	be	

needed	if	not	for	the	carelessness	of	the	Nevada	state	agency.	TARP	funds	should	

not	be	used	to	pay	for	expenses	to	fix	careless	recordkeeping.	These	funds	

should	have	come	from	non‐Hardest	Hit	Fund	sources.		

Treasury should disallow $26,395.70 HHF paid for Nevada’s forensic accountant

and require the Nevada state agency to repay this wasted expense.

The Nevada State Agency’s Careless 

Recordkeeping Resulted in Additional Waste of 

Nearly $11,000 Paid to an Independent Auditor 

to Reconcile Bank Accounts Including NonHHF Accounts 

SIGTARP	found	that	the	Nevada	state	agency	wasted	$10,812	in	TARP	funds	to	

pay	an	independent	auditor	for	additional	services	outside	the	normal	scope	to	

reconcile	the	state	agency’s	bank	accounts	including	accounts	unrelated	to	HHF.	

This	work,	and	the	related	cost,	would	not	have	been	necessary	had	the	agency	

not	been	careless	in	its	accounting.	Therefore,	it	constitutes	waste.	These	funds	

should	have	come	from	non‐Hardest	Hit	Fund	sources.		

Treasury should disallow $10,812 HHF paid for these additional services and

require the Nevada state agency to repay this wasted expense.

 

20	The	forensic	auditor	had	limited	access	to	records	and	conducted	the	review	according	to	procedures	

agreed	upon	by	the	Nevada	state	agency.	
SIGTARP-16-004 29 September 9, 2016 

The Nevada State Agency Wasted TARP 

Dollars by Paying the Recently Terminated 

CEO a 2-Month Full Pay and Benefit 

Severance Package 

After	essentially	terminating	the	most	recent	CEO	in	May	2016,	the	Nevada	state	

agency’s	Board	agreed	to	pay	the	CEO	a	two‐month	full	compensation	severance	

package	of	$20,874.75	including	full	salary,	expenses	(including	a	fixed	expense	

and	automobile	allowance	of	$618	per	month),	and	benefits	through	July	31,	

2016.	SIGTARP	found	that	his	salary	and	fixed	expenses	are	being	paid	out	of	the	

HHF	bank	account.		

The	CEO’s	employment	agreement	has	no	provision	for	severance	but,	even	if	it	

had,	severance	should	not	be	paid	from	Hardest	Hit	funds.	The	CEO	told	

SIGTARP	that	his	last	day	was	June	3,	2016.		

In	addition,	minutes	of	a	board	meeting	show	that	the	Nevada	state	agency’s	

severance	agreement	with	the	CEO	includes	that	the	state	agency	will	not	object	

to	the	CEO’s	request	for	unemployment.	Any	unemployment	benefits	should	not	

be	paid	using	HHF	dollars.	Those	board	minutes	also	show	that	a	lawyer	would	

prepare	the	Severance	and	Release	Agreement.	No	lawyer’s	fees	should	be	

charged	to	HHF	as	they	are	not	necessary	to	provide	HHF	services.	Rather,	these	

expenses	relate	to	the	Board’s	essentially	terminating	the	CEO	who	oversaw	

carelessness	and	waste.	

Treasury should disallow the former CEO’s severance package of $19,874.75, and

any unemployment benefits paid through HHF or associated lawyer’s fees, as waste

and seek repayment from the Nevada state agency. 21

 

21	Two	months	(June	and	July	2016)	of	the	automobile	allowance,	or	$1,000,	is	included	in	a	previous	finding	

in	this	report	related	to	the	CEO’s	car	allowance.	Therefore,	we	reduced	the	total	severance	of	$20,874.75	

by	$1,000,	which	would	need	to	be	added	back	if	Treasury	does	not	seek	repayment	of	the	car	allowance.	
SIGTARP-16-004 30 September 9, 2016 

The Nevada State Agency Has Committed 

Waste by Using Hardest Hit Funds to Pay for 

Non-Hardest Hit Fund Expenses 

SIGTARP	found	that	the	Nevada	state	agency	has	been	using	HHF	funds	to	pay	

for	non‐HHF	expenses.	No	state	agency	is	entitled	to	Hardest	Hit	funds	for	

expenses	unrelated	to	the	Hardest	Hit	Fund	program.		

 In	December	2014,	Treasury	found	that	the	Nevada	state	agency	had	used	

TARP	funds	to	pay	18	specific	non‐HHF	costs,	including:	

o to	pay	for	a	laptop	shipped	to	an	employee’s	personal	address;		

o to	pay	for	travel expenses	that	were	“non‐HHF	related;”	and	

o to	pay	for	credit card charges that	were “non‐HHF	related.”	

 Although	the	initial	dollar	amounts	Treasury	found	were	small	($3,143.67),	

on	March	26,	2015,	under	a	limited	review	with	restricted	access,	the	

outside	forensic	auditor	identified	other	expenses	unrelated	to	the	Hardest	

Hit	Fund	charged	to	HHF.	These	non‐HHF	expenses	incurred	between	

January	1,	2013	and	December	31,	2014,	included:	

o Lawyers’ fees for work unrelated to HHF of	$205;22

o Fees paid to the former controller for consulting services in	the	amount	

of	$2,955;	

o Conference expenses	of	$550	for	former	CEO	to	attend	a	Clean	Energy	

Summit	and	a	Women’s	Leadership	Conference	at	the	MGM	Resort.23

 The	forensic	auditor	also	found	costs	paid	with	Hardest	Hit	funds	where	it	

was	unable	to	determine	if	allowable	under	Treasury’s	contract	because	of	

the	careless	recordkeeping,	including:	

o Meals and entertainment expenses of $666.47;

o Auto reimbursement and parking fees of $695.52;

o Unsupported travel costs of $1,979.19 for its then‐CEO; and

o $1,400.30 in costs over per diem for an employee to attend a CoreLogic

risk	summit	at	the	St.	Regis	hotel	for	its	then	CEO.	

 

22	The	Nevada	state	agency	eventually	reimbursed	HHF	Nevada	the	$205	in	lawyers’	fees,	but	not	until	

August	18,	2015.	 23	This	non‐HHF	expense	was	also	included	in	the	amount	identified	by	Treasury.		
SIGTARP-16-004 31 September 9, 2016 

Table 6: Wasteful and Questionable Uses of TARP Dollars to Pay Non-HHF Expenses 

Non-HHF expenses for computer, travel expenses, and credit card charges $3,143.70 

Improper consulting fees not allowed under HHF policy $2,955.00 

Questionable expenses for meals and entertainment $666.47 

Questionable auto and parking reimbursement charges $695.52 

Unsupported travel costs $1,979.19 

Excess costs over per diem rates $1,400.30 

Total $10,840.18 

Source: SIGTARP’s analysis of Treasury’s December 2014 compliance report and March 2015 outside forensic 

auditor’s report. 

