SIGTARP-17-002 August 25, 2017

Audit Report

Unnecessary Expenses Charged to the 

Hardest Hit Fund

SIGTARP OFFICE OF THE SPECIAL

INSPECTOR GENERAL FOR

THE TROUBLED ASSET

RELIEF PROGRAM
SIGTARP-17-002 August 25, 2017

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OFFICE OF THE SPECIAL INSPECTOR GENERAL 

FOR THE TROUBLED AsSET RELIEF PROGRAM 

1801 L STREET, NW, 4 TH FLOOR 

WASHINGTON, D .C . 20220 

MEMORANDUM FOR: Honorable Steven T. Mnuchin - Secretary of the Treasury 

SUBJECT: 

Honorable 

for the Troubled 

Christy 

Asset 

Goldsmith 

Relief Program 

Romero - Special Inspector ,,..'-« General 

fllP 

~ 

~,.....,, __ __. 

Unnecessary Expenses Charged to the Hardest it Fund · 

FROM: 

(SIGT ARP 17-002) 

We are providing this report for your information and use. SIGT ARP found $3 million in 

· unnecessary expenses charged to TARP by state agencies paiticipating in TARP' s Hardest Hit 

Fund. 

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

this audit (engagement code 03 5) under the authority of the Emergency Economic Stabilization 

Act of 2008 and Public Law 110-343, as amended, which also incorporates certain 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 me at any time. 

SIGTARP-17-002 August 25, 2017 
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SIGTARP-17-002 i August 25, 2017

Table of Contents

Table of Contents................................................................................................................ i

Executive Summary ........................................................................................................... 1

Background ........................................................................................................................ 3

To Be Authorized Under TARP Law, Treasury Set a Strict Test in its Contracts 

for State Agency Expenses: Expenses Must Be “Necessary” to Facilitate the 

Loan Modifications Authorized by the Emergency Economic Stabilization Act.......... 3

Treasury Determined that EESA Did Not Allow Expenses for Housing Counselors 

for General Foreclosure Prevention, Legal Aid, or Other Expenses that Are 

Merely “Reasonably Related” to EESA’s General Purpose to Prevent 

Foreclosures, But Not “Necessary” to Modify Loans ................................................. 5

SIGTARP Applied Treasury’s Own Test, Criteria, and Reporting to Determine 

Whether to Question a State Agency’s Administrative Expenses Charged to 

TARP as Violating Treasury’s Contracts ................................................................... 6

Treasury’s Then-General Counsel Articulated Two Criteria to Determine Whether 

an Expense Is Necessary to Modify Loans Under the Hardest Hit Fund, 

Criteria that Treasury Should Apply to All Expenses in the Program......................... 7

Treasury’s Contracts Include a Schedule of “Permitted Expenses” Listing 

Categories of Expenses and Dollar Limits................................................................. 8

SIGTARP Found Elevated Risk of Fraud, Waste, Abuse, and Overpayment 

Because State Agencies Are Lumping Unnecessary Expenses Into 

Permitted Expense Categories .................................................................................. 10

SIGTARP Found that Taxpayers Are Paying More for This Program Than Is 

Necessary, and Losing Federal Dollars to Waste, Because Treasury Is Not 

Following Its Own Contract to Limit TARP Dollars to Only Necessary 

Expenses ..................................................................................................................... 11

Eight State Agencies Charged TARP a Total of $4,179.65 for Meals with 

Treasury Employees, Which Violates Treasury’s Contract, Including Five 

Catered Barbeques for Treasury and State Agency Employees ............................ 15

North Carolina Housing Finance Agency’s Culture Involves Charging TARP for 

TARP Barbeques, Parties, Restaurant Outings, Gifts, Employee Gym 

Memberships, Regular Employee Meals, and Employee Cash Bonuses............... 19

Nearly $11,000 for Employee Parties, Celebrations, and Outings Charged to 

TARP....................................................................................................................... 21

$1,965 in Gift Certificates and Other Gifts Charged to TARP ....................................... 26

$8,880 Gym Memberships Charged to TARP............................................................... 27

$18,091 Employee Cash Bonuses Charged to TARP................................................... 27

$14,124 Charged to TARP for Employee Breakfasts, Lunches, and Dinners Not 

During Travel, Sometimes with External Parties...................................................... 28
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$53,712 in Food and Other Costs at Events with Housing Counselors Charged 

to TARP................................................................................................................... 30

The Florida Housing Finance Corporation, Whose Executive Director Was 

Forced to Resign in December 2016 Over Bonuses Paid For with State 

Dollars and a Lavish Dinner, Also Charged TARP for a TARP Barbeque and 

$106,774 for Bonuses Including Doubling and Tripling Bonuses After 

SIGTARP’s Audit......................................................................................................... 33

TARP Barbeque and Sandwiches................................................................................. 36

The Nevada Agency Contractor, NAHAC, Which SIGTARP Previously Found 

Had Wasted $8.2 Million, Charged TARP $43,497 for Bonuses, Almost All to 

the CEO Who Was Later Terminated......................................................................... 38

SIGTARP Questions More Than $100,000 in State Agency Charges to TARP for 

Barbeques, Parties, Picnics, Celebrations, Outings, Food, and Beverages.......... 40

Nine State Agencies Charged TARP $11,777 for Parties, Picnics, Celebrations, 

and Outings ............................................................................................................. 40

SIGTARP Found No Consistency in Charges to TARP by State Agencies for 

Food and Beverages, and Found Unnecessary Charges to TARP of $98,971 ....... 42

State Agencies Charged TARP for Employee Food and Beverages ............................ 43

Seven State Agencies Unnecessarily Charged TARP for Employee Water and 

Coffee...................................................................................................................... 44

Several State Agencies Charged TARP for Food and Beverages for Meetings 

with Lenders, Counselors, Legislative Staff or Others, or for Training..................... 45

SIGTARP Questions Nearly One Million Dollars in TARP Charges for Some 

State Agencies’ Employee Cash Bonuses/Awards/ Gifts and Payments to 

Former Employees That Violate Treasury’s Contract.............................................. 48

Eight State Agencies Charged TARP $332,022 for Employee 

Bonuses/Awards/Gifts, Which Violates Treasury’s Contract ................................... 48

State Agencies in Nevada, Oregon, and California Charged TARP $230,692 in 

Settlements, Legal Fees, or Other Expenses for Claims by Former 

Employees and a Contractor, Which Are Not Necessary to Modify Loans in 

HHF......................................................................................................................... 51

State Agencies in Nevada, Kentucky, and Rhode Island Charged TARP 

$132,911 for Severance Payments to Former Employees, Which Are Not 

Necessary to Modify Loans ..................................................................................... 52

State Agencies Charged TARP to Pay $229,779 in Unemployment Payments to 

Former Employees, Which Are Not Necessary to Modify Loans in HHF................. 53

SIGTARP Found Rhode Island Housing Charged TARP $1,031,310 Including (1) 

“Rent” Backdated in 2015 for the Prior 3 Years When the Program Was 

Closed, as well as (2) a New Customer Center’s Build-Out Charges, 

Operating Expenses, and Online System Expenses that Include Non-HHF 

Use ............................................................................................................................... 55
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SIGTARP Questions a $96,590 “Rent” Charge to TARP that Was Backdated in 

2015 for Files and Wind-Down Staff in the Building Owned by the State 

Agency for the Prior 3 Years When the Hardest Hit Fund Closed, and the 

$2,200 Per Month the Agency Has Continued to Pay for that Space ...................... 55

Rhode Island Housing Charged TARP 100% of $351,958 in Build-Out and StartUp Costs for Its New Customer Center, Despite the Fact that It Is Also Used 

for Non-Hardest Hit Fund Work ............................................................................... 56

SIGTARP Questions the Rhode Island State Agency Charging TARP 100% of 

$116,219 in Rent and Other Operating Costs for the New Customer Center 

When It Is Also Used for Non-Hardest Hit Fund Programs...................................... 57

The Rhode Island State Agency Overcharged TARP $124,416.67 for a New 

Homeowner Application System That Is Also Used for Non-Hardest Hit Fund 

Programs................................................................................................................. 58

In Late 2015, 2 Years After the Washington, D.C., Agency Shut Down HHF to 

New Homeowners, It Charged TARP a Quarter of a Million Dollars Paid to a 

Contractor for “Storage and Data Access” of the Shuttered Homeowner 

Application System, Rather Than Mitigate Storage Costs ...................................... 59

State Agencies in South Carolina, Nevada, Michigan, Rhode Island, Ohio, and 

California Charged TARP $609,374 for Cars for Two Executives, “Free 

Parking” Paid by TARP, or a Monthly Payment to Employees and 

Contractors for Parking and Bus Passes ................................................................. 60

TARP Cars.................................................................................................................... 60

Cash for Parking and “Free Parking” ............................................................................ 62

Conclusion........................................................................................................................ 63

Recommendations ........................................................................................................... 70

Management Comments and SIGTARP’s Response..................................................... 76

Appendix A – Objective, Scope, and Methodology....................................................... 77

Limitations on Data ....................................................................................................... 78

Use of Computer-Processed Data ................................................................................ 79

Internal Controls............................................................................................................ 79

Prior Coverage.............................................................................................................. 79

Appendix B – Acronyms and Abbreviations.................................................................. 80

Appendix C – Audit Team Members ............................................................................... 81

Appendix D – Management Comments.......................................................................... 82
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Executive Summary

Homeowner relief was so important to Congress that it rejected initial TARP 

legislation that solely focused on recapitalizing financial institutions. It was only 

after funds were allotted to foreclosure prevention that the legislation passed. And 

the need for a temporary safety net to save the homes of unemployed or 

underemployed Americans and demolish blighted homes remains so critical that in 

2015 Congress added $2 billion to the Hardest Hit Fund (HHF), one of the primary 

homeowner relief programs. 

To ensure that the HHF follows TARP law and funds reach their intended recipients, 

Treasury set significant limits in its HHF contracts with state agencies: all expenses 

must be “necessary” to facilitate loan modifications. A lesser, “reasonable” standard 

was not used. Treasury’s contracts with the state agencies administering HHF also 

included a schedule of permitted expenses, which listed specific categories of 

necessary expenses and dollar limits. 

Such precautions are much needed: state agencies will spend $1.1 billion in 

administrative expenses to distribute $8.5 billion. Every dollar spent on 

unnecessary expenses is a dollar that is no longer available for homeowner 

assistance. After a SIGTARP audit of Nevada’s state agency found millions in waste, 

Senator Charles Grassley asked SIGTARP to open a program-wide audit of HHF 

administrative expenses.

In our second audit, SIGTARP used the U.S. Department of the Treasury’s own 

expense criteria to identify $3 million in unnecessary expenses made by state 

agencies. Some of the unnecessary expenses are large: Rhode Island charged to 

TARP hundreds of thousands for the construction of a customer center that is also 

used also for non-HHF purposes—years after billing TARP for the build-out of an 

office in 2010. 

Source: SIGTARP analysis of data provided by the HHF state agencies and Treasury. 
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Others are relatively small but numerous: TARP gift cards for employees, 

TARP barbeques, TARP flowers, TARP gym memberships, TARP balloons—even a 

TARP piñata. All these unnecessary expenses violate TARP law and Treasury’s 

contracts. And, most importantly, every dollar that state agencies used such 

unnecessary expenses is a dollar no longer available for homeowners.

Many state agencies treat HHF as a windfall: money that can be used for anything. 

North Carolina called HHF a “game changer.” It was: the agency charged more than 

$100,000 in unnecessary expenses, including barbeques, parties, cash bonuses, and 

steak and seafood dinners.

For TARP and taxpayers to be made whole, these state agencies must pay back their 

ill-gotten gains. SIGTARP is making 30 recommendations for Treasury to recover 

the $3 million in unnecessary expenses identified in this report, and to protect 

taxpayers from spending more than is necessary in the future. Treasury responded 

by saying they appreciate SIGTARP’s oversight and thorough review of the 

administrative expenses charged to TARP and agree that Treasury should recover 

the amounts expended in violation of program requirements.

The audit’s objective was to review the use of TARP funds for administrative 

expenses, operating expenses, or other spending by the 19 state housing finance 

agencies (and/or their contractors or partners) who receive Hardest Hit Fund 

dollars. SIGTARP conducted this audit in accordance with generally accepted 

government auditing standards established by the U.S. Government Accountability 

Office (GAO). For a complete discussion of the audit scope and methodology, see 

Appendix A.
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Background 

Congress did not pass TARP in the first bill. In his book, On The Brink, former 

Treasury Secretary Henry Paulson talks about Treasury’s efforts to get TARP 

passed after being voted down. He said, “With Senate approval, TARP’s 

success now depended once again on the House, where Barney Frank was 

working hard to push things along. To win Democratic votes, he pressed us to 

do something about homeowner relief.” TARP passed in October 2008. The 

Emergency Economic Stabilization Act (EESA) added authority for TARP 

dollars for foreclosure mitigation. 