SIGTARP	found	that	Treasury	has	not	ensured	that	all	of	these	non‐HHF	

expenses	paid	with	TARP	funds	were	recovered	for	HHF.	

Treasury should disallow and require the Nevada state agency to repay all of these

expenses totaling $10,840.18, as shown in Table 6. Treasury should conduct an in‐

depth review of all administrative expenses incurred by the Nevada state agency to

determine whether there are additional non‐HHF expenses that have been paid for

with Hardest Hit funds.
SIGTARP-16-004 32 September 9, 2016 

The Nevada State Agency’s Careless 

Recordkeeping Resulted in Additional Waste of 

Nearly $25,000 in Travel, Entertainment, and 

Unsupported Credit Card Charges 

Treasury	found	that	the	Nevada	state	agency	used	nearly	$25,000	in	TARP	funds	

for	unsupported	credit	card	charges	and	inappropriate	travel	and	entertainment	

expenses.	In	2014,	Treasury	found	that	between	April	1,	2013	and	September	

30,	2014,	the	Nevada	state	agency	had	paid	$21,278.56	in	credit	card	charges	

where	there	was	missing	or	inadequate	support.	This	carelessness	amounts	to	

waste.	

Treasury	also	found	$1,760.42	in	hotel,	lodging,	flights,	and	meals	paid	for	with	

Hardest	Hit	funds	that	were	not	in	compliance	with	the	travel	policy.	Treasury	

found	$1,899.36	in	entertainment	and	per	diem	improperly	paid	to	Nevada	state	

agency	employees.	A	portion	($1,100.09)	of	these	costs	was	also	identified	by	

the	forensic	auditor.	

SIGTARP	found	that	Treasury	has	not	ensured	that	all	of	these	non‐HHF	

expenses	paid	with	TARP	funds	were	recovered	for	HHF.	

Treasury should disallow and require the Nevada state agency to repay

$23,838.2524 for this waste. Treasury should conduct an in‐depth review of all

administrative expenses incurred by the Nevada state agency to determine

whether there is additional travel, entertainment, and unsupported credit card

charges that should be disallowed and repaid.

 

24	Both	Treasury	and	the	outside	forensic	auditor	identified	$1,100.09	of	non‐HHF	related	costs.	Because	

SIGTARP	already	included	these	costs	in	the	previous	finding,	we	subtracted	the	$1,100.09	from	the	

$24,938.34.		
SIGTARP-16-004 33 September 9, 2016 

The Nevada State Agency Committed Waste 

by Using Hardest Hit Funds to Pay 100% of its 

Overhead Costs Including Rent and Payroll 

Even Though It Works on Non-Hardest Hit 

Fund Activities 

HHF	is	not	a	program	to	fund	all	of	a	state	agency’s	overhead.	Treasury’s	

contract	only	allows	those	administrative	costs	necessary	to	provide	the	HHF	

services,	not	other	expenses	necessary	to	run	a	state	agency.	The	Nevada	state	

agency	does	not	solely	work	on	HHF	matters.	

When	a	state	agency	administers	the	Federally‐funded	Hardest	Hit	Fund	

program	as	well	as	state	programs	and	activities,	administrative	costs	should	be	

tracked	separately,	and	shared	costs	(such	as	overhead)	should	be	apportioned	

between	the	Federal	and	other	funding	sources.	The	Nevada	state	agency’s	

internal	auditor	and	outside	forensic	auditor	found	no	evidence	of	a	cost‐sharing	

methodology,	and	told	the	state	agency	that	payroll	costs	had	to	be	allocated	

between	the	Hardest	Hit	Fund	and	non‐HHF	funding	sources	according	to	a	cost‐

sharing	methodology.		

SIGTARP	found	the	Nevada	state	agency	initially	shared	overhead	costs	such	as	

rent	and	payroll	to	both	the	Hardest	Hit	Fund	and	non‐HHF	funding,	but	then	

stopped	that	practice,	instead	using TARP funds to pay 100% of overhead

items such as rent and payroll even though the agency conducted other

business completely unrelated to HHF.		

Small	and	inconsistent	reimbursements	to	Treasury	for	rent	in	the	Reno	office	in	

2012	of	a	total	of	$2,739,	which	decreased	to	$1,943	in	2013,	evidence	that	the	

state	agency	knew	that	the	Hardest	Hit	Fund	should	not	pay	100%	of	these	costs	

and	that	those	costs	should	be	shared.	25	However,	the	state	agency	charged	

100%	of	the	Las	Vegas	office	rent	to	the	Hardest	Hit	Fund	for	2012	to	2015.	In	

2014	and	2015,	it	ceased	reimbursements	for	the	Reno	rent.	The	state	agency	

reimbursed	Treasury	nearly	$100,000	for	partial	payroll	in	2012,	and	about	half	

that	amount	in	2013.	It	did	not	reimburse	Treasury	for	any	payroll	in	2014	and,	

in	2015,	SIGTARP	identified	a	single	small	reimbursement	of	$706.30,	but	there	

were	no	subsequent	reimbursements.	26

 

25	SIGTARP	identified	that	the	Nevada	state	agency	reimbursed	HHF	6	times	in	2012	(4	@	$391.95	each,	

$200.00,	and	$971.54)	and	4	times	in	2013	(4	@$485.77)	totaling	$4,682.42	for	rent	at	the	Reno	office.	In	

the	absence	of	a	formalized	cost‐sharing	methodology,	there	is	no	way	to	determine	whether	this	amount	

represents	all	amounts	that	should	be	reimbursed	to	HHF.	 26	SIGTARP	also	identified	$154,684.96	in	non‐HHF	salaries	reimbursed	to	Treasury	before	2014.	However,	

this	reimbursement	is	inconsistent,	and	does	not	happen	on	a	regular	basis:	10	times	in	2012	($3,904.00,	

$3,638.31,	$6,240.23,	$7,794.49,	$14,630.98,	3	@	$7,829.11	each,	$9,327.11,	and	$30,281.76),	and	4	times	

in	2013	($12,687.28,	2	times	@	$12,997.98,	and	$15,991.21).	In	the	absence	of	a	formalized	cost‐sharing	

methodology,	there	is	no	way	to	determine	whether	this	amount	represents	all	amounts	that	should	be	

reimbursed	to	HHF.	
SIGTARP-16-004 34 September 9, 2016 

The	agency’s	internal	compliance	auditor	found	repeated	noncompliance	with	

requirements	that	semi‐annual	certifications	be	signed	by	employees	and	

supervisors	that	the	employees	solely	worked	on	a	Federal	program	in	

accordance	with	Federal	guidelines.	This	serves	as	a	check	to	ensure	that	

Federal	funding	is	not	being	used	for	non‐Federal	matters.	