In EESA, Congress also imposed limitations on its authorization, with 

Congress giving the U.S. Department of the Treasury (Treasury) authority to 

use $250 billion of $700 billion, and the President authority to decide on an 

additional $100 billion, but keeping the right to disapprove the final tranche 

of $350 billion. Secretary Paulson discussed in his book calling Congressman 

Frank in November and telling him that Treasury could not do more on

foreclosures without the final tranche of TARP money, and that Treasury was 

not going to ask for it. Secretary Paulson recalled telling Congressman Frank, 

“We hadn’t told Congress or the public that the TARP funds would be used 

for a spending program.” He recalled in his book that Congressman Frank 

called him the next morning and said, “You need a housing program,” and 

that if Treasury came up with a foreclosure plan, it could get the last tranche 

of TARP. On January 22, 2009, the House voted to disapprove the final $350 

billion tranche, but because the disapproval did not pass the Senate, the $350 

billion was authorized. 1 In February 2009, Treasury announced the Making 

Home Affordable Program. In February 2010, Treasury announced the 

Hardest Hit Fund (HHF), a program that would end up providing TARP 

dollars to homeowners in 19 hard-hit states, including the District of 

Columbia. 

To Be Authorized Under TARP Law, Treasury Set a Strict Test in its 

Contracts for State Agency Expenses: Expenses Must Be 

“Necessary” to Facilitate the Loan Modifications Authorized by the 

Emergency Economic Stabilization Act 

In 2010, then-Treasury Secretary Timothy Geithner, in letters written to 35 

Members of Congress, took the position that, to be paid by the Hardest Hit 

Fund, a state expense would have to be authorized under the Emergency 

Economic Stabilization Act (EESA), the law that authorized TARP.2 This 

 1The Senate had voted to approve the last $350 billion for TARP on January 15, 2009. 2 See Letter from Treasury Secretary Geithner to the Honorable Mary Jo Kilroy and 33 other Members of Congress, 

September 13, 2010; Letter from Treasury Secretary Geithner to the Honorable Sherrod Brown, September 13, 

2010 (collectively, the “Secretary Geithner Letters”).
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requirement was implemented in Treasury’s 2010 contracts with state 

agencies for the Hardest Hit Fund, which state, “HFA [Housing Finance 

Agency] and Eligible Entity each represent and warrant that it is in compliance 

with, and covenants that all Services will be performed in compliance with, 

EESA....” 

Because EESA does not authorize specific expenses, Treasury set a strict test 

in its contracts that only expenses necessary to carry out the authority 

granted in EESA would be permitted, as those expenses are authorized by 

EESA by implication. Treasury’s contracts provide: “Contemporaneously with 

the execution and delivery of this Agreement, HFA and Eligible Entity shall also 

deliver to Treasury a budget detailing the administrative expenses necessary to 

carry out the Services (the “Permitted Expenses”).”3

Secretary Geithner’s letters to Congress were in response to state agencies’ 

proposals to use TARP dollars to pay housing counselors and legal aid.4

Then-Secretary Geithner relied on a legal analysis by then-Treasury General 

Counsel George Madison, whose office would have approved the HHF 

contracts. Treasury General Counsel Madison analyzed that, under well 

settled law, by implication Congress authorized expenses that are “necessary 

or incident to” the implementation of the expressly stated purpose of the 

law.5 Through this analysis, Treasury determined that EESA only authorizes 

expenses necessary to “facilitate loan modifications using credit 

enhancements in the form of payments to loan servicers, investors, and 

borrowers”—because that is the authority Treasury uses to operate TARP’s 

Hardest Hit Fund program.6

Appropriations law recognizes that Congress holds the power of the purse as 

a key element of the constitutional framework of checks and balances.7 As 

GAO has reported, “No money can be paid out of the Treasury unless it has 

been appropriated by an act of Congress,” citing a Supreme Court decision. 

GAO reported:

 3 These Services were outlined in short schedules that listed the type of services provided (for example, 

modifications of loans through principal reduction or payments to servicers, investors or borrowers). Treasury 

later included in schedules the demolition of abandoned blighted houses. 4 See Congressional Record Volume 156, Number 168 (Friday, December 17, 2010)] [House] [Pages H8623-

H8629], https://www.gpo.gov/fdsys/pkg/CREC-2010-12-17/html/CREC-2010-12-17-pt1-PgH8623.htm

(accessed 7/14/2017). 5 See attachments to Secretary Geithner Letters. Secretary Geithner’s letter and Treasury General Counsel George 

Madison’s legal memorandum became public. See, e.g., Congressional Record Volume 156, Number 168 (Friday, 

December 17, 2010)] [House] [Pages H8623-H8629], https://www.gpo.gov/fdsys/pkg/CREC-2010-12-

17/html/CREC-2010-12-17-pt1-PgH8623.htm (accessed 7/14/2017). 6 Section 109(a) of EESA authorizes the Secretary to use “loan guarantees and credit enhancements to facilitate 

loan modifications to prevent avoidable foreclosures,” which is the assistance the Hardest-Hit Fund provides 

homeowners. See attachment to Secretary Geithner letters. 7 GAO, Principles of Federal Appropriations Law, Chapter 1, 4th ed. 2016 rev., GAO-16-463SP, pg 5.
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[T]he Constitution vests in Congress the power and duty to 

affirmatively authorize all expenditures. Regardless of the nature of the 

payment—a salary, a payment promised under a contract, a payment 

ordered by a court—a federal agency may not make such a payment and, 

indeed, may not even incur a liability for such a payment, unless Congress 

has made funding authority available.8

Any government obligation or expenditure whatsoever may be made only as 

authorized by an appropriation, either annually or in a permanent 

appropriation.9 These activities are subject to the limitations imposed by law 

upon the use of all appropriated funds.10 One key law is the purpose statute 

that provides that “appropriations may be used only for their intended 

purpose.”11

Treasury Determined that EESA Did Not Allow Expenses for 

Housing Counselors for General Foreclosure Prevention, Legal Aid, 

or Other Expenses that Are Merely “Reasonably Related” to EESA’s 

General Purpose to Prevent Foreclosures, But Not “Necessary” to 

Modify Loans

Treasury determined that EESA did not allow payments for legal aid and 

counseling programs. Treasury also decided, “programs that involve direct or 

indirect payments of TARP funds for lawyers, legal expenses, legal aid or 

mediation assistance are not permissible.”12

Treasury applied the Comptroller General’s three-part test to determine 

whether an expense is necessary. First, it must be reasonably related to the 

purpose for which the appropriation was made. However, that, on its own, is 

not enough as all three factors must be met. Second, it must not be prohibited 

by law. Third, it must not fall within the scope of another appropriation. 

Treasury concluded that the proposed expenditure of EESA funds for legal 

aid services under the Hardest Hit Fund clearly failed factor three because 

legal aid services were already appropriated by Congress under another law. 

Treasury set the standard for payments of expenses through EESA: “We 

recognize that typical legal aid services, such as those proposed by the 

various state HFAs, are reasonably related to foreclosure prevention efforts 

generally. However, we do not believe they are necessary or essential to loan 

 8 Id., pg. 6. 9 Id., pg 6-7. 10 Id., pg 7. 11 Id., pg 8. 12 Letter from Representative Mary Jo Kilroy and 33 other Members of Congress to Secretary Timothy Geithner 

citing Treasury guidance, June 21, 2010; Letter from Senator Sherrod Brown to Secretary Timothy Geithner, 

June 1, 2010. 
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modification programs under the HFA Hardest Hit Fund.” Treasury 

rejected prior Comptroller General opinions that expenditures merely need 

to be “reasonably related” or “contribute materially” to a law’s expressed 

purpose, stating:

Here, one could argue that a general statutory purpose of EESA is to 

prevent foreclosures and that any expenditures reasonably related to that 

purpose are permissible. We believe that such an interpretation sweeps too 

broadly. It would authorize an almost unlimited number and variety of 

government expenditure—i.e. anything that is reasonably related to 

preventing foreclosures. It also would render meaningless the express 

provisions in EESA that together provide authority for the Hardest Hit 

Fund: Section 101 authorizes the Secretary to purchase “troubled assets 

from any financial institution,” and 109(a) authorizes the Secretary to use 

“loan guarantees and credit enhancements to facilitate loan modifications 

to prevent avoidable foreclosures. Lastly, such an interpretation would be 

contrary to how Treasury has implemented EESA. 

In a 2013 interview about the Hardest Hit Fund, Mark McArdle, a senior 

Treasury official who later became the Deputy Assistant Secretary, told 

SIGTARP that Treasury told the state agencies what Treasury thought EESA 

could and could not fund, and that when state agencies proposed legal aid, 

Treasury’s counsel believed “it did not directly facilitate a modification to 

prevent foreclosure, which is what EESA requires.” Deputy Assistant 

Secretary McArdle explained to SIGTARP, “EESA was pretty clear about the 

language, which says facilitate a modification to prevent an avoidable 

foreclosure. So it had to be before the foreclosure occurred or prevented a 

foreclosure.” Mr. McArdle told SIGTARP that a counselor can be an intake 

agent, adding “We can’t pay for general counseling.”

SIGTARP Applied Treasury’s Own Test, Criteria, and Reporting to 

Determine Whether to Question a State Agency’s Administrative 

Expenses Charged to TARP as Violating Treasury’s Contracts

In this audit, SIGTARP reviewed certain administrative expenses charged to 

TARP in HHF to determine whether they were “necessary to carry out” HHF 

as required under Treasury’s contracts.13 SIGTARP also applied GAO 

standards to determine whether the expense constituted waste and/or 

abuse. We also questioned certain costs. A questioned cost means a cost that 

is questioned because of an audit finding: 

 13 For this report, SIGTARP is not including other expenses such as travel, conferences, professional expenses, 

marketing, IT, salaries, or counseling (except for a limited number of items identified in the course of the audit). 

SIGTARP is continuing to review these expenses.
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(a) Which resulted from a violation or possible violation of a statute, 

regulation, or the terms and conditions of a Federal award, including for 

funds used to match Federal funds; 

(b) Where the costs, at the time of the audit, are not supported by adequate 

documentation; or 

(c) Where the costs incurred appear unreasonable and do not reflect the actions 

a prudent person would take in the circumstances.14

As part of its questioned cost analysis, SIGTARP examined whether each 

charge violated Treasury’s contract as unnecessary to modify loans (or 

demolish blighted houses) in the Hardest Hit Fund. In that determination, 

SIGTARP considered: (1) criteria articulated by Treasury General Counsel 

Madison; (2) Treasury’s list of “Permitted Expenses” in its HHF contracts 

with state agencies; and (3) Treasury reporting on state agency performance 

in modifying loans.

Treasury’s Then-General Counsel Articulated Two Criteria to 

Determine Whether an Expense Is Necessary to Modify Loans 

Under the Hardest Hit Fund, Criteria that Treasury Should Apply to 

All Expenses in the Program

Treasury’s General Counsel analyzed that there were two important criteria 

for an expense to be necessary to loan modifications under the Hardest Hit 

Fund and determined that, after applying those criteria, legal aid servicers 

were not permitted: 

1. Legal aid services frequently would result in outcomes other than loan 

modifications. Accordingly, they are not—by definition—necessary or 

essential to loan modifications under the Hardest Hit Fund. 

2. Borrowers can obtain loan modifications without legal services. By 

contrast, Treasury determined that limited services such as 

homeowner eligibility review and document review related to TARPfunded modifications would be eligible for EESA funding. Treasury 

determined that it would be very difficult for many of these programs 

to run effectively without such services.15

 14 2 CFR § 200.84

15 Treasury’s strict test from its interpretation of EESA’s limitations on Hardest Hit Fund spending led to two Ohio 

Congressmen introducing companion bills in the House and Senate entitled “The Aiding Those Facing 

Foreclosure Act,” to amend EESA to allow this spending, with neither bill passing as law. See S. 3979 (November 

29, 2010) and H.R. 5510 (June 10, 2010). Specifically, the bills authorized the Treasury Secretary to allow 

amounts authorized by EESA to provide assistance to nonprofit counseling intermediaries and nonprofit legal 

organizations to provide assistance to homeowners in, or at risk of, default, delinquency, or foreclosure. On the 

house floor, Congressman Marcy Kaptur argued, “Nothing could be more important than allowing families 

facing foreclosure to be afforded proper legal assistance to rework their loan where that is possible.”
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As these two criteria were articulated by Treasury’s General Counsel 

whose office would have approved the HHF contracts, and that analysis was 

relied on by the Treasury Secretary. SIGTARP considered these criteria in 

determining whether expenses were necessary for loan modifications in the 

Hardest Hit Fund.

Treasury’s Contracts Include a Schedule of “Permitted Expenses” 

Listing Categories of Expenses and Dollar Limits

In addition to the criteria articulated by then-Treasury General Counsel 

Madison, in its contract with state agencies, Treasury made an initial 

determination that certain categories of expenses may be necessary to 

modify loans, which it referred to as “Permitted Expenses,” as follows:16

 16 Presumably, Treasury applied the two criteria articulated by its then-General Counsel George Madison in 

determining the types of expenses it initially would permit as necessary.
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Figure 1: Permitted Expenses Under Treasury’s Original Contract with the 

North Carolina State Agency

Source: Treasury’s original HFA Participation Agreement with the North Carolina state agency, Schedule C 

“Permitted Expenses,” dated August 3, 2010.

All expenses in these Permitted Expenses are not automatically necessary to 

modify loans, and therefore, authorized under Treasury’s contract in 

compliance with EESA. Treasury requires quarterly reporting on expenses in 

these categories, and conducts on and off site expense reviews. Treasury also 

caps spending in each category and overall administrative expenses.
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SIGTARP-17-002 10 August 25, 2017

SIGTARP Found Elevated Risk of Fraud, 

Waste, Abuse, and Overpayment Because State 

Agencies Are Lumping Unnecessary Expenses 

Into Permitted Expense Categories 

SIGTARP found elevated risk of fraud, waste, abuse, and overpayment 

because the state agencies are charging TARP for administrative expenses 

not allowed under Treasury’s contract that are lumped into “Permitted 

Expense” categories in quarterly reports to Treasury. 

• SIGTARP found that some agencies are charging TARP for expenses 

such as meals, parties, picnics, outings, and gifts that are lumped into 

Permitted Expense categories. 

• SIGTARP found that some agencies are charging TARP for expenses 

that may be related to broad categories of Permitted Expenses but are 

not necessary to modify loans. For example, some state agencies 

lumped employee bonuses and gym memberships into the high-level 

category of “Salaries.” One state agency lumped a car allowance for a 

Mercedes Benz for the Chief Executive Officer (CEO) into Permitted 

Expense categories of travel. Another state also charged exclusive use 

of a car for an employee.

• SIGTARP found that some agencies are charging TARP for expenses 

lumped into a “Miscellaneous” category.

Because the state agencies lumped these expenses into Permitted Expenses 

at such high level categories in Treasury’s template, there is a lack of 

transparency about how state agencies are spending TARP dollars. This lack 

of transparency elevates the risk that taxpayers pay more for this program 

than they need to, and the risk of fraud, waste, and abuse. This lack of 

transparency also shields the expenses from oversight. 

SIGTARP found tremendous inconsistency in the types of expenses each state 

agency charges TARP, an inconsistency that results in taxpayers paying more 

than they have to for this program. 
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SIGTARP Found that Taxpayers Are Paying 

More for This Program Than Is Necessary, and 

Losing Federal Dollars to Waste, Because 

Treasury Is Not Following Its Own Contract to 

Limit TARP Dollars to Only Necessary Expenses

Taxpayers are paying more for this program than is necessary, and losing 

Federal dollars to waste, because Treasury is not following its own contract 

to limit TARP spending to only expenses necessary to modify loans or 

demolish blighted houses. Treasury has also allowed state agencies to charge 

TARP for expenses not included in the Permitted Expenses, such as food and 

beverages, which are not necessary to modify loans or demolish blighted 

houses. Treasury also does not consider the criteria for what is an 

unnecessary expense articulated by then-General Counsel Madison: (1) that 

the expense frequently would result in outcomes other than loan 

modifications; and (2) that borrowers could obtain loan modifications (or 

blighted houses could be demolished) without the expense.

Taxpayers lost $8.1 million in waste that SIGTARP found in the Hardest 

Hit Fund in Nevada because Treasury decided not to recover 99% of this 

waste. In its September 9, 2016, audit, SIGTARP reported that expenses 

charged to TARP by the Nevada Affordable Housing Assistance Corporation 

(NAHAC) had skyrocketed, even though NAHAC had all but stopped 

admitting homeowners to the Hardest Hit Fund. 

SIGTARP recommended Treasury seek repayment of $8.2 million in 

wasted and abused TARP funds, including:

• $11,000 for the CEO’s car allowance for a Mercedes Benz

• $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 moving to a luxury building 

with double the rent, and then relocation and related costs to move 

from that building

• $184,319.21 spent on legal expenses to defend alleged violations of 

the law 

• $26,395.70 paid to forensic auditors to reconcile its books

• $10,812.00 paid to an independent auditor to reconcile non-HHF 

bank accounts
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 12 August 25, 2017

• $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 wasted in excessive administrative expenses during 

2015, which exceeded the per-homeowner-cost in 2013, and

• $7,459,626.22 in overhead as NAHAC charged 100% of its overhead to 

HHF while working on non-HHF matters.

Critical to SIGTARP’s recommendation that Treasury recover these expenses 

was data showing that NAHAC was not performing its services under 

Treasury’s contract, but was still charging TARP for its expenses. SIGTARP 

reported that the already low numbers of Nevada homeowners admitted to 

HHF plummeted by 94% from 2013 to 2015. NAHAC admitted only 117 

homeowners into HHF in 2015, as shown in Figure 2. 

Figure 2: Spending by Hardest Hit Fund Nevada Compared to Homeowners Approved for HHF

Source: SIGTARP Audit Report: “Waste and Abuse in the Hardest Hit Fund in Nevada,” 9/9/2016, 

https://www.sigtarp.gov/Audit%20Reports/HHF%20Nevada_090916.pdf.

Taxpayers had to pay an additional $8.1 million because in April 2017 

Treasury did not apply its own contract limitations, instead only 

recovering 1% ($82,000) of the waste identified by SIGTARP. Treasury did 

not determine whether the expenses were necessary for loan modifications 

as required by its contract. In its April 7, 2017, letter to NAHAC, Treasury’s 

review shows zero analysis or mention of whether the expenses were 

necessary for loan modifications. Treasury knew that loan modifications 

under HHF were not taking place from NAHAC’s quarterly reports and from 

SIGTARP’s report. Treasury never considered this critical nonperformance 

data. Under Treasury’s analysis, a state agency that did not perform under its 

contract with Treasury to modify loans for Nevada homeowners, still charged 

TARP for essentially all of its operating expenses.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 13 August 25, 2017

Instead, Treasury only applied Federal cost principles, principles 

that do not override, but are in addition to, the requirement that an 

expense must be necessary for loan modifications. Treasury’s April 2017 

review appears to have focused on compliance with Federal cost principles 

(Office of Management and Budget (OMB) Circular A-87). Cost principles do 

not authorize Federal spending, but serve as an additional limitation on 

them. 

Treasury’s contracts with state agencies explicitly provide that the Federal 

cost principles are in addition to the requirement that the expense be 

necessary for loan modifications: 

Contemporaneously with the execution and delivery of this Agreement, HFA 

and Eligible Entity shall also deliver to Treasury a budget detailing the 

administrative expenses necessary to carry out the Services (the “Permitted 

Expenses”). Additionally, all administrative expenses paid with HHF 

Program funds shall be accounted for and are subject to OMB Circular A-87 

(revised 5/4/95, as further amended 8/29/97). (emphasis added)

Thus, once an expense meets the test of being necessary to carry out the 

services authorized by EESA, the Federal cost principles (OMB Circular A-87) 

serve as an additional limitation. Federal cost principles are not a substitute 

for, and do not override, Treasury’s contractual requirement that the 

spending must be necessary to carry out the specific action EESA authorizes 

(loan modifications). For example, OMB Circular A-87 may allow an expense 

that is authorized by state law or policy, but that, on its own, does not make 

that expense allowable under Treasury’s contract. 

Treasury’s failure to determine whether each NAHAC expense identified by 

SIGTARP was necessary for loan modifications in HHF resulted in Treasury 

allowing TARP to pay for expenses that were not allowed under the contract, 

and beyond that, constituted waste. For example:

• Treasury allowed TARP to pay NAHAC for a $20,000 severance 

payment for NAHAC’s CEO, who had just been fired by NAHAC’s 

board.

• Treasury allowed TARP to pay NAHAC for $123,217.96 in legal fees 

defending discrimination complaints by former employees. 

• Treasury allowed TARP to pay $100,385.20 for NAHAC to double its 

rent by moving into a luxury building dubbed the “Taj Mahal” and 

then later, when NAHAC’s board determined the rent to be too 

expensive, pay legal fees and other costs associated with breaking the 

lease and moving into a new building, including new furniture, and 

rent on two offices during one month.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 14 August 25, 2017

• Treasury allowed NAHAC to keep nearly one TARP dollar for 

itself for every TARP dollar it provided to a homeowner in 2015. For 6 

months in that year, Treasury allowed NAHAC to keep more in TARP 

dollars for itself than it distributed to homeowners.

Treasury allowed TARP to pay all of these expenses, and others identified by 

SIGTARP, despite the fact that NAHAC incurred these expenses at a time 

when it had all but stopped distributing TARP dollars to Nevada 

homeowners, and was not performing under Treasury’s contract. These 

expenses, and others SIGTARP identified, are not necessary to modify loans 

and, therefore, violate Treasury’s contract, whether or not they comply with 

Federal cost principles. 

Treasury compliance staff’s application of only Federal cost principles in 

OMB Circular A-87 is not sufficient for the Department of the Treasury to 

fulfill its responsibility as a steward over taxpayer dollars.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 15 August 25, 2017

Eight State Agencies Charged TARP a Total 

of $4,179.65 for Meals with Treasury Employees, 

Which Violates Treasury’s Contract, Including 

Five Catered Barbeques for Treasury and State 

Agency Employees 

Treasury employees attended five catered barbeques thrown by state 

agencies in North Carolina and Alabama, where the cost of the food, the 

gratuities, and the décor were charged to TARP. None of these expenses are 

permitted under Treasury’s contract as they are not necessary to modify 

loans.

• The North Carolina state agency charged TARP $2,749.69 for four 

catered barbeque lunches for their employees and Treasury 

employees. There were 50-60 people at three barbeques, and 90 

people at the fourth barbeque. The North Carolina state agency used a 

check drawn on the HHF account and charged a credit card to pay the 

barbeque company (Figure 3) and another restaurant for food and 

gratuities, and other stores for additional food and décor, and later 

paid the credit card bill from the TARP account. The North Carolina

state agency also charged TARP $80.54 for breakfast for Treasury 

employees (Table 1).

Figure 3: Menu for BBQ Restaurant Where TARP Paid for Lunch for Treasury 

and North Carolina Agency Employees

Source: Cooper’s Barbeque website: https://www.clydecoopersbbq.com/accessed 8/7/2017.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 16 August 25, 2017

Table 1: North Carolina Agency’s Charges to TARP for Treasury Employee Meals

Date Charge to TARP

Type of 

Charge Attendees

Treasury 

Employee 

Reimbursement

Jan. 25, 2011

$606.16 Total

$550.25 Cooper’s BBQ 

(food and tip)

+ $55.91 Walmart for 

sodas, cookies, salad

BBQ Lunch 

for 50 

people

Treasury 

employees 

+ state 

agency 

employees

$0

Sept. 15, 2011

$359.64 Total

$320.55 Cooper’s BBQ 

(food and tip)

+ $39.09 Walmart for 

napkins, plates

BBQ Lunch 

for 50 

people

Treasury 

employees 

+ state 

agency 

employees

$0

Sept. 12, 2011 $80.54

Breakfast 

for 

Treasury 

audit kickoff

Treasury 

employees 

+ state 

agency 

employees

$0

Oct. 18, 2012

$868.87

$745.33 Cooper’s BBQ 

(including food and tip)

+ $115 Italian Kitchen 

(salads and tip) + $8.54 

tablecloth and 

decorations

BBQ Lunch 

for 60 

people

Treasury 

employees 

+ state 

agency 

employees

($111)

March 17, 2016

$915.02 Total

$873.99 Cooper’s BBQ

(food and tip)

+ $19.96 Costco salad + 

$21.07 Dollar General 

for bamboo table 

torches, balloons, 

tablecloths and pottery 

light

BBQ lunch 

or dinner 

for 90 

people

Treasury 

employees 

+ state 

agency 

employees

($132)

Subtotal $2,830.23 ($243)

Total $2,587.23 TARP charge

Source: SIGTARP analysis of state agency provided data in the Hardest Hit Fund program.

• The Alabama state agency also charged TARP for a catered 

barbeque with Treasury employees. In 2011, the Alabama state 

agency charged TARP $197 for the food and gratuity paid to Champs 

BBQ for 10-15 Treasury and state agency employees. In 2012, the 

Alabama state agency also charged TARP $33.50 for “Lunch for 

Treasury staff” at two restaurants—both on the same day. In 2014, 

the state agency charged TARP $110 for a catered lunch at Jennie 

Weller Catering for 10 people including Treasury employees.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 17 August 25, 2017

Other state agencies also charged TARP for meals for Treasury 

employees, including:

The Mississippi state agency charged TARP $327.00 for lunch for 30 people 

at, or catered by, the Basil’s Belhaven restaurant and charged another $42.16 

at Lil Tony’s Restaurant including all of the Treasury employees visiting and 

the state agency employees.

The Kentucky state agency charged TARP $130.80 for a catered lunch for 

12 people including Treasury employees, on July 11, 2011. That same day, 

the Kentucky state agency charged an additional $13.99 for food for the 

Treasury meeting. On January 9, 2012, the Kentucky state agency charged 

$13.99 for “breakfast items for Treasury visit.”

The Oregon state agency charged TARP in June 2011 for a Treasury visit, 

including $194.05 for lunch catered from a restaurant for multiple Treasury 

employees including a senior Treasury official and nine state agency 

employees. That same day, the state agency did not charge TARP for 

Treasury employee’s lunches, but did charge TARP $161.17 for state 

employees’ lunches during a “UST visit lunch at Sassy Onion.” The state 

agency also charged $48.85 for coffee, pastries and desserts that same day 

for Treasury employees, as well as $26 for coffee for meetings with Treasury 

on other occasions.

The Michigan state agency charged TARP $77 for “refreshments for meals 

with Treasury” on July 31, 2015. 

The Illinois state agency charged TARP $14.35 for breakfast for a meeting 

with Treasury on September 23, 2013. 