 SIGTARP found that the Nevada state agency paid 100% of the Las Vegas

office rent from 2012 to 2015 with HHF, and 100% of the Reno office rent in

2014 and 2015. Given	these	findings	and	the	lack	of	a	formal	cost‐sharing	

methodology,	Treasury	should	reject	the	entire	unreimbursed	rent	expense	

between	2012	and	2015	in	the	amount	of	$467,899.99,	and	make	the	

Nevada	state	agency	prove	what	portion	was	necessary	to	provide	the	HHF	

services.	This	is	particularly	critical	as	the	Nevada	state	agency	provided	

very	little	service	under	HHF	during	2014	and	2015,	as	the	number	of	

homeowners	admitted	to	the	program	plummeted	in	those	years.	

 SIGTARP found that the Nevada state agency paid 100% of the utilities with

HHF, amounting to $350,207.87.27 HHF	should	not	pay	the	cost	of	utilities	for	

programs	and	activities	unrelated	to	HHF.	Treasury	should	reject	all	of	these	

costs	and	make	the	Nevada	state	agency	prove	what	portion	is	necessary	to	

provide	the	HHF	services.	

 SIGTARP has also uncovered that the Nevada state agency is using Hardest Hit

Funds to pay 100% of its payroll since 2014 even though employees also work

on matters unrelated to HHF. Because	the	Hardest	Hit	Fund	is	not	

responsible	for	funding	an	entire	state	agency,	the	Hardest	Hit	Fund	should	

not	pay	100%	of	the	wages	for	employees	who	work	on	matters	unrelated	to	

the	Hardest	Hit	Fund.	Given	this	finding	and	the	lack	of	a	formal	cost‐sharing	

methodology,	Treasury	should	reject	the	entire	unreimbursed	payroll	

expense	between	2012	and	2015	in	the	amount	of	$6,641,518.36,	and	make	

the	Nevada	state	agency	prove	what	portion	was	necessary	to	provide	the	

HHF	services.		

 SIGTARP	found	that	some	of	these	employees	to	whom	the	Nevada	state	

agency	paid	back	wages	for	its	violation	of	Federal	employment	law	also	

worked	on	matters	unrelated	to	the	Hardest	Hit	Fund.	The	Nevada	state	

agency	did	not	apportion	the	costs.	Treasury	should	determine	which	of	the	

47	employees	worked	on	matters	unrelated	to	the	Hardest	Hit	Fund,	and	

determine	the	percentage	of	wages	to	be	clawed	back.	

 

27	SIGTARP	identified	a	single,	small	reimbursement	of	$40.00	in	2015,	after	the	outside	forensic	auditor	

found	it	had	been	improperly	paid	with	HHF.		SIGTARP’s	analysis	of	invoices	identified	no	other	

reimbursements.	In	the	absence	of	a	formalized	cost‐sharing	methodology,	there	is	no	way	to	determine	

whether	this	amount	represents	all	amounts	that	should	be	reimbursed	to	HHF.	
SIGTARP-16-004 35 September 9, 2016 

As TARP funds paid 100% of overhead costs during periods in which the Nevada

state agency also performed non‐HHF services that were not necessary to provide

HHF services to homeowners, in the absence of a formal cost‐sharing methodology

Treasury should disallow the entire rent expense of $467,899.99, the entire utilities

expense of $350,207.87, and the entire payroll expense of $6,641,518.36, 28 and

require the Nevada state agency to deliver support on what share of overhead

under 100% is necessary to provide Hardest Hit Fund services only, as required by

Treasury’s contract. Once it receives the Nevada state agency’s justification in

support of its claims, Treasury should determine the proper cost sharing allocation

methodology, both retrospectively and prospectively, for the Nevada state agency,

and only allow HHF funds to be used to pay for administrative costs in support of

HHF and not waste. Treasury should ensure that employee certifications are

completed as required by Federal guidelines.

 

28	Some	portion	of	these	identified	rent,	utilities	and	payroll	expense	amounts	may	overlap	with	other	

amounts	SIGTARP	identified	as	waste	elsewhere	in	this	report	(e.g.,	as	wasted	administrative	expense	in	

2015,	or	as	excessive	rental	expense	for	the	Las	Vegas	office).	To	the	extent	that	Treasury	recovers	those	

other	amounts,	Treasury	should	determine	the	amount	of	any	such	overlap	and	adjust	the	disallowed	

amounts	identified	in	this	paragraph	as	appropriate.	
SIGTARP-16-004 36 September 9, 2016 

Conclusion 

The Nevada Housing Division allowed abuse and waste of $8.2 

million in Hardest Hit Fund dollars instead of helping homeowners 

at risk of foreclosure.29 The Nevada	Housing	Division,	the	state	housing	

finance	agency,	outsourced	administration	of	the	Hardest	Hit	Fund	to	one	of	its	

pre‐existing	components	called	the	Nevada	Affordable	Housing	Assistance	

Corporation	(“NAHAC”).30	Its	proposal	to	Treasury	said,	“Program	leadership	

will	come	from	the	NAHAC	Executive	Committee....The	Nevada	state	agency’s	

Executive	Director,	Chief	Financial	Officer	and	Chief	of	Federal	Programs	

constitute	the	Executive	Committee....”31	Given	that	the	Nevada	Housing	Division	

served	as	the	agency	responsible	under	Treasury’s	HHF	contract,	SIGTARP	will	

refer	to	both	NHD	and	NAHAC	as	“the	state	agency”	or	“Nevada	state	agency.”	

Hardest	Hit	Fund	programs	are	targeted	to	address	these	significant	problems	

that	place	Nevada	homeowners	at	risk	of	foreclosure,	but	the	Hardest	Hit	Fund	

cannot	be	effective	in	tackling	these	problems	if	the	TARP	funds	are	kept	for	

administrative	expenses	and	do	not	get	out	to	homeowners.	

SIGTARP	found	that	the	state	agency	took	homeowner	rescue	dollars	for	itself,	

at	the	same	time	it	all	but	stopped	helping	homeowners.		

 In 2015, the Nevada state agency kept one TARP dollar for 

every TARP dollar it gave to a homeowner. It kept for itself more

than $1.4 million of the $2.4 million in TARP dollars spent in administrative

expenses in Nevada that year.

 For half of 2015, it spent more on itself than it provided to 

homeowners. The Nevada agency spent $1.2 million on itself, almost

$250,000 more than it provided to homeowners.

 

29	For	purposes	of	this	calculation,	SIGTARP	reduced	the	$2,241,396	wasted	administrative	expenses	in	2015	

by	the	specific	2015	expenses	identified	in	this	report	to	avoid	potential	double	counting.	The	specific	2015	

expenses	totaled	$1,915,465.49.	 30	The	state	HFA	is	in	contract	with	Treasury,	and	information	on	HHF	appears	on	the	state	HFA’s	website.	