The Washington, DC agency charged TARP $202.28 for a continental 

breakfast with Treasury on March 6, 2012.

Treasury should have been on notice that these meals were being charged to 

TARP. SIGTARP questions these charges as not necessary for loan 

modifications, and therefore, not permitted under Treasury’s contract. In 

addition, SIGTARP finds that these expenses constitute waste. The GAO 

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

extravagantly, or to no purpose.”17 GAO has also described waste as: 

“...taxpayers do not receive reasonable value for their money in connection 

 17 GAO, Standards for Internal Control in the Federal Government (the Green Book).
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 18 August 25, 2017

with any government-funded activity due to inappropriate acts or 

omissions by officials with control over or access to government 

resources.”18

 18 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,” GAO08-568T, March 11, 2008, http://www.gao.gov/new.items/d08568t.pdf (accessed 07/13/2016).
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 19 August 25, 2017

North Carolina Housing Finance Agency’s 

Culture Involves Charging TARP for TARP 

Barbeques, Parties, Restaurant Outings, Gifts, 

Employee Gym Memberships, Regular Employee 

Meals, and Employee Cash Bonuses

SIGTARP found $107,578 in waste, abuse, and questioned costs that violated 

Treasury’s contract by the North Carolina Housing Finance Agency, including 

the TARP barbeques with Treasury. SIGTARP found that the North Carolina 

agency’s culture involves regularly charging TARP for expenses that other 

state agencies were not charging.19

According to the North Carolina Housing Finance Agency, “the game changer” 

was being selected by Treasury to receive initially $482.8 million in the 

Hardest Hit Fund. Previously, the state agency operated a small, focused state 

program from 2005 to 2010, receiving $12.4 million in non-TARP grants. 

SIGTARP found that TARP was not only a “game changer” in the number of 

people who could be helped by the North Carolina agency, but also in the 

number of dollars now available for spending. The TARP funding was 38 

times the total amount of grants the North Carolina agency previously 

received. 

The culture at the North Carolina agency was that officials could use almost 

any justification to charge TARP for barbeques, parties, celebrations, 

restaurant outings, gifts, gym memberships, regular employee meals, and 

employee cash bonuses. For example: 

• Treasury officials’ visit was the North Carolina agency’s justification to 

throw four big TARP barbeques with 50, 60, or 90 people. The charges 

to TARP were $600, $350, $870, and $915.

• When Treasury left, it was cause to celebrate with a lunch for all 

employees. For example, the agency charged TARP $660 for another 

TARP barbeque to recognize the employees who worked on 

Treasury’s “audit.”

• Opening up the HHF program to North Carolina homeowners was the 

North Carolina agency’s justification to take all employees who 

worked on it to a steak and seafood dinner, and charge TARP the bill. 

 19 For this report, SIGTARP is not including other expenses such as travel, conferences, professional expenses, 

marketing, IT, salaries, or counseling (except for a limited number of items identified in the course of the audit). 

SIGTARP is continuing to review these expenses.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 20 August 25, 2017

• “Get to know new staff” was the North Carolina agency’s 

justification to charge TARP for a “Hardest Hit Fund Staff Picnic” for 

employees and family on a Saturday, with TARP even paying for the 

piñata and candy to fill it for the children.

• Reaching milestones of homeowners helped was the North Carolina 

agency’s justification to charge TARP $290 for another TARP 

barbeque, and $829 for a restaurant-catered lunch.

• “To meet and learn the role of the Hardest Hit Fund” was the North 

Carolina agency’s justification for a celebration for all employees, and 

even non-HHF employees, on Valentine’s Day, charging TARP $277 for 

food and Valentine’s Day décor, including a “V-day mailbox.” 

• “Employee health, welfare, and morale” was the justification for many 

charges to TARP.

The North Carolina agency started this culture at the very beginning of the 

Hardest Hit Fund. Before providing $1 in TARP to any North Carolina 

homeowners, the North Carolina agency charged TARP $2,349 in meals, and 

$2,115 in cash bonuses to two employees. After helping just 16 homeowners 

in its first quarter it accepted applications for HHF, the state agency paid an 

additional $1,688 in meals and an additional $5,000 in bonuses (to the same 

two employees).

The following calendar shows one month of meals totaling $1,100 charged to 

TARP, a few months later in January 2011:

Figure 4: Meals Charged in January 2011 by the North Carolina Agency

Source: SIGTARP analysis of data provided by North Carolina state agency.

The North Carolina agency’s culture included that “Working 

breakfasts/lunches/dinners” were regularly charged to TARP. One manager 

had a “working breakfast” at IHOP one morning and a “working lunch” at 

Firebirds Restaurant that same day ordering seared tuna and crab cakes, all 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 21 August 25, 2017

charged to TARP. Two employees bought two coffees at Dunkin Donuts 

one morning for $4.72 and charged it to TARP as a “working breakfast.” 

Employees could often charge their meals to TARP if they worked through 

the breakfast or lunch hour. Even one bottle of water bought at CVS for $1.81 

was charged to TARP. 

This culture of spending did not stop at meals. The state agency purchased 

shirts from Land’s End with their logo for employees and contractors who 

attended events “so they could be easily identified” and charged it to TARP at 

a cost of $1,113. 

The culture of the North Carolina Housing Finance Agency included regularly 

charging gifts to a credit card paid from the TARP bank account.20 While not 

luxurious gifts, employees were not willing to spend their own personal 

money or state funds on less than $5 on a balloon for one employee or $8 on 

balloons and a card for their student intern, or to pay for “Hammer & Nail” 

awards to recognize employees who “nailed it” with a note from the 

supervisor and a gift card. Unfortunately, these gift cards, which are the 

equivalent of cash, were charged to TARP. When North Carolina homeowners 

were approved for new TARP funding in 2016, one employee was given a $50 

gift card, charged to TARP. 

Treasury showed up on site and routinely reviewed only samples of the state 

agency’s spending on expenses. Treasury’s April 2016 review of expenses 

charged to TARP from September 2014 to February 29, 2016, led to “No 

Observations” about administrative expenses. 

SIGTARP identified the following waste, abuse, and questioned costs. Because 

the North Carolina agency provided information on expenses only up to 

September 30, 2016, it is highly likely that the agency has charged TARP even 

more in these categories since then.

Nearly $11,000 for Employee Parties, Celebrations, and Outings 

Charged to TARP

In addition to the unreimbursed amount of $2,58721 charged for TARP 

barbeques and other meals with Treasury, the North Carolina agency also 

charged TARP $8,219 as of September 30, 2016, for employee holiday 

parties, celebratory dinners and lunches, an employee family picnic, and to 

celebrate other events. For most of these expenses, North Carolina officials 

 20 SIGTARP’s analysis of North Carolina agency’s credit card statements in FY 2011 through FY 2016 revealed 

other questionable expenses that appeared to be charged to TARP. These include charges to Roly Poly 

Sandwich, Spirit Halloween, Windy City Novelties, Panera Bread, Mrs. Pumpkin Muffins, Tom’s Pizza Salad, and 

the Italian Kitchen. SIGTARP will continue to review these expenses. 21 Amount shown is net of $243 reimbursed by Treasury.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 22 August 25, 2017

charged the expense to a credit card, with the bill expensed to the TARP 

bank account. 

HHF Program Rollout Steak and Seafood dinner: To celebrate the opening 

of the HHF program in November 2010, the North Carolina agency charged 

TARP $734 for a steak and seafood dinner for 18 employees at Winston’s 

Grill, charging TARP for the following food and gratuity at $41 per person, as 

shown in Table 2.

Table 2: North Carolina Agency’s 11/4/10 Dinner at Winston’s Grill 

Charged to TARP

Food Paid By TARP

5 Ribeye Specials 2 Goat Cheese Bruschetta

1 Prime Rib 6 Salads & 1 Collards

1 Grilled Tuna 4 Bananas Foster

2 Cashew Salmon 5 Cheesecake

1 Tilapia 1 Bread Pudding

1 Shrimp and Grits 1 Chocolate Soufflé

1 Pork Loin 1 Butter Pecan

1 Shrimp Rigatoni 1 Crème Brule

1Triple Crown meal 1 Key Lime Pie

2 Calamari Soda, tea, coffee

4 Crab Dip Gratuity

Total Charged to TARP: $734

Source: Documentation provided by the North Carolina state agency for the Winston Grill dinner.

Employee Recognition Lunch at Winston’s Grill: On Friday, January 7, 2011, 

the North Carolina agency charged TARP $161 for a lunch for employees at 

Winston’s Grill. Employees ordered steak salad, catfish, Triple Crown meal, 

and sandwiches.

Lunch the Week of Christmas 2010: On December 20, 2010, the North 

Carolina agency charged TARP $289 for three deluxe sandwich trays. There 

was no justification for this charge to TARP.

December 2011 Holiday Party at The Square Rabbit: The North Carolina 

state agency charged TARP $666 for a “Holiday Luncheon for HHF Staff” on 

Friday December 16, 2011, at a restaurant called The Square Rabbit for 

approximately 60 people. They bought butternut squash lasagna, pork roast 

with glazed apples, and roast beef, all charged to TARP. 

Pizza for Employees who Missed the 2011 Holiday Party: The North 

Carolina agency charged TARP $59 for pizza for the employees who missed 

the holiday party to work.

December 2014 Holiday Lunch: The North Carolina agency charged TARP 

$96 for a Honey Baked Ham holiday lunch, plus drinks and supplies. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 23 August 25, 2017

December 2015 Employee Potluck: In mid-December 2015, the North 

Carolina agency held an employee potluck and charged TARP $18 for drinks, 

table covers, and napkins.

December 2015 Holiday Breakfast: On December 22, 2015, the North 

Carolina agency charged TARP $63 for a breakfast for “employee health, 

welfare, and morale.”

Catered Lunch by The Square Rabbit: On May 3, 2012, the North Carolina 

agency charged TARP $457 for a lasagna lunch catered by The Square Rabbit 

for 40 employees. The agency’s justification was employee recognition after a 

conference. 

Seafood Lunch: The North Carolina agency charged TARP $41 to treat two 

employees to a seafood lunch at the restaurant Firebirds the week of 

Thanksgiving 2011. The agency’s justification was recognition for helping 

with a conference.

Family Picnic: The North Carolina agency charged TARP $348 for a “Hardest 

Hit Fund Staff Picnic” on a Saturday in June 2011 that included a piñata and 

candy for the children, balloons, donuts, games, toys, drinks, and supplies. 

HHF Program Rollout Lunch: Just prior to the steak and seafood dinner in 

November 2010, as described above, the North Carolina agency employees 

had already celebrated the rollout of the HHF program in October 2010, 

charging TARP $183 for lunch for 11 state employees at the Fox and Hound.

Employee Recognition Lunch: In September 2010, before the first North 

Carolina homeowner applied for HHF, it charged TARP $200 for a lunch for 

14 employees at the Duck & Dumpling, charging TARP for food.

New Employee Welcome Breakfast: Also in September 2010, the North 

Carolina agency charged TARP $91 for a welcome breakfast for new 

employees.

Cakes and Party Supplies for Employee Celebration of Milestone of 

Homeowners Helped: In January 2013, the North Carolina agency charged 

TARP $426 for an employee luncheon to celebrate a milestone in the number 

of homeowners assisted. Charges to TARP included $182 for five different 

kinds of cakes, $106 to Party City for candles and balloons, plus $138 in 

snacks and party supplies.

TARP Barbeque for Employee Celebration of Milestone of Homeowners 

Helped: In January 2014, the North Carolina agency charged TARP $290 for a 

catered barbeque from Q Shack including 5 pork butts, 5 chickens, 4 gallons 

of tea, and 60 cookies, to celebrate a milestone in the number of homeowners 

assisted.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 24 August 25, 2017

TARP Barbeque to Celebrate Employees Working on Audit: In late 

October 2014, the North Carolina agency charged TARP $660 for a catered 

barbeque from Q Shack, and for cakes, drinks, and supplies. 

Catered Lunch for 75 Employees to Celebrate Milestone of Homeowners 

Helped: In July 2015, the North Carolina agency charged TARP $829 for an 

employee luncheon to celebrate a milestone in the number of homeowners 

assisted. The Square Rabbit catered 45 lemon chicken lunches and 30 

lasagnas, and salads were bought from another restaurant.

Employee Valentine’s Day Open House: The North Carolina agency charged 

TARP $277 for an open house on Valentine’s Day 2012 for all employees with 

the justification “to meet and learn the role of the Hardest Hit Fund.” The 

North Carolina agency charged TARP for Valentine décor including hearts, 

bowls, chocolate hearts, seven Valentine garlands, one “mailbox V-day” and 

flower bouquets, Chick-Fil-A iced tea, cookies, red velvet cake, cupcakes, and 

soda.

Celebrate TV Promo: The North Carolina agency charged TARP $80 for lunch 

to recognize employees who worked on the promo in May 2015.

Celebrate a New Program: The North Carolina agency charged TARP $228 

for pizza, cake, and fruit tarts to recognize 22 employees who worked on the 

new HHF program in September 2015.

Celebrate Financial Year: The North Carolina agency charged TARP $34 for 

taco bar supplies for the “Fiscal Year kickoff for the Financial Team” for 

“Employee Health, Welfare & Morale.”

Employee Party: The North Carolina agency charged TARP $38 for chicken 

wings, roast chicken, sausage, and flowers for “Employee Recognition” in 

June 2016.

Employee Farewells: The North Carolina agency charged TARP $103 to 

recognize employee farewells called “transitions,” including an ice cream 

sundae party.22 They also charged TARP for flowers for “transitions,” which 

is addressed in the next section. 

Cupcakes, Cakes, Candy, and Ice Cream for Employees: 

• In March 2011, the North Carolina agency charged TARP $59 to treat 

15 employees to frozen yogurt. 

 22 One celebration was bagels, another was an ice cream sundae party, one was buying the employee’s tacos and 

truffle fries at a restaurant. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 25 August 25, 2017

• Between March 2011 and September 2011, the North Carolina 

agency bought candy and charged TARP $351.

• The North Carolina agency charged TARP $27 for a cake for a birthday 

in December 2011.

• In June 2012, the North Carolina agency charged TARP $22 for cake 

and supplies.

• In September 2012, the North Carolina agency charged TARP $36 for 

cupcakes, cakes, and packs of gum. 

• In October 2012, the North Carolina agency charged TARP $53 for ice 

cream and cake.

• In May 2015, the North Carolina agency charged TARP $20 for 

cupcakes and pie. 

Balloons: The North Carolina agency spent less than $10 on balloons for 

“Employee Recognition” for “HHF Staff,” but was unwilling to use anything 

but TARP dollars to pay for it. 

Donuts and Other Breakfast Items for Employee Recognition: The North 

Carolina agency charged TARP $682 to buy donuts and other breakfast items 

regularly for “Employee Recognition.”

Charges to Restaurants and Supply Stores with no Receipts or 

Justification: The North Carolina agency charged $590 to TARP to 

restaurants and other stores where they had purchased food and party 

supplies. For example, there was a $99 charge to Italian Kitchen with no 

receipt. The state agency lumped most of these expenses into the 

“Miscellaneous” category.

SIGTARP questions all of these expenses as violating Treasury’s contract 

because they are not necessary to modify homeowner loans in HHF. Other 

state agencies modified loans in HHF without these expenses, and parties, 

celebrations, or employee recognition are not listed as “Permitted Expenses” 

in Treasury’s contract. In addition, these expenses constitute waste as they 

have no purpose in HHF, some are extravagant, and are the subject of 

inappropriate acts by officials with control over government resources. 

These charges also constitute abuse.23

 23 Abuse involves behavior that is deficient or improper when compared with behavior that a prudent person would 

consider reasonable and necessary operational practice given the facts and circumstances. This includes the misuse of 

authority or position for personal gain or for the benefit of another. GAO’s Green Book on Federal Internal Control 

Standards.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 26 August 25, 2017

$1,965 in Gift Certificates and Other Gifts Charged to TARP

The North Carolina Housing Finance Agency charged TARP at least $1,965 for 

gifts, as of September 30, 2016, including:

• $1,113 in Land’s End shirts with the agency’s logo for employees and 

contractors

• A $50 CVS gift card in 2016 in recognition of getting new HHF funding

• A $50 Target gift card for an employee

• A $50 Chockstone gift card from Nantucket Grill for an employee

• Three $75 Visa gift cards plus service charges of $17.85 for three 

employees 

• Two $25 Bath and Body Works gift cards to employees of Housing 

Consultant Group

• A $25 McDonald’s gift card for an employee

• $31.38 for an Exxon gift card, poinsettia, and card for an employee 

• $17.76 for a Lindt chocolate truffle bag and flowers for an employee 

• $29.42 for supplies to make a poster for an employee’s farewell 

• $31.99 for flowers for an employee 

• $8.52 for flowers (a fall bouquet) for one employee

• $10.66 for flowers for an employee 

• $6.39 for flowers for an employee 

• $9.87 for flowers for an employee 

• $17.06 for tulips and other flowers for two employees, $12.78 for 

sunflowers for an employee, $35.16 for a floral bouquet for two 

employees, and $38.38 for a floral arrangement for the 2016 Annual 

Housing Counseling Conference 

• Three $5 gift cards for the 2016 Annual Housing Counseling 

Conference

• $8.01 for balloons, a bow, and a card for a student intern’s graduation 

• $4.26 for a balloon for an employee 

• Six award pins worth $108 to housing counselors

SIGTARP questions all of these expenses as violating Treasury’s contract 

because they are not necessary to modify homeowner loans in HHF. Other 

state agencies modified loans in HHF without these expenses. Gifts are not 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 27 August 25, 2017

listed as “Permitted Expenses” in Treasury’s contract. In addition, these 

expenses constitute waste as they have no purpose in HHF, and they are the 

subject of inappropriate acts by officials with control over government 

resources. These charges also constitute abuse. 

$8,880 Gym Memberships Charged to TARP

The North Carolina state agency was the only agency to charge TARP for 

employee gym memberships/wellness benefits, paying six employees $30 a 

month. As of September 2016, the North Carolina agency had charged TARP 

$8,580 for these gym memberships/ wellness benefits. From October 2016 

through February 2017, the North Carolina agency charged TARP $300 for 

employee gym memberships/wellness benefits for two of the six employees. 

SIGTARP assumes that the charges for the two employees have and would 

continue to accrue at an annual rate of $720. SIGTARP questions these 

expenses as violating Treasury’s contract because they are not necessary to 

modify loans. No other state agency charged for gym memberships. Gym 

memberships are not listed as “Permitted Expenses” in Treasury’s contract. 

In addition, these charges constitute waste as they have no purpose in HHF.

$18,091 Employee Cash Bonuses Charged to TARP

The North Carolina Housing Finance Agency also charged TARP for cash 

bonuses of at least $15,841 to three employees, as of September 30, 2016. In 

2010, before the North Carolina agency had provided $1 to any North 

Carolina homeowners, the North Carolina agency charged TARP $1,320 to 

pay cash bonuses to Employee 1 and $795 to Employee 2. The state agency 

paid these two employees bonuses of $2,700 and $2,696, respectively, on 

December 31, 2010. In June 2011, the North Carolina agency charged TARP 

$2,850 for another cash bonus to Employee 1. Both employees had received 

2 bonuses each in a 6-month period. In 2013, the North Carolina agency 

charged TARP for four bonuses of $750 each to Employee 3 in January, April, 

July, and October. In 2014, the North Carolina agency charged TARP $1,500, 

paying Employee 3 two bonuses of $750 each in January and April. In 

October 2014, the North Carolina agency charged TARP $480 for a bonus to 

Employee 2. In April 2016, the North Carolina agency charged TARP $500 for 

a cash bonus to Employee 1 for working with Treasury’s audit team. The 

North Carolina agency also charged TARP $2,250 to cash bonuses to 

contractors for working with Treasury’s audit team. 

SIGTARP questions these charges as violating Treasury’s contract. They were 

not necessary to modify loans in HHF given that 11 state agencies modified 

loans in HHF without paying cash bonuses. Bonuses are also not listed as 

“Permitted Expenses” in Treasury’s contract. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 28 August 25, 2017

$14,124 Charged to TARP for Employee Breakfasts, Lunches, 

and Dinners Not During Travel, Sometimes with External Parties

The North Carolina agency regularly charged TARP for breakfasts, lunches, 

and dinners for employees not during travel or training. The North Carolina 

agency charged TARP $9,314 for employee meals at restaurants to interview 

job candidates and conduct annual reviews, and for employee breakfasts, 

lunches, and snacks where just employees dined. The North Carolina agency 

also charged TARP $4,810 in lunch meetings between state agency 

employees and outside parties. The person approving the spending often had 

their meal paid with TARP funds.

At least $4,854 in Employee-Only Meetings in (or catered by) Restaurants 

Unrelated to Travel: The North Carolina agency regularly charged TARP for 

nearly 90breakfasts, lunches, or dinners at (or catered by) restaurants for 

employees.24

• The North Carolina agency charged TARP $794 for 22 meals at 

restaurants to interview job candidates ($264) and conduct 

employees’ annual reviews ($530). Sometimes employees had

multiple “annual reviews” in a year with the lunch charged to TARP. 

TARP paid for the lunch of the employee and manager.

• The North Carolina agency charged TARP nearly $4,060 for 65 

breakfasts, lunches, or dinners at (or catered by) restaurants. Only 

state agency employees attended these meals. For example:

o There were many working meetings during these meals. 

One senior employee often held working breakfasts and 

lunches at restaurants and charged it to TARP.

o There was a monthly lunch meeting to discuss “marketing,” 

usually held at restaurants or sandwich shops. 

o The North Carolina agency charged TARP $265 in lunch 

from the Italian Kitchen restaurant for employees who did 

not attend the annual housing conference but worked in 

the office, and $318 for sandwiches, desserts, and fruit for 

employees who did not attend the annual agency meeting, 

but worked in the office. 

o Often when Treasury conducted a review, employees who 

prepared for the review would have their meals charged to 

TARP before and during the review, sometimes delivered 

from restaurants like The Square Rabbit ($286.54) on the 

 24 Restaurants included Bahama Breeze, Firebirds, Carolina Ale House, Italian Kitchen, The Olive Garden, Kanki 

House of Steaks, Bonefish Grill, Pittsboro Roadhouse, Vivace, Zoe’s Kitchen, and IHOP.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 29 August 25, 2017

same week as one of the big barbeques with Treasury, 

Zoe’s Kitchen ($107), or Japan Express ($68.26).

o Sometimes the North Carolina agency charged TARP for 

meals for employees to meet each other, such as $160 

charged to TARP for seafood and other lunches for “HHF 

Legal and HHF closers met for team building and to discuss 

process flow,” for “Employee Health, Welfare and Morale.”

At least $4,460 Charged to TARP for Fast Food Breakfasts, Lunches, or 

Snacks for Employees, Not During Travel: The North Carolina agency also 

charged TARP $2,901 for fast food for state agency employees who worked 

through breakfast or lunch hour, or on the rare weekend. Sometimes the 

lunch would be sandwiches or burritos for many employees costing nearly 

$150 and another over $300. However, the culture at the North Carolina 

agency allowed charges to TARP even if it was not a big staff lunch, but 

instead a couple of employees. Two small coffees from Dunkin Donuts that 

cost less than $5 were charged to TARP for a “working breakfast.” One 

employee charged TARP $9 for a Chick-Fil-A nugget meal while she worked 

to meet a deadline. There was even a $1.81 charge to TARP for one water 

bottle from CVS. Although most of the charges to TARP for meals were 

unrelated to training, the North Carolina agency charged TARP $967 for food 

during employee training. Additionally, North Carolina charged TARP $591 

for snacks and water.

$4,810 in Breakfast and Lunch Meetings Between Employees and Outside 

Parties Paid for with TARP: North Carolina agency officials met with lenders 

and others over lunch or breakfast at (or catered by) restaurants and 

charged the bill to TARP, as shown in Table 3.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 30 August 25, 2017

Table 3: Breakfast and Lunch Meetings With Outside Parties Charged to TARP

* Dollar amounts may not add due to rounding.

Source: SIGTARP analysis of North Carolina agency provided data in TARP’s Hardest Hit Fund program. 

SIGTARP questions these charges as violating Treasury’s contract. It is not 

necessary for TARP to pay for employee meals, or even meals with lenders or 

other external parties, for homeowners to receive a modification on their 

mortgage. Other state agencies did not charge TARP for meals. Meals are not 

listed as “Permitted Expenses” in Treasury’s contract. In addition, these 

charges constitute waste.

$53,712 in Food and Other Costs at Events with Housing 

Counselors Charged to TARP

As of September 30, 2016, the North Carolina agency charged TARP $53,712

for food and other costs at events with housing counselors and others, as 

shown in Table 4. 

Date Charge to TARP Type of Charge

Recipients and State 

Agency Staff

Aug. 5, 2010 $110 Panera Lunch for 6 people Homeowners

Nov. 9, 2010 $154 Lunch for 12 people Bank of America

Dec. 6, 2010 $193 Lunch for 16 people Chase Mortgage

Feb. 24, 2011 $106 Lunch for 12 people Bank of America

May 24, 2011 $114 Lunch for 4 people Wells Fargo

July 2011 $304 + $607 The 

Square Rabbit 

Breakfast + Dinner 

for 45 Congressional staff

Aug. 31, 2011 $125 Lunch for 10 people CitiMortgage

July 12, 2012 $238 CCAB Lunch Homeowners

Sept. 20, 2012 $632 The Square Rabbit Dinner for 45 Congressional staff

Sept. 26, 2012 $309 Rosca Tuscan 

Grill

Lunch during PHCO 

Annual 

Conference

Wells Fargo, 

CitiMortgage, Bank 

of America, Chase

Sept. 2013

$397 Honey Baked 

Ham, sandwiches, 

drinks

Lunch Homeowners

Feb. 25, 2014 $576 Firehouse Subs Lunch Homeowners (receipt 

missing)

July 2015 $64 Snacks Congressional staff

May 2012 – Aug. 