Treasury	required	that	each	state	HFA	use	a	financial	institution	to	serve	as	an	“eligible	entity.”	NAHAC	is	

the	eligible	entity.	When	it	launched	HHF	in	2010,	NHD	officials	comprised	a	majority	of	the	Executive	

Committee	of	NAHAC’s	board.	In	2013,	NHD	approved	changes	to	the	make‐up	of	NAHAC’s	board	that	

reduced	its	influence	over	NAHAC	and	spun	off	NAHAC	as	a	component.	This	is	rare	in	HHF,	as	most	state	

housing	agencies	in	the	Hardest	Hit	Fund	administer	the	program,	either	themselves	or	through	a	special‐

purpose	eligible	entity	created	specifically	for	HHF.	 31	By	mid‐2013,	NAHAC’s	executive	committee	was	no	longer	comprised	of	NHD	executives.	The	proposal	is	

published	on	Treasury’s	website	at	https://www.treasury.gov/initiatives/financial‐

stability/programs/housing‐programs/hhf/Documents/NV.pdf.
SIGTARP-16-004 37 September 9, 2016 

 In 2015, it only admitted 117 new Nevada homeowners into 

the Hardest Hit Fund, a 95% decrease from 2012 and 2013. Although many homeowners in the nation have seen some recovery, many

Nevada homeowners remain hard hit by unemployment and underwater

mortgages—precisely the problems HHF was designed to address. Demand for

the program continued, but in 2015, the state agency only admitted 14.5% of

homeowners who applied.

SIGTARP	found	that	the	Nevada	state	agency	abused	the	Hardest	Hit	Fund	with	

seemingly,	a	sense	of	entitlement	and	no	appreciation	for	the	fact	that	they	were	

taking	funds	for	themselves	that	were	intended	to	help	struggling	Nevada	

homeowners	stave	off	foreclosure.		

 A car allowance of $500 per month for the CEO who drove a 

Mercedes was charged to the Hardest Hit Fund. The Nevada state

agency expensed $11,000 to the Hardest Hit Fund beginning in October 2014,

an expense that was not necessary to the administration of HHF, particularly

because it was not charged in the past and official travel by car can be

reimbursed by mileage.

 More than $10,000 charged to the Hardest Hit Fund for a 

manager outing at the nation’s best high volume cocktail bar 

Herbs & Rye, a $105 country club lunch, a $900 company 

picnic, a $100 massage for an employee, a $124 Edible 

Arrangement for the accounting staff, a baby gift for an 

employee, regular staff breakfasts, lunches and perks and a 

$4,500 bonus for the CEO, all while the number of 

homeowners admitted to the program plummeted. These expenses

were not necessary for the Hardest Hit Fund as shown by the fact that the

Nevada state agency provided HHF help to homeowners in past years without

buying meals and drinks and gifts for employees. SIGTARP found the Nevada

state agency increased spending on wining and dining and freebies for

employees, at the same time it decreased the number of homeowners admitted

to the Hardest Hit Fund. The Nevada state agency abused HHF by spending

these rescue dollars on its own employees like a private company, but making

HHF foot the bill.		

 December holiday parties for employees complete with 

holiday gift cards were charged to the Hardest Hit Fund. While

not a large sum of money ($5,811), it was money that could have helped some

homeowners pay their mortgage. These parties started in December 2013 at a

local restaurant, escalated to a casino in December 2014, and then a country

club in December 2015, all while the agency’s HHF help to homeowners

plummeted. In the 4th quarter of 2015, while holding their holiday party at a

country club, the state agency only admitted 24 new homeowners into the

program—a meager 8% of the homeowners admitted two years prior.		
SIGTARP-16-004 38 September 9, 2016 

 In July 2014, the state agency moved offices to the gleaming 

$130 million City Hall building in North Las Vegas, built three 

years earlier, without concern that their rent would nearly 

double, because they charged the full rent to the Hardest Hit 

Fund. At the same time, the state agency cut their staff, and severely cut

homeowner admissions to the program. The New York Times ran a story on

November 19, 2011, criticizing city officials from moving into this new building

derided by residents still suffering from the economy as “a Taj Mahal,”

http://www.nytimes.com/2011/11/20/us/in‐north‐las‐vegas‐new‐city‐hall‐is‐

a‐reminder‐of‐flush‐days.html?_r=0.

32 The New York Times described the

North Las Vegas City Hall building as having a view that stretched for miles,

marble floors, granite tabletops, a parking lot covered with solar panels to

keep cars cool in the Vegas heat, a wellness center including fitness equipment,

and an outdoor concert plaza. Given that one third of the homes in North Las

Vegas were in foreclosure, and that houses that were occupied were worth less

than half the value from two years prior, the New York Times reported one

resident who lost his job as saying about the City Building, “It’s just

disrespectful – like they have no idea of what people are going through.”		

In	internal	correspondence	in	2014,	the	Nevada	state	agency	discussed	that	City	

Hall	was	“much	nicer	space”	and	that	it	would	help	with	employee	morale,	but	

showed	no	concern	for	the	high	rent.	City	Hall	rent	was	$11,200	per	month,	“one	

of	the	highest	lease	rates	around,”	as	described	by	the	former	CEO,	and	nearly	

double	the	prior	rent	of	approximately	$6,000.	After	the	board	changed	in	2015,	

a	new	CEO	broke	the	lease,	but	the	state	agency	never	reimbursed	the	Hardest	

Hit	Fund	for	the	excessive	rent,	instead	continuing	to	charge	the	Hardest	Hit	

Fund	for	costs	to	move	the	agency	to	a	smaller	more	affordable	office,	lawyers’	

fees	related	to	moving,	and	rent	at	two	offices	during	their	office	move	in	the	

month	of	June	2015,	for	a	combined	waste	total	of	more	than	$100,000.	

Violations of Federal labor laws, employee suits for discrimination, 

and careless accounting, all served to drive up costs, costs that the 

Nevada state agency expensed to Treasury. 

Lawyers	to	settle	a	Federal	investigation	by	the	Department	of	Labor	who	found	

that	the	state	agency	violated	Federal	law,	employee	discrimination	lawsuits	

(block‐billed	at	$123,217),	and	for	an	ethics	investigation	(block‐billed	at	

$18,160),	a	forensic	auditor	to	reconstruct	the	financial	books	(at	$26,395),	an	

independent	auditor	to	reconcile	bank	accounts	(at	$10,812),	and	a	lawyer	and	

private	investigator	(at	$12,845),	all	worked	to	clean	up	situations	that	never	

should	have	happened	in	the	first	place,	and	certainly	should	not	have	been	

charged	to	the	Hardest	Hit	Fund.	

 

32	Jennifer	Medina,	“In	Nevada,	a	City	Hall	Is	a	Reminder	of	Flush	Days,”	The New York Times,	Nov.	19,	2011.	
SIGTARP-16-004 39 September 9, 2016 

This is not a case of mistake or negligence. SIGTARP found a 

deliberate attempt by the Nevada state agency to charge the 

Hardest Hit Fund for every expense it could. 

1. Chosen to be the conduit of TARP rescue funds from Treasury to Nevada

homeowners, the state agency used those same funds to run nearly its entire

business. They ran all expenses (HHF and non‐HHF) first through the Hardest

Hit Fund bank account, and then determined whether to reimburse any items

back to that account, often not reimbursing.		