2015

$878 Lunch Lenders and others 

Total $4,810*
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 31 August 25, 2017

Table 4: Charges to TARP at Housing Counselor Events

Date Charge to TARP Recipients and State Agency Staff

Aug. 18, 2010

$516

$441.53 The Square Rabbit

$74.08 Costco cookies, 

chocolate, napkins, cutlery

HUD, N.C. Dept. of Commerce, 

Northwestern Regional Housing Authority, 

Center for Responsible Lending, and 

others

Oct. 21, 2011

$11,152

$5,836 in food to Center Plate 

+ $5,316 in additional direct 

costs

2011 Annual Housing Counselor 

Conference at Raleigh Convention & 

Performing Arts Complex

April 25, 2012

$27,208

$1,990 to Rick’s Diner & 

catering + $25,218 additional 

direct costs

N.C. Free Foreclosure Prevention Event at 

NC State University’s McKimmon Center

Jan. 25, 2013 $134 Wake County Housing Counselors

Nov 19, 2013

$5,590

Deposit + food charge to 

TAVO restaurant (including 

tilapia, chicken, pork chops, 

$400 in virgin cocktails and 

$200 in mini cupcakes + $770 

gratuity)

Housing Counselors Dinner

June 30, 2016

$9,113

$1,346 RAVE! Catering + 

$2,851 Lip Service Catering + 

$4,916 additional direct costs

2016 Annual Housing Counseling 

Conference

Total $53,712*

Note: Dollar amounts may not add due to rounding.

Source: SIGTARP analysis of state agency provided data in TARP’s Hardest Hit Fund program. 

The largest TARP spending was on its Annual North Carolina Foreclosure 

Prevention Conferences, which more than 100 counselors attended each 

year. A description of the November 2013 conference in the North Carolina 

agency’s report to Treasury is “We celebrated counselors for their work 

preventing foreclosures. We also provided new marketing materials for 

distribution to homeowners.”25 The $5,590 dinner was a celebration, which 

violates Treasury’s contract. 

In some of these other conferences, TARP is being charged the cost of the 

conference, despite the purpose of the conference for general foreclosure 

prevention, even if that includes HHF. This violates Treasury’s contract. 

Then-Treasury Secretary Geithner and then-Treasury General Counsel 

Madison determined in 2010 that under EESA, TARP funds could not pay for 

housing counselors’ general foreclosure prevention efforts, even though that 

is the general purpose of TARP as stated in EESA. Under EESA, TARP cannot 

pay for food or for counselors to attend a general foreclosure prevention 

conference. 

These meals and conference expenses for counselors are not necessary to 

modify loans. The North Carolina agency made many trips to meet and train 

counselors throughout the state charged to TARP. These annual conferences 

 25 See http://www.ncforeclosureprevention.gov/PDFs/TreasuryReport2013Q4.pdf.8/7/2017.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 32 August 25, 2017

are different from those specific HHF trainings. Treasury’s contract 

explicitly limits “Permitted Expenses” under the category of “counseling” to 

“File intake, decision costs, successful file, keep business partners on-going.” 

The North Carolina agency lumped these charges into one of these categories, 

presumably. 

There is no transparency so that taxpayers can see where TARP dollars are 

being spent. This lack of transparency also makes oversight extremely 

difficult. To the extent that the North Carolina agency continues to hold these 

conferences, it should pay for them using the millions of dollars in grants 

received from others directly for counseling costs, not with TARP dollars.26

 26Grants include the Department of Housing and Urban Development for counseling costs, the National 

Foreclosure Mitigation Counseling Program, the NC Association of Realtors, NeighborWorks America.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 33 August 25, 2017

The Florida Housing Finance Corporation, 

Whose Executive Director Was Forced to Resign 

in December 2016 Over Bonuses Paid For with 

State Dollars and a Lavish Dinner, Also Charged 

TARP for a TARP Barbeque and $106,774 for 

Bonuses Including Doubling and Tripling 

Bonuses After SIGTARP’s Audit 

SIGTARP questions $106,774 in bonuses by the Florida Housing Finance 

Corporation charged to TARP, as well as $636 in gift certificates to employees 

and $454 in a TARP barbeque, an all-employee lunch, and a lunch with Bank 

of America.27 These expenses violate Treasury’s contract because they are 

not necessary to modify loans. Other state agencies modified loans without 

paying bonuses or having TARP barbeques. Additionally, these are not listed 

in Treasury’s “Permitted Expenses” in its contracts. These expenses also 

constitute waste. Paying bonuses when a state agency is severely 

underperforming in HHF constitute waste. 

Florida agency officials told SIGTARP that the Executive Director of the 

Florida agency authorized all of the bonuses charged to TARP. This same 

Executive Director was reportedly asked to resign by the Governor around 

December 23, 2016, after the Florida Inspector General found that state 

funds had paid nearly $443,000 in employee bonuses and a $52,000 dinner, 

while thousands of Floridians were waiting for assistance to save their 

homes.

28 The Governor’s spokesperson reportedly told the Miami Herald that 

the Governor asked the Executive Director to resign, saying, “Whenever any 

tax dollars aren’t used effectively and transparently, the governor is 

obviously concerned.”29

In October 2015, SIGTARP issued a report finding that the Florida Housing 

Finance Corporation had severely underperformed in the Hardest Hit Fund. 

SIGTARP reported that only 20% of homeowners who applied to modify 

their loan received assistance, the lowest of any HHF state, and that the 

Florida state agency consistently denied a higher percentage of homeowners 

for assistance than the national average.

 27 From August 19, 2011 to December 16, 2016, the Florida state agency charged TARP $106,774 to pay 27 

bonuses to 15 employees and 1 contractor. 28 “Director of Florida housing agency resigns in wake of scathing audit,” Susan Taylor Martin and Kristen Clark, 

Miami Herald, December 23, 2016 http://www.miamiherald.com/news/politics-government/statepolitics/article122710764.html. 7/27/2017. 29 Id.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 34 August 25, 2017

• The Florida state agency charged TARP for a $15,000 signing 

bonus to a contractor in 2011. 

• The Florida state agency charged TARP for bonuses for 15 employees.

o The Florida state agency charged TARP for an annual bonus to 

the Director30 in charge of HHF despite consistent 

underperformance in HHF. 

Figure 5: $24,542 Cash Bonuses Charged to TARP for the Florida Agency’s Director of HHF

Source: SIGTARP analysis of Florida state agency data.

The director’s bonus charged to TARP nearly doubled in 2015 

and 2016 (Figure 5), despite SIGTARP’s October 2015 report 

showing that the Florida agency had provided HHF to 

homeowners at the lowest rate of any state agency in HHF, 31

and the fact that, during those years, the number of Florida 

homeowners provided HHF dropped significantly from 2014.

o SIGTARP found that the amount of bonuses the state agency 

charged to TARP doubled and tripled to other senior Florida 

officials after SIGTARP’s October 2015 audit report on the 

severe underperformance of the Florida agency. Figures 6 and 

7 shows some examples of increased employee bonuses.

 30 The Director is one of the 15 employees. 31 See SIGTARP, Factors Impacting the Effectiveness of Hardest Hit Fund Florida, October 6, 2015.

$4,827 $4,419 

$7,750 $7,546 

 $-

 $1,000

 $2,000

 $3,000

 $4,000

 $5,000

 $6,000

 $7,000

 $8,000

 $9,000

December 20, 2013 December 24, 2014 December 24, 2015 December 24, 2016

Total = $24,542

SIGTARP Oct. 2015 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 35 August 25, 2017

Figure 6: One Florida Agency Employee’s Bonuses Tripled

Source: SIGTARP analysis of Florida state agency data.

Figure 7: One Florida Agency Employee’s Bonuses Increased Approximately 2.5 Times

Source: SIGTARP analysis of Florida state agency data.

Also in December 2015, the Florida agency paid one employee 

$7,424—the highest bonus charged to TARP other than the 

Director and contractor signing bonus.

o In December 2016, despite no substantial improvement after 

SIGTARP’s report, the Florida agency paid cash bonuses to HHF 

staff, as shown in Table 5 (in addition to the director’s bonus): 

$1,485 

$4,454 

 $-

 $500

 $1,000

 $1,500

 $2,000

 $2,500

 $3,000

 $3,500

 $4,000

 $4,500

 $5,000

December 2013 December 2015

$2,747 

$6,682 

 $-

 $1,000

 $2,000

 $3,000

 $4,000

 $5,000

 $6,000

 $7,000

 $8,000

December 2013 December 2015

SIGTARP Oct. 2015 Report
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 36 August 25, 2017

Table 5: December 2016 Cash Bonuses Charged to TARP

$3,252

$3,712

$4,454

$5,345

$6,459

$7,424

Total: $30,646

Source: SIGTARP analysis of Florida state agency data.

The Florida state agency also charged TARP $636 for six $100 gift cards 

given to employees to the Publix grocery store. 

The bonuses and gifts were not necessary to modify loans. Other state 

agencies modified loans without paying bonuses and buying gifts. Bonuses 

are not listed as “Permitted Expenses” in Treasury’s contract. 

Given the severe underperformance of the Florida agency, these bonuses and 

gifts also constitute waste and abuse. At the same time the Florida agency 

was charging TARP for these bonuses and gifts to employees, it was denying 

TARP dollars to homeowners at high rates. SIGTARP previously reported that 

in the first 2 years of the program (2010-2012), nearly half of all 

homeowners were denied as ineligible. In November 2012, Treasury sent a 

memorandum to the Florida agency that at current participation and 

spending rates, Treasury estimated that Treasury will not utilize a significant 

amount of allocated funds, and that Florida Housing lags behind other HHF 

states. Subsequently, one employee received the following, which was 

charged to TARP:

Table 6: Bonuses and Gifts for One Employee Charged to TARP

Date

Charge to 

TARP Bonus/Gift

Jan. 14, 2013 $105.95 $100 Gift card to Publix grocery store

Feb. 15, 2013 $931.06 Cash bonus

March 11, 2013 $105.95 $100 Gift card to Publix grocery store

April 1, 2013 $105.95 $100 Gift card to Publix grocery store

June 17, 2013 $105.95 $100 Gift card to Publix grocery store

Total $1,354.86

Source: State agency data provided to SIGTARP.

This is waste and abuse when the agency was severely underperforming in 

modifying homeowner loans in HHF. 

TARP Barbeque and Sandwiches

SIGTARP also questions the Florida agency’s charge of $454 for a TARP 

barbeque, lunch for all employees, and lunch with Bank of America 

employees as not necessary to modify loans. This is made clear because 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 37 August 25, 2017

meals are not permitted expenses in Treasury’s contract, and other 

state agencies modified loans without a TARP barbeque, employee meals, or 

meals with banks. In September 2011, the Florida agency charged TARP 

$231 for a catered TARP barbeque from Piggy’s Barbeque for all of its 

employees, before Treasury visited for a compliance review.32 This review 

would result in Treasury sending an Action Memorandum to the Florida 

agency about its underperformance in the program. In September 2013, the 

Florida agency charged TARP $89 for lunch for all employees as they worked 

on rolling out a new HHF program. The Florida agency charged TARP $134 

for lunch for a meeting with Bank of America.

All TARP barbeques constitute waste, as do the other lunches.

Other state agencies also charged TARP for gifts:

The Alabama state agency charged TARP $166 for a Visa gift card and fruit 

baskets for individuals who participated in TV and radio commercials and 

provided customer testimonials.

The Michigan state agency charged TARP $55 for Bed Bath & Beyond gifts 

to the state agency employees.

 32 Treasury issued its compliance report on June 14, 2012.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 38 August 25, 2017

The Nevada Agency Contractor, NAHAC, 

Which SIGTARP Previously Found Had Wasted 

$8.2 Million, Charged TARP $43,497 for 

Bonuses, Almost All to the CEO Who Was Later 

Terminated 

In 2016, SIGTARP found $8.2 million in waste in the Hardest Hit Fund by the 

Nevada contractor NAHAC, and NAHAC’s severe underperformance in HHF, 

which SIGTARP reported in an audit, saying:

SIGTARP found a deliberate attempt by the Nevada state agency to 

charge the Hardest Hit Fund for every expenses it could, all while it 

denied Nevada homeowners admission to the program. Sometimes 

over the last three years, this state agency lost sight of the fact that 

it is only in this program to be a 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. 

SIGTARP previously reported that admission of Nevada homeowners into the 

Hardest Hit Fund decreased 94% between 2013 and 2015. Despite the 

plummeting performance, NAHAC charged TARP for $43,497 in bonuses—

nearly 91% of which ($39,500) was paid to its CEO in 2015, as shown below. 

Figure 8: Nevada State Agency Bonus Payments and Homeowners Assisted with HHF

Source: SIGTARP analysis of Treasury and state agency provided data in Hardest Hit Fund program, as of 

September 30, 2016.

$3,665

$331

$30,000

$4,500 $5,000

0

200

400

600

800

1,000

1,200

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Homeowners 

Bonuses Nevada Assisted

Bonus Homeowners Assisted
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 39 August 25, 2017

In the report Waste and Abuse in the Hardest Hit Fund in Nevada, 

released September 9, 2016, SIGTARP found extensive waste and abuse, 

including charging TARP for the CEO to drive a Mercedes Benz, for lunches at 

his country club, for employee parties at casinos and restaurants, employee 

gifts (such as a Massage Envy gift card, gift cards for the movies, and an 

Edible Arrangement gift basket), moving into a luxury office, breaking the 

lease on the luxury office, buying new furniture, a manager’s outing at a highend cocktail bar, and other expenses. Included in SIGTARP’s report was a 

$4,500 July 2015 bonus paid to the CEO. Treasury implemented SIGTARP’s 

recommendation to recover the $4,500. 