2. The Nevada state agency routinely paid their corporate credit card using a

check drawn on the Hardest Hit Fund bank account and failed to reimburse

the HHF account for non‐HHF expenses.		

3. Treasury told the state agency in 2014 that it had caught, on a sample basis,

charges unrelated to HHF. The state agency reimbursed Treasury for some of

those charges. The state agency did not show Treasury other charges that

were also not related to HHF. And the state agency continued to charge new

non‐HHF expenses to the Hardest Hit Fund.		

4. An external forensic auditor told the state agency in 2015 that non‐HHF

expenses were not allowed under Treasury’s contract. The state agency

continued to use HHF dollars for non‐HHF expenses.		

5. The internal auditor and the external forensic auditor told the state agency

that payroll costs had to be allocated between the Hardest Hit Fund and non‐

HHF funding sources according to a cost‐sharing methodology, which the state

agency ignored.

6. The state agency had inappropriate travel and entertainment expenses and

unsupported credit card charges caught by Treasury and the forensic auditor

of $23,838. However, the state agency continued to charge entertainment

expenses to HHF.

7. The state agency initially shared overhead costs such as rent and payroll

between both the Hardest Hit Fund and non‐HHF funding, but then stopped

that practice, instead charging all to the Hardest Hit Fund. Small and

inconsistent reimbursements to Treasury for rent in the Reno office in 2012 of

a total of $2,739, which decreased to $1,943 in 2013, evidence that the state

agency knew that the Hardest Hit Fund should not pay 100% of these costs.

However, the state agency charged 100% of the Las Vegas office rent to the

Hardest Hit Fund and, in 2014 and 2015, ceased reimbursements for the Reno

rent. The state agency reimbursed Treasury nearly $100,000 for partial

payroll in 2012, and about half that amount in 2013. It did not reimburse

Treasury for any payroll in 2014, and in 2015 reimbursed a single payment of

$706.
SIGTARP-16-004 40 September 9, 2016 

Warnings	about	inappropriate	spending	were	met	with	a	temporary	fix	to	

reverse	those	charges	caught,	while	continuing	the	behavior.	SIGTARP	recently	

learned	that	although	the	state	agency	essentially	terminated	the	latest	CEO	in	

May,	who	left	on	June	3,	2016,	a	two‐month	severance	package	of	$20,875	in	full	

pay	and	benefits	(including	a	fixed	expense	and	automobile	allowance	of	more	

than	$600	per	month)	is	being	paid	out	of	the	HHF	bank	account.	This	has	no	

purpose	in	HHF.	SIGTARP	finds	that	all	of	the	deliberate	behavior	constitutes	

waste	and	abuse.33		

The	Hardest	Hit	Fund	was	not	intended	to	be	a	cash	cow	for	participating	state	

agencies,	and	the	state	agency	must	pay	these	wasted	expenses	back.	Treasury’s	

HHF	contract	limits	administrative	expenses	to	only	those	“necessary	to	carry	

out	the	services.”	SIGTARP	will	report	in	the	future	on	additional	amounts	this	

state	agency	must	pay	back.	As	President	Obama	has	said	in	an	Executive	Order,	

the	American	people	must	be	able	to	trust	that	the	Government	is	doing	

everything	in	its	power	to	stop	wasteful	practices	and	earn	a	high	return	on	

every	dollar	that	is	spent.	The	role	of	SIGTARP,	like	other	Offices	of	Inspector	

General,	includes	reporting	on	wasteful	spending	and	abuse	so	that	Federal	

agencies	can	act	to	stop	the	waste	and	abuse,	and	seek	repayment.	SIGTARP	is	

an	independent	watchdog	protecting	taxpayer	dollars.	Every	dollar	wasted	

translates	to	one	less	dollar	to	help	the	homeowners	Congress	intended	TARP	to	

assist.	A	failure	to	seek	and	obtain	repayment	of	these	wasted	federal	dollars	

would	only	harm	those	people	who	HHF	intended	to	serve.		

Sometime	over	the	last	three	years,	this	state	agency	lost	sight	of	the	fact	that	

they	are	only	in	this	program	to	be	the	conduit	through	which	Treasury	provides	

TARP	rescue	funds	to	Nevada	homeowners	to	help	them	stay	in	their	homes.	

NAHAC	stopped	performing	under	Treasury’s	contract,	and	the	Nevada	Housing	

Division	allowed	that	to	continue.	Both	state	agencies	seemingly	had	no	regard	

for	the	squandered	opportunity	to	help	Nevada	homeowners	this	program	

intended	to	assist,	at	a	time	when	those	homeowners	needed	it	most.	As	a	result,	

Nevada	homeowners	have	not	had	fair	access	to	these	Federal	funds.	They	have	

been	treated	differently	and	unfairly	than	homeowners	in	other	participating	

states,	all	because	of	a	low‐performing	state	agency	that	engaged	in	waste	and	

abuse.		

The	Nevada	Housing	Division	allowed	the	waste	and	abuse	to	occur	unchecked.	

That	arrangement	is	rare	as	typically	state	housing	finance	agencies	themselves	

administer	the	Hardest	Hit	Fund	in	their	state.	The	most	recent	termination	of	

NAHAC’s	CEO	and	greater	involvement	now	by	the	Nevada	Housing	Division	

over	NAHAC	is	not	enough	to	protect	this	program	against	continued	waste	and	

abuse.	Management	and	the	board	have	changed	many	times	over—four	CEOs	in	

the	span	of	three	years—and	this	pattern	of	waste	and	abuse	continued	under	

the	Nevada	Housing	Division’s	nose.		

 

33	According	to	GAO,	waste	is	defined	as	the	act	of	using	or	expending	resources	carelessly,	extravagantly,	or	

to	no	purpose.	Abuse	involves	behavior	that	is	deficient	or	improper	when	compared	to	behavior	that	a	

prudent	person	would	consider	reasonable	and	necessary.	This	includes	the	misuse	of	authority	or	position	

for	personal	gain	or	for	the	benefit	of	another.		
SIGTARP-16-004 41 September 9, 2016 

With	an	above‐average	6.4%	unemployment	rate,	and	the	highest	

underemployment	rate	(13.1%)	in	the	nation,	Nevadans	need	help.	HHF	still	has	

an	opportunity	to	help	them,	but	only	if	there	is	drastic	change.	It	is	too	late	for	

incremental	improvement	by	NAHAC.	SIGTARP	recommends	that	Treasury	

require	that	the	Nevada	Housing	Division	remove	NAHAC	from	work	on	the	

Hardest	Hit	Fund	and	that	the	Nevada	Housing	Division	administer	the	program	

with	controls	implemented	to	prevent	the	type	of	wasteful	and	abusive	spending	

identified	by	SIGTARP	and	any	further	waste.	If	NAHAC	continues	to	receive	

TARP	dollars	and	work	on	the	Hardest	Hit	Fund,	SIGTARP	warns	that	Nevada	

homeowners	and	American	taxpayers	will	suffer	even	further.	
SIGTARP-16-004 42 September 9, 2016 

Recommendations 

1. To prevent further abuse and waste that takes away Hardest Hit Fund dollars from

homeowners, the Nevada Housing Division should stop outsourcing its administration of HHF

Nevada, and remove the Nevada Affordable Housing Assistance Corporation (“NAHAC”) from

all dealings related to HHF. Treasury should prohibit NAHAC from receiving HHF dollars or

working on the HHF program.

2. Treasury should disallow and require the Nevada state agency to repay $11,000 for abuse and

waste in charging the Hardest Hit Fund for a car allowance of $500 per month for the CEO

who drove a Mercedes, and any additional car allowance paid by HHF.		

3. To prevent further waste and abuse, Treasury should prohibit the use of Hardest Hit Fund

dollars for car allowances for employees of state agencies when official travel by car necessary

for HHF can be reimbursed through standard mileage rates.			

4. Treasury should determine whether any of the 19 state agencies committed waste and abuse

by charging the Hardest Hit Fund for car allowances for employees, and if found, seek

repayment of those wasted expenses, and notify SIGTARP.

5. Treasury should disallow and require the Nevada state agency to repay $10,963.68 for abuse

and waste in charging the Hardest Hit Fund for a bonus to the CEO while HHF performance

plummeted, a manager outing at a cocktail bar, a country club lunch, company picnic,

massage, baby gift, birthday cakes, regular staff lunches, office refreshments and other

employee perks.		

6. To prevent waste and abuse, Treasury should prohibit the spending of Hardest Hit Fund

dollars for each category of expenses: employee bonuses, employee gifts, employee outings,

birthday cakes, regular staff lunches, office refreshments, and other employee perks.

7. Treasury should determine whether any of the 19 state agencies committed waste and abuse

by charging the Hardest Hit Fund for employee bonuses, employee gifts, employee outings,

birthday cakes, regular staff lunches, office refreshments, and other employee perks, and if

found, require that those wasted expenses be repaid to Treasury, and notify SIGTARP.		

8. To prevent waste and ensure that TARP funds are not used to pay for non‐HHF expenses,

Treasury should prohibit the Nevada state agency and other housing finance agencies

participating in HHF from paying their credit card bills directly from their Hardest Hit Fund

bank accounts. Treasury should require the Nevada state agency and other state housing

finance agencies either to allocate expenses based on what the individual charges relate to and

draw from both HHF and non‐HHF bank accounts as appropriate, or to pay their credit card

bills from non‐HHF bank accounts and only use HHF funds to reimburse those expenses proven

necessary to provide HHF services.

9. Treasury should disallow and require the Nevada state agency to repay $5,811.27 for abuse

and waste in charging the Hardest Hit Fund for employee holiday parties and holiday gifts to

employees.		

10. To prevent waste and abuse, Treasury should prohibit the spending of Hardest Hit Funds on

employee parties.
SIGTARP-16-004 43 September 9, 2016 

11. Treasury should determine whether any of the 19 state agencies has committed waste

and abuse by charging the Hardest Hit Fund for employee parties, if found, require that those

wasted expenses be repaid to Treasury, and notify SIGTARP.		

12. Treasury should disallow and require the Nevada state agency to repay $100,385.20 for abuse

and waste in charging the Hardest Hit Fund rent, lawyer’s fees, moving costs, and other related

expenses for its move to new office space in Las Vegas that was much nicer, larger than what

was necessary for HHF, and at one of the highest lease rates around, while the state agency

had all but stopped helping homeowners with HHF and reduced its workforce.

13. To prevent waste, Treasury should prohibit state agencies from significantly increasing office

rent charged to the Hardest Hit Fund absent a corresponding surge in the number of

homeowners being admitted to HHF in that state during the most recent 6 months.

14. To prevent waste, Treasury should prohibit state agencies from spending Hardest Hit funds to

pay themselves more in administrative expenses than they provide to homeowners in any one

quarter, as SIGTARP found in HHF Nevada.		Should that happen, Treasury should suspend all

administrative expense payments to the state agency, notify SIGTARP, conduct an in‐depth

review of spending, and seek repayment of wasted spending.

15. To prevent waste, Treasury should prohibit state agencies from spending Hardest Hit funds to

pay themselves one dollar in administrative expenses for every dollar they provide to

homeowners in any one quarter, as SIGTARP found in HHF Nevada.		Should that happen,

Treasury should suspend all administrative expense payments to the state agency, notify

SIGTARP, conduct an in‐depth review of spending, and seek repayment of wasted spending.

16. To prevent waste of Hardest Hit Fund dollars spent more on administrative expenses than is

necessary for HHF, Treasury should develop metrics for each of the 19 states to assess

administrative expenses relative to the current level of assistance provided to homeowners and

recipients, and monitor performance and spending against those metrics each quarter.		

Treasury should disallow administrative expenses that are disproportionate to the services

provided to homeowners and other recipients in HHF.

17. Because it was not necessary to administer the Hardest Hit Fund for the Nevada state agency

to spend more in administrative expenses per homeowner admitted to the Hardest Hit Fund in

2015 (when it accepted only 117 homeowners into the program) than at its peak in 2013

(when it accepted 2,111 homeowners into the program), Treasury should disallow and require

the Nevada state agency to repay $2,241,396 in wasted administrative expenses during 2015

that exceed the per homeowner administrative expense cost in 2013.

18. Treasury should disallow and require the Nevada state agency to repay $184,319.21 for waste

in charging the Hardest Hit Fund for its violations of the law and alleged violations of the law.		

19. Treasury should determine whether the Nevada state agency charged the Hardest Hit Fund for

back wages (pursuant to the U.S. Department of Labor’s finding that the Nevada state agency

violated labor laws) for employees that worked on matters unrelated to the Hardest Hit Fund.		

If found, Treasury should determine the percentage of time each employee worked on non‐

HHF matters, and require that percentage of those employee’s wages and benefits be repaid.		
SIGTARP-16-004 44 September 9, 2016 

20. Treasury should disallow and require the Nevada state agency to repay $26,395.70 for

waste charged to the Hardest Hit Fund for a forensic auditor to reconstruct the financial books

due to the state agency’s careless recordkeeping.

21. Treasury should disallow and require the Nevada state agency to repay $10,812 for waste

charged to the Hardest Hit Fund for an independent auditor to reconcile bank accounts due to

the state agency’s careless recordkeeping.

22. Treasury should disallow and require the Nevada state agency to repay $19,874.75 for waste

charged to the Hardest Hit Fund for the former CEO’s severance package of two months full

pay and benefits, as well as any unemployment benefits paid through HHF to the former CEO

and any related lawyer’s fees.