SIGTARP now finds that NAHAC charged TARP for a $30,000 signing bonus 

for that same CEO, and an additional $5,000 bonus for the CEO in December 

2015, 6 months before he was terminated. The ousted Nevada CEO received 

$39,500 in bonuses charged to TARP, after working there less than 2 years 

(October 2014 to June 2016). The only other person who received a bonus 

charged to TARP was a senior official who was paid $3,997 in bonuses. The 

new CEO’s employment contract provides for quarterly bonuses, which 

should not be charged to TARP. 

SIGTARP’s 2016 audit reported that the Nevada state agency had charged 

$903.84 to the Hardest Hit Fund to pay for a 2015 company picnic, including 

supplies. SIGTARP now finds that the state agency also charged TARP for 

$109 to reserve a location for a 2016 picnic ($90 of which was later 

reimbursed when the agency canceled the reservation).

SIGTARP is concerned about other charges to TARP recently found, including 

tens of thousands of dollars in legal fees and other expenses for litigation or 

claims by former employees. SIGTARP will continue to audit NAHAC’s 

spending of TARP dollars and report on these charges in its pending second 

audit for HHF in Nevada.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 40 August 25, 2017

SIGTARP Questions More Than $100,000 in 

State Agency Charges to TARP for Barbeques, 

Parties, Picnics, Celebrations, Outings, Food, 

and Beverages

SIGTARP questions $114,928 charged by state agencies to TARP: 

• $11,777 for barbeques, parties, picnics, celebrations, and outings; 

• $98,971 in food and beverages unrelated to travel; and 

• $4,180 in barbeques, and other food and beverages with Treasury 

officials.33

These charges to TARP are in addition to the waste identified in HHF in 

Nevada in SIGTARP’s September 2016 audit.

Nine State Agencies Charged TARP $11,777 for Parties, Picnics, 

Celebrations, and Outings 

In SIGTARP’s September 2016 audit, SIGTARP identified waste by NAHAC in 

Nevada on parties, picnics, celebrations, and outings. In addition, SIGTARP 

has now identified other questioned costs and waste by other state agencies 

that charged TARP $11,777 for barbeques, parties, picnics, celebrations, and 

outings, as shown in Table 7.

 33 Total includes $454 food and beverages charged by the Florida state agency, and charges by the North Carolina 

agency including $8,219 in barbeques, parties, picnics, celebrations, and outings, and $32,386 in food and 

beverage charges (not including North Carolina agency charges for direct costs other than food with housing

counselors), discussed earlier in report.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 41 August 25, 2017

Table 7: Charges to TARP for Barbeques, Parties, Picnics, Celebrations, and Outings 

State Agency Charge to TARP Type of Charge

North Carolina $8,219 BBQ, parties, picnic, celebrations, 

outings

Illinois $549 Pizanos Pizza and Pasta ($464 

food + $85 tip)

June 14, 2016 “Celebrate HHF 

Funds officially given from U.S. 

Treasury and celebrating 

[employee’s] upcoming wedding”

Illinois $243 Employee Retirement party

Kentucky $97 (portion charged to TARP) Picnic with food trucks, gelato 

outing, breakfast, lunch

Michigan $450

Cupcakes, ice cream sandwiches, pizza

Employee appreciation day, 5 Year 

Anniversary Celebration

Michigan

$251

Including $100 Beaners Gourmet 

Coffee, $17 Party City (Balloons & 

decorations), $48 for photo cake,

$40 supplies

Open House, Meet and greet

Rhode Island $573

Sandwiches, fruit, cookies

Employee lunch around December 

holidays 2011

Rhode Island $271 Pizza lunch 

Rhode Island $89* Chair rentals for grand opening of 

new center

Oregon $90 Pizza to celebrate after Treasury’s 

audit

Oregon $60 Lunch to celebrate after Treasury’s 

audit

Nevada 

(NAHAC) $225 Group Picnics 2014 & 2015

Nevada 

(NAHAC) $19* Unreimbursed portion of 2016 Group 

Picnic rental

New Jersey $472 Land & Sea Restaurant Misc.

New Jersey $277 Italian People’s Bakery Misc.

Arizona $0

California $0

Total $11,777**

* Amount discussed later in this report, and not included in the chart total.

** Dollars may not add due to rounding.

Source: SIGTARP analysis of state agency provided data for the Hardest Hit Fund program.

SIGTARP questions all of these expenses as violating Treasury’s contract 

because they are not necessary to modify homeowner loans in HHF. Other 

state agencies modified loans in HHF without these expenses. Barbeques, 

parties, celebrations, and outings are not listed as “Permitted Expenses” in 

Treasury’s contract. In addition, these expenses constitute waste as they 

have no purpose in HHF.

Recovered Taxpayer Dollars: After SIGTARP questioned Rhode Island 

Housing, the state agency told SIGTARP it would reimburse Treasury 

$271 for pizza for employees that it charged to TARP.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 42 August 25, 2017

SIGTARP Found No Consistency in Charges to TARP by State 

Agencies for Food and Beverages, and Found Unnecessary 

Charges to TARP of $98,971

All but two state agencies (in Arizona and California) charged TARP for food 

and beverages, unrelated to travel, with total charges to TARP of $98,971. 

“Meals” or “food and beverages” are not listed as “Permitted Expenses” under 

Treasury’s contract.34

SIGTARP questions all of these expenses as violating Treasury’s contract

because they are not necessary to modify homeowner loans in HHF. Arizona 

and California modified loans in HHF without these charges. The California 

agency has the most allocated TARP dollars for HHF compared to the other 

18 states, and did not charge TARP for food and beverages. Without Treasury 

bringing accountability, taxpayers were charged in TARP based on the 

culture and decisions of each state agency. 

• State agencies in North Carolina, Illinois (and Nevada as previously 

identified in SIGTARP’s September 2016 audit), regularly charged 

TARP for employee food and beverages, with North Carolina as far 

more egregious than any other state agency in HHF. 

• State agencies in Georgia and Indiana did not charge TARP for any 

food, but charged TARP for office beverages for employee 

breakrooms. 

• The Ohio agency charged TARP only for food and related costs at 

events with housing counselors, which was over $13,000. 

• The South Carolina agency charged TARP only for food/beverages 

when meeting with legislative staff and business partners.

• State agencies in New Jersey, Tennessee, and Washington, D.C. 

reported to SIGTARP spending no money on food or beverages, but a 

search of their general ledgers revealed charges of $836, $427, and 

$482, respectively. 

Federal taxpayers paid more than they had to for HHF because Treasury left 

TARP charging decisions for expenses to the state agencies. Treasury left 

these decisions to state agencies, despite food and beverages not listed as a 

permitted expense under Treasury’s contract, and despite Treasury 

compliance officials regularly reviewing the administrative expenses of each 

 34 Total includes charges by state agencies in North Carolina and Florida reported earlier in this report. These 

charges do not include charges to TARP by NAHAC in Nevada for meals, meal supplies, office beverages, or 

snacks identified by SIGTARP in its September 2016 audit.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 43 August 25, 2017

state agency whereby they would have seen all different types and 

amounts of expenses, as shown in Table 8 below. Treasury would have also 

seen that state agencies in California (with the most dollars in HHF) and 

Arizona charged zero TARP dollars for food and beverages, evidencing that 

food and beverage are not necessary for homeowners to have their loans 

modified in HHF.

Table 8: Food/Beverages Charged to TARP, Not Including Food/Beverages When Treasury 

Visited or at Parties/Celebration/Outings 

State Agency Charge to TARP Type of Charge

North Carolina $32,386a

$14,124+ $18,262

Food/Beverages for Employees + 

Food/catering with counselors

Illinois $15,297 Water, coffee, ice machine, food

Ohio $13,158 Food/catering with counselors

South Carolina $12,735 Food/Beverages with legislative staff

Georgia $6,813 Water, coffee

Michigan $5,941 Food/Beverages for Employees, 

Food/Beverages with others

Nevada $2,661b Food/Beverages for Employees, 

Food/Beverages with others

Mississippi $2,399 Food/Beverages with counselors

Indiana $1,558 Water

Oregon $1,418 Food/Beverages for Employees, 

Food/Beverages with others

Kentucky $1,429 Food/Beverages for Employees

New Jersey $836 Food/Beverages with others

Rhode Island $780 Food/Beverages with others

Washington, D.C. $482 Food/Beverages with others

Florida $454a Food/Beverages for Employees, 

Food/Beverages with others

Tennessee $427 Food provided with others

Alabama $197 Food/Beverages with others

Total $98,971* a Including state agency food/beverage charges previously discussed in this report.

b Excluding NAHAC waste in charges previously identified in SIGTARP’s Sept. 2016 audit.

* Dollars may not add due to rounding.

Source: SIGTARP analysis of state agency provided data for the Hardest Hit Fund program.

State Agencies Charged TARP for Employee Food and Beverages

Most state agencies did not charge TARP for employee food and beverages.

The North Carolina agency charged TARP the highest amount, charging 

$14,124 for employee food and beverages, as previously discussed in this 

report.

The Illinois agency charged TARP $4,475 for food and beverages, providing 

generic justification to SIGTARP, such as “meal,” “business meal,” “employee 

expense,” or the name of the restaurant. The agency bought cookies, sodas, 

and donuts, and paid a number of delivery fees. The Illinois agency also 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 44 August 25, 2017

charged TARP $304 (which includes a $30 tip + $20 delivery fee) in 

food catered by a Cuban restaurant for employees for training.

The Kentucky agency charged TARP $120 for lunch during employee 

meetings. 

The Alabama state agency charged TARP $157 for employee lunches, 

including for “lunch for noon conference call with Treasury.” 

The Florida state agency charged TARP $22 for an employee lunch to 

prepare for a Treasury visit, as previously mentioned in this report. 

In addition to the employee food and beverages charged to TARP by NAHAC 

that SIGTARP identified in its September 2016 audit, SIGTARP questions 

$1,604 in food and beverages charged by NAHAC in Nevada. NAHAC charged 

TARP $28 for the CEO to have a “business lunch,” and $127 in business 

lunches of another executive, with no further justification. In SIGTARP’s 2016 

audit, SIGTARP questioned $215 that NAHAC charged TARP for lunches and 

snacks for Board of Directors meetings. In this audit, there is an additional 

$26 charge for food at those meetings.

The Oregon state agency charged TARP $545 for employee lunches from 

restaurants when working on 16 Saturdays and Sundays to process 

homeowner applications. The Oregon agency also charged TARP $26 for 

coffee and cookies, and another $38 for refreshments.

The New Jersey agency charged TARP $836 for food from the Italian 

Peoples Bakery under the category “Training.” 

The Michigan agency charged TARP $144 for food during training.

Charges for employee food and beverages are not necessary to modify loans 

in HHF and therefore violate Treasury’s contract. Other state agencies 

modified loans without charging employee food and beverages to TARP. 

These are not listed as “Permitted Expenses” in Treasury’s contract.

Seven State Agencies Unnecessarily Charged TARP for Employee 

Water and Coffee

Twelve state agencies did not charge TARP for employee water and coffee. 

SIGTARP questions six state agency charges to TARP of $26,101 for employee 

water and coffee as not necessary to modify loans in HHF. 

The Kentucky agency charged TARP $1,309 for coffee and water. 

The Indiana agency charged TARP $1,558 for water. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 45 August 25, 2017

The North Carolina agency routinely purchased office beverages 

charged to TARP, as previously mentioned in this report. 

SIGTARP questions these costs as not necessary to modify loans. Other state 

agencies modified loans in HHF without these charges. Office beverages are 

not listed as a “permitted” expense under Treasury’s contract. SIGTARP

identified in the prior audit that NAHAC in Nevada charged TARP for water, 

which NAHAC justified because they work in the desert. Nevada homeowners 

also live in the desert. In this report, SIGTARP found that NAHAC charged an 

additional TARP $1,058 for coffee and water.

In addition to questioning the remaining costs for office beverages at three 

other agencies, SIGTARP found that these three state agencies’ charges to 

TARP also constituted waste because they charged TARP to pay a contractor 

to provide and deliver office beverages, which raised the cost even higher. 

The Illinois agency charged TARP $10,042 to pay a contractor to provide 

and deliver coffee, coffee supplies, and water, and to rent a water cooler and 

ice machine. 

The Georgia agency, who never charged TARP for parties or any employee 

food, charged TARP $6,813 to pay a contractor to provide and deliver office 

beverages. A Georgia official told SIGTARP, “As an agency practice, the 

Georgia Housing and Finance Authority provide beverages (water, coffee, tea, 

and hot cocoa) in its break rooms for all employees. Hardest Hit Fund dollars 

are used to purchase the break room beverages for Hardest Hit Fund staff 

located in the HomeSafe Georgia office.”

The Michigan agency charged TARP $5,321 to pay Clark Coffee Service and 

First Choice Coffee to provide and deliver coffee and water. 

Several State Agencies Charged TARP for Food and Beverages for 

Meetings with Lenders, Counselors, Legislative Staff or Others, or 

for Training

Earlier in this report, SIGTARP discussed that the North Carolina state 

agency and the Florida state agency charged TARP for food and beverages 

for meetings with lenders, counselors, legislative staff, and others. The North 

Carolina agency charged TARP $18,262 in charges to TARP for catering and 

other food and beverages in meetings with housing counselors.