23. To prevent waste, Treasury should prohibit the use of TARP funds for any fees to attorneys,

accountants and other contractors, contained in invoices where services related to the Hardest

Hit Fund are combined in a single entry with services unrelated to HHF (“block‐billed”).

24. Treasury should disallow and require the Nevada state agency to repay $10,840.18 for waste

charged to the Hardest Hit Fund for expenses unrelated to the Hardest Hit Fund, for example:

a laptop shipped to an employee’s home, non‐HHF travel expenses, non‐HHF credit card

charges, non‐HHF lawyer’s fees, and non‐HHF conference expenses.

25. Treasury should determine whether the Nevada state agency committed additional waste by

charging the Hardest Hit Fund for additional non‐Hardest Hit Fund expenses and, if found,

require that those wasted expenses be repaid to Treasury, and notify SIGTARP.

26. Treasury should disallow and require the Nevada state agency to repay $23,838.25 for waste

in charging the Hardest Hit Fund for credit card charges, travel and entertainment that due to

the state agency’s carelessness are unsupported or violate its own policies.

27. Treasury should determine whether the Nevada state agency committed additional waste and

abuse by charging the Hardest Hit Fund dollars for travel, entertainment, and credit card

charges that due to the state agency’s carelessness are unsupported, violate its own policies, or

violate federal regulations (OMB A‐87) and if found, require that those wasted expenses be

repaid to Treasury, and notify SIGTARP.

28. To prevent waste, Treasury should prohibit all state agencies from charging the Hardest Hit

Fund for 100% of overhead costs, including but not limited to, rent, utilities, and payroll, given

that these agencies also work on matters unrelated to the Hardest Hit Fund. Treasury should

require within 60 days that each state agency has a cost‐sharing methodology approved by

Treasury that accurately reflects the sharing of each overhead cost between the Hardest Hit

Fund and non‐HHF sources of payment. Treasury should require that the cost‐sharing

methodology is kept current given the state agency’s activities. If any state agency submits a

cost‐sharing methodology that the Hardest Hit Fund should be charged 100% of that state

agency’s payroll expense in any period of time, Treasury should require the state agency to

submit timely to Treasury the semi‐annual certifications required to be signed by employees

and supervisors in accordance with Federal guidelines (OMB A‐87) that the employees solely

worked on a Federal program.
SIGTARP-16-004 45 September 9, 2016 

29. Treasury should disallow and require the Nevada state agency to repay $7,459,626.22

for waste in charging the Hardest Hit Fund 100% of overhead costs in 2014 and 2015,

including the entire rent expense of $467,899.99, the entire utilities expense of $350,207.87,

and the entire payroll expense of $6,641,518.36.			

 To the extent that the Nevada state agency seeks to prove that Treasury allow any of those

funds, it should be required to: (1) submit its current cost‐sharing methodology for rent,

utilities, and payroll as certified by its board and the Nevada Housing Division under

penalty of perjury; (2) receive Treasury approval of that methodology; (3) provide to

Treasury a cost‐sharing methodology for 2014 and 2015 certified by the board of NAHAC

and the Nevada Housing Division under penalty of perjury; and (4) correlate that spending

to the purpose of HHF by proving the results achieved in HHF by spending those funds. If

the state agency submits a cost‐sharing methodology to charge the Hardest Hit Fund for

100% of payroll for any period of time, Treasury should not allow those expenses until the

state agency submits certifications by employees and supervisors required under federal

regulation (OMB A‐87) that the employees solely worked on a Federal program.		

30. To prevent further waste and abuse, Treasury should require the Nevada state agency to take

appropriate corrective action within 60 days on all recommendations made by internal and

external auditors and Treasury, report that corrective action to Treasury and SIGTARP, and

require staff training.		

31. To prevent waste and abuse, Treasury should require that all administrative expenses incurred

by a state agency and charged to the Hardest Hit Fund that Treasury identifies as non‐Hardest

Hit Fund expenses, unsupported expenses, or expenses violating federal regulation (OMB A‐87)

are repaid to TARP within 30 days, and should suspend further drawdowns of HHF dollars for

any administrative expenses until those expenses are repaid.
SIGTARP-16-004 46 September 9, 2016 

Management Comments and SIGTARP’s 

Response 

Treasury	responded	by	thanking	SIGTARP	for	its	review	and	said	it	takes	very	

seriously	its	responsibility	to	monitor	housing	finance	agencies.	Treasury	

discussed	that	at	Treasury’s	direction,	NAHAC	recently	restructured	its	board,	

changed	its	CEO	and	that	the	Nevada	Housing	Division	now	has	a	greater	role	in	

program	administration.	As	discussed	in	the	audit,	SIGTARP	is	aware	of	these	

recent	changes,	and	does	not	believe	them	to	be	sufficient	to	protect	this	

program	given	the	waste	and	abuse	that	SIGTARP	identified	in	this	report.	As	an	

Office	of	Inspector	General	with	a	responsibility	to	prevent	fraud,	a	

responsibility	that	rests	with	Treasury	as	well,	SIGTARP	strongly	recommends	

that	in	light	of	this	new	information	found	by	SIGTARP,	Treasury	not	maintain	

its	current	turnaround	strategy	developed	without	knowledge	of	waste	and	

abuse,	but	instead	remove	NAHAC	from	the	Hardest	Hit	Fund	entirely.	Any	

organization	that	has	engaged	in	deliberate	acts	of	waste	and	abuse	cannot	be	

trusted	with	additional	Federal	dollars.	
SIGTARP-16-004 47 September 9, 2016 

Appendix A – Objectives, Scope, and 

Methodology 

SIGTARP	performed	this	audit	under	authority	of	Public	Law	110‐343,	as	

amended,	which	also	incorporates	the	duties	and	responsibilities	of	Inspectors	

General	under	the	Inspector	General	Act	of	1978,	as	amended.	SIGTARP	initiated	

this	audit	as	part	of	our	continuing	oversight	of	TARP.	The	objective	of	this	audit	

was	to	review	Hardest	Hit	Fund	(“HHF”)	Nevada’s	use	of	TARP	funds	for	

administrative	and	other	costs.		

The	scope	of	this	audit	covered	administrative	and	other	costs	incurred	by	the	

Nevada	state	agency	from	January	2012	to	July	2016.	

SIGTARP	conducted	interviews	with	and	obtained	program	and	financial	

documentation	from	officials	at	the	Nevada	Affordable	Housing	Assistance	

Corporation	(“NAHAC”)	and	the	Nevada	Housing	Division	(“NHD”)—referred	to	

herein	collectively	and	individually	as	the	“Nevada	state	agency”	or	“state	

agency”—and	other	state	and	Federal	government	agencies,	including	Treasury.	

SIGTARP	reviewed	and	analyzed	data	from	the	Nevada	state	agency,	to	include	

all	available	Nevada	state	agency	quarterly	performance	reports	and	quarterly	

financial	reports,	the	state	agency	HHF	contract	and	all	subsequent	

amendments,	the	Nevada	state	agency’s	policies	and	procedures,	and	internal	

and	external	compliance	(including	Treasury	compliance)	and	audit	reports.	