The Ohio state agency did not charge TARP for any 

barbeques/parties/celebrations or employee food and beverages, but 

charged TARP $13,158 for catering, food, beverages, and other costs at 

events (meetings, training) with counselors. For example: 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 46 August 25, 2017

• On February 10, 2014, the Ohio agency charged TARP $2,032 for 

a breakfast and lunch for 60 people at the Columbus Zoo and 

Aquarium.

• On February 12, 2014, the Ohio agency charged TARP $1,974 for an 

event at the Cincinnati Zoo and Botanical Garden, charging TARP for 

breakfast and lunch, equipment, facility rentals, service charges, and 

zoo admission and parking for 35 people. 

• On February 13, 2014, the Ohio agency charged TARP $1,685 for 

breakfast and lunch for 80 people ($1,416) and service charges 

($269) at the Cleveland Metro Park Zoo.

• On September 27, 2013, the Ohio agency charged TARP $1,102 to 

Hauk Hospitality for breakfast, coffee, sandwiches, and service 

charges, and on April 16, 2014, the state agency charged TARP $925

to Two Caterers for lunch, coffee, and service fee.

The South Carolina agency did not charge TARP for any 

barbeques/parties/celebrations or employee food and beverages, but 

charged TARP $8,243 for food and beverages at annual meetings with 

legislative staff, as well as $4,492 for food and beverages at eight training 

events from March 2011 to April 2016 to train their business partners. 

The Mississippi agency charged TARP $2,399 for lunches with counselors 

during training, all in the year 2011.

Several state agencies charged TARP for lunch with Bank of America. The 

Alabama agency charged TARP $41 for “meals with Bank of America staff 

for discussion on HHF” in 2012. 

The Oregon agency charged TARP $42 for a lunch meeting at the Newport 

Seafood Grill with Bank of America staff. The Oregon agency also charged 

TARP $767 for pastries, coffee, and lunches for another meeting with Bank of 

America staff, meetings with legislative staff, and others.

The Michigan agency charged TARP $476 for coffee with lenders in Detroit

and for an open house. 

The Rhode Island agency charged TARP $780 for lunch, desserts, pastries, 

and fruit platters at meetings and training with lenders and counselors. 

The Washington, D.C. agency did not charge TARP for any 

barbeques/parties/celebrations, but had two charges totaling $482 for 

breakfast and snacks for training for 25 people. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 47 August 25, 2017

The Illinois agency charged TARP $233 in charges to TARP for food 

for “sponsor training,” and $243 for “food for sponsors” or lunch for 

counselors.

The Tennessee agency charged TARP $427 for food and beverages for 

training.

While meetings with counselors, lenders, and legislative staff may be 

reasonably related to modifying loans in HHF, that is not the standard. TARP 

providing food and beverages is not necessary, but instead more a matter of 

hospitality. In many cases, these meetings/trainings can have successful 

outcomes unrelated to HHF. To the extent that state agencies want to provide 

these food and beverages, state dollars should be used.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 48 August 25, 2017

SIGTARP Questions Nearly One Million 

Dollars in TARP Charges for Some State 

Agencies’ Employee Cash Bonuses/Awards/ 

Gifts and Payments to Former Employees That 

Violate Treasury’s Contract

SIGTARP questions nearly one million dollars in TARP charges of payments 

that violate Treasury’s contract to current or former employees, including 

the following.

Table 9: State Agency Charges to TARP for Employee Cash Bonus/Awards/Gifts 

Certificates and Payments to Former Employees 

State Agencies Type of Charge to TARP Amount of TARP Charge

Florida, Illinois, Indiana, 

Nevada, North Carolina, South 

Carolina, Arizona, and 

Kentucky

Employee cash 

bonuses/awards or Employee 

gift certificates/gifts

$332,022*

Nevada, Oregon, and 

California

Settlement payments/legal 

fees/other expenses for 

claims/disputes by former 

employees

$230,692*

Nevada, Kentucky, and Rhode 

Island

Severance payments to 

former/resigning/terminated 

employees

$132,911

Oregon, Rhode Island, Ohio, 

Mississippi, Tennessee

Unemployment payments to 

former employees $229,779

Total: $925,404

* Includes amounts identified in an earlier section of this report and/or SIGTARP’s Sept. 2016 audit.

Source: SIGTARP analysis of state agency provided data for the Hardest Hit Fund program.

None of these expenses were allowed under Treasury’s contract. They are 

not listed as permitted expenses in Treasury’s contract, which makes sense 

because these charges are not necessary to modify loans under HHF. All 

payments to former or resigning employees do not lead to modifying loans in 

HHF. Instead, they are either a state responsibility or a state agency’s choice. 

Payments of bonuses/awards/gifts to current employees are also not 

necessary to modify loans in HHF, as evidenced by the fact that 11 state 

agencies modified loans in HHF without charging TARP for employee 

bonuses/awards.

Eight State Agencies Charged TARP $332,022 for Employee 

Bonuses/Awards/Gifts, Which Violates Treasury’s Contract

Eleven state agencies modified loans in HHF without charging TARP for 

employee bonuses/awards/gifts, proving that those charges are not 

necessary under EESA. Eight state agencies charged TARP for employee 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 49 August 25, 2017

bonuses/awards/gifts in violation of Treasury’s contract as shown in 

Table 10.

Table 10: State Agency Charges to TARP for Employee Cash Bonus/Awards/Gifts 

a Amount discussed in an earlier section of this report.

b Includes $35,000 identified and discussed in an earlier section of this report, and $4,500 previously 

identified in SIGTARP’s Sept. 2016 audit.

Source: SIGTARP analysis of state agency provided data for the Hardest Hit Fund program.

TARP charges for bonuses/awards/gifts may be even higher if these states 

continued to pay these while charging them to TARP in subsequent fiscal 

years.

Although all bonuses/awards/gifts should have been disallowed under the 

Treasury contract, it was particularly egregious that underperforming state 

agencies charged TARP for employee bonuses/awards. For example, the 

Florida state agency charged employee bonuses/awards/gifts to TARP even 

though it has modified loans in HHF for only 21% of homeowners who 

applied. The Nevada state agency contractor NAHAC charged TARP for 

bonuses/awards/gifts despite having a 94% drop in the number of 

homeowners helped from 2013 to 2015, despite a great need in the state. 

The Arizona state agency charged TARP for bonuses even though it modified 

loans in HHF for only 25% of homeowners who applied.

In addition to bonuses/awards/gifts that state agencies in Florida and North 

Carolina charged TARP (discussed earlier in this report), the following state 

agencies charged TARP for employee bonuses/awards/gifts.

The Illinois state agency charged TARP nearly $100,000 in a one-year 

period to pay awards to 41 employees. The Illinois state agency told 

employees by letter in December 2012 that they would each receive a $500 

bonus in their next paycheck, another $1,000 7 months later, and another 

$1,000 5 months later in December 2013, as long as they remained 

employed. This resulted in unnecessary charges of $98,305 to TARP. This 

included charging TARP for 28 employees who received 3 retention bonuses 

State Agency Charged to TARP Type

Florida $107,410a Cash signing bonus for contractor,

Cash bonuses for top employees,

Gift cards

Illinois $98,305 Cash Retention Awards

Indiana $45,100 Cash bonuses for Director, Cash incentives for 

contractor managing program

Nevada $43,497b Cash signing bonus for CEO, Cash bonuses for 

CEO, Cash bonus

North 

Carolina $18,772a Cash bonuses, Gift cards, flowers, chocolates

South 

Carolina $16,040 Cash bonuses, State budgeted “proviso-budget”

Arizona $2,244 Cash incentive and cash retention bonus

Kentucky $654 Gift certificates and cash bonuses

Total $332,022
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 50 August 25, 2017

over a single year and 12 employees who received 2 retention bonuses 

over a single year. Additionally, the state agency charged TARP for a $4,805 

bonus paid to one employee on December 31, 2012. 

The Indiana state agency charged TARP $45,100, including charging TARP 

$15,500 in additional bonuses paid to a senior official three times in a 2- year 

period from 2015-2017 in increasing amounts. The Indiana state agency also 

charged to TARP $29,600 for 16 bonuses paid from June 2014 to November 

2016— including almost every month in 2014 and 2016—to a contractor 

running an HHF subprogram, in addition to regularly scheduled monthly 

payments. This contractor received these bonuses for standard work such as 

filing required reports with Treasury. While the contract called these 

payments “bonuses,” after SIGTARP initiated this audit, the Indiana state 

agency amended the contract to remove the word “bonus.” Changing the 

name of a bonus does not make it any more necessary to modify loans or 

demolish blighted houses.

The South Carolina state agency charged TARP $16,040 in bonuses. In 

2012, the state agency paid one employee a bonus of $3,000 and in 2014 paid 

one employee a bonus of $3,000. The state agency also paid 14 employees an 

$800 bonus in October 2015, because the state’s budget required this 

“proviso-bonus” for all state employees making less than $100,000. Given 

that this was required by the state budget, it should have been paid with 

state budgeted dollars, but the state agency charged it to TARP. As this is a 

state budget issue, it was not necessary to modify loans under HHF.

Kentucky Housing Corporation charged TARP $654 in bonuses. This 

included $100, which the state agency deemed TARP’s portion of an 

approximately $4,000 program where employees could award another 

employee with a VIP gift certificate generally ranging from $25 to $250 (with 

one gift certificate of $650). It also included $554, which the state agency 

deemed TARP’s portion of more than $27,000 in bonuses to 18 employees on 

November 15, 2015.

Recovered Taxpayer Dollars: After SIGTARP questioned state 

officials about bonuses, the Indiana state agency found three 

payments charged to TARP for bonuses that were related to a 

non-HHF program, and told SIGTARP that it was reimbursing 

TARP $2,000 for these payments. SIGTARP has not yet verified 

the reimbursement.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 51 August 25, 2017

SIGTARP found that the Arizona state agency, which has denied 

homeowners for the program at the highest rate of any other state (67%), 

charged TARP $2,244 for a bonus to one employee in January 2014. 

State Agencies in Nevada, Oregon, and California Charged TARP 

$230,692 in Settlements, Legal Fees, or Other Expenses for Claims 

by Former Employees and a Contractor, Which Are Not Necessary 

to Modify Loans in HHF

SIGTARP already reported in September 2016 that the Nevada state agency 

contractor NAHAC charged to TARP for lawyer fees to defend allegations by 

several former employees against allegations of discrimination. SIGTARP 

questioned the entire lawyer’s fees of $123,217.96 because the charges on 

these discrimination cases were block billed with other activities. SIGTARP 

also reported that NAHAC charged TARP $4,000 to settle one former 

employee’s allegations.35 SIGTARP also reported that NAHAC charged TARP 

$12,845.25 to pay its lawyers, a private investigator, and a computer forensic 

expert to retrieve and recover equipment from a terminated employee who 

had alleged discrimination and ethics violations. In conducting this audit, 

SIGTARP found that NAHAC also charged TARP $4,000 to settle another 

former employee’s discrimination claim.

The Oregon state agency charged TARP $29,592 to settle a former 

employee’s wrongful termination litigation,36 and $54,664 in legal fees 

related to settlement of claims of this employee and two other terminated 

employees.37

The California state agency charged TARP $2,373 to a contractor’s laid-off 

employee to avoid the cost of litigation.

None of these payments were necessary for loan modifications as 16 other 

state agencies were able to conduct modifications under HHF without 

charging TARP for payouts, or other expenses, to former employees for their 

 35 Treasury recovered the $4,000 based on SIGTARP’s recommendation. 36 Treasury identified this expense and requested reimbursement from the state agency. 37 The charges to TARP in Oregon could be higher as state officials told SIGTARP, “HHF dollars were used in this 

settlement to the extent OAHAC contributes to the pool through its indirect costs paid to Oregon Housing and 

Community Services.”

Recovered Taxpayer Dollars: During this audit, the agency 

found $9,752 in charges to TARP that were in error, which it 

reimbursed TARP. The Kentucky agency in May 2016 had 

reversed other payments for bonuses to employees charged to 

TARP, raising concerns over the state agency’s controls for 

charges to TARP.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 52 August 25, 2017

claims against the state agency or its employees. Former employees do 

not modify loans. These payments were the choice of the state agency, and 

therefore should be charged to the state agency, not TARP. These charges 

also constitute waste. Treasury’s contract requires state agencies to comply 

with all Federal, state, and local laws.

State Agencies in Nevada, Kentucky, and Rhode Island Charged 

TARP $132,911 for Severance Payments to Former Employees, 

Which Are Not Necessary to Modify Loans 

Although 16 state agencies did not charge TARP for severance payments to 

former employees, proving that severance payments are not necessary for 

loan modifications under HHF, 3 state agencies charged TARP $132,911 for 

severance payments, as shown in Table 11.

Table 11: Severance Payments Charged to TARP Through March 2017

State Severance Payments Charged to TARP

Nevada $71,106*

Kentucky $46,811

Rhode Island $14,994

Total $132,911

* Includes $20,875 identified in SIGTARP’s Sept. 2016 audit.

Source: SIGTARP analysis of state agency provided data for Hardest Hit Fund program.

The Nevada contractor NAHAC charged TARP $71,106 to pay severance to 

32 employees. One-third of the total ($20,875) was paid to NAHAC’s former 

CEO when the board terminated him in May 2016.38 NAHAC had such poor 

recordkeeping that they identified $39,904 in severance