SIGTARP	also	reviewed	and	analyzed	Nevada	state	agency	Board	meeting	

minutes,	general	ledgers,	legal	invoices	through	December	31,	2015,	and	other	

relevant	correspondence	and	memoranda.	Additionally,	we	obtained	relevant	

bank	records	from	the	Bank	of	New	York	Mellon	and	the	Nevada	State	Bank.	

SIGTARP	conducted	this	audit	from	February	2016	through	August	2016	in	

Washington,	D.C.	The	audit	was	conducted	in	accordance	with	generally	

accepted	Government	Auditing	Standards	established	by	the	U.S.	Government	

Accountability	Office.	Those	standards	require	that	SIGTARP	plan	and	perform	

the	audit	to	obtain	sufficient,	appropriate	evidence	to	provide	a	reasonable	basis	

for	our	findings	and	conclusions	based	on	our	audit	objectives.	SIGTARP	

believes	that	the	evidence	obtained	provides	a	reasonable	basis	for	our	findings	

and	conclusions	based	on	our	audit	objectives.		

Limitations on Data 

SIGTARP	generally	relied	on	Treasury,	the	Nevada	state	agency	and	bank	

records	to	provide	relevant	documentation,	including	other	files	related	to	the	

Nevada	state	agency’s	programs	and	activities.	To	the	extent	that	the	

documentation	provided	by	these	entities	did	not	reflect	a	comprehensive	

response	to	SIGTARP’s	documentation	requests,	SIGTARP’s	review	may	have	

been	limited.		
SIGTARP-16-004 48 September 9, 2016 

Use of Computer-Processed Data 

SIGTARP	generally	relied	on	computer‐processed	data	for	this	audit.	Specifically,	

SIGTARP	relied	on	the	Nevada	state	agency’s	and	Treasury’s	quarterly	

performance	reports	to	determine	homeowner	admission	rates	and	the	number	

of	homeowners	denied	for	all	of	the	Nevada	state	agency’s	programs.	SIGTARP	

utilized	the	quarterly	financial	reports	to	determine	the	status	of	HHF	funding	in	

HHF	Nevada,	as	well	as	the	administrative	expenses	spent.	SIGTARP	did	not	

validate	the	accuracy	of	the	data.	

Internal Controls: 

To	assess	internal	controls	pertaining	to	the	Nevada	state	agency’s	

administrative	expenses,	SIGTARP	interviewed	Nevada	state	agency	officials;	

reviewed	the	Nevada	state	agency’s	internal	and	external	audit	and	compliance	

reports;	reviewed	Treasury’s	compliance	reports;	and	reviewed	policies	and	

procedures	from	Treasury	and	the	Nevada	state	agency	to	determine	the	extent	

to	which	internal	controls	were	reasonable	and	effective.		

Prior Coverage 

SIGTARP	has	covered	the	HHF	program	in	its	quarterly	reports	since	2010,	and	

in	two	prior	audit	reports	and	one	evaluation	report:		

 April	12,	2012,	“Factors	Affecting	Implementation	of	the	Hardest	Hit	

Fund	Program.”	

 April	21,	2015,	“Treasury	Should	Do	Much	More	to	Increase	the	

Effectiveness	of	the	TARP	Hardest	Hit	Fund	Blight	Elimination	Program.”	

 October	6,	2015,	“Factors	Impacting	the	Effectiveness	of	Hardest	Hit	

Fund	Florida.”	

 June	16,	2016,	“Treasury’s	HHF	Blight	Elimination	Program	Lacks

Important	Federal	Protections	Against	Fraud,	Waste,	and	Abuse.”

In	addition,	SIGTARP	reviewed	two	prior	audit	reports	that	it	conducted	related	

to	legal	fees	paid	under	TARP:		

 April	2011,	“Treasury’s	Process	for	Contracting	for	Professional	Services	

under	TARP.”		

 September	26,	2011,	“Legal	Fees	Paid	Under	the	Troubled	Asset	Relief	

Program:	An	Expanded	Report.”		
SIGTARP-16-004 49 September 9, 2016 

Appendix B – Acronyms and Abbreviations 

CEO	 Chief	Executive	Officer	

EESA	 Emergency	Economic	Stabilization	Act	

GAO	 Government	Accountability	Office	

HHF	 Housing	Finance	Agency	Innovation	Fund	for	

the	Hardest	Hit	Housing	Markets	(also	“Hardest	

Hit	Fund”)		

NAHAC	 Nevada	Affordable	Housing	Assistance	

Corporation	

NHD	 Nevada	Housing	Division	

OMB	 Office	of	Management	and	Budget	

State	agency		 	Nevada’s	state	housing	finance	agency	(Nevada	

HFA/NHD	and/or	NAHAC)	

TARP	 Troubled	Asset	Relief	Program	

Treasury	 U.S.	Department	of	the	Treasury	

Appendix C – Audit Team Members 

This	audit	was	conducted	and	the	report	was	prepared	under	the	direction	of	

Jenniffer	F.	Wilson,	Deputy	Special	Inspector	General	for	Audit	and	Evaluation,	

and	Christopher	Bosland,	Assistant	Deputy	Special	Inspector	General	for	Audit	

and	Evaluation,	Office	of	the	Special	Inspector	General	for	the	Troubled	Asset	

Relief	Program.	The	following	staff	conducted	this	audit:	Crystal	Reese,	Andy	

Sinclair,	Clark	Beecken,	and	Christina	Harris.	Others	who	made	key	

contributions	to	this	report	are	Caroline	Ashe	and	Joshua	Alexander.	
SIGTARP-16-004 50 September 9, 2016 

Appendix D – Management Comments 
SIGTARP-16-004 51 September 9, 2016 
SIGTARP-16-004 52 September 9, 2016 
SIGTARP-16-004 September 9, 2016 

SIGTARP Hotline 

If you are aware of fraud, waste, abuse, mismanagement, or misrepresentations associated with the 

Troubled Asset Relief Program, please contact SIGTARP. 

By UOnline FormU: Uwww.SIGTARP.govU By Phone: Call toll free: (877) SIG-2009 

By Fax: (202) 622-4559 

By Mail: Office of the Special Inspector General

for the Troubled Asset Relief Program

1801 L Street., NW, 3rd Floor 

Washington, DC 20220

Press Inquiries 

If you have any inquiries, please contact our Press Office: 

Robert Sholars 

Director of Communications 

Robert.Sholars@treasury.gov

202-927-8940 

Legislative Affairs 

For Congressional inquiries, please contact our Legislative Affairs Office: 

Joseph Cwiklinski 

Director of Legislative Affairs 

Joseph.Cwiklinski@treasury.gov

202-927-9159 

Obtaining Copies of Testimony and Reports 

To obtain copies of testimony and reports, please log on to our website at Uwww.SIGTARP.govU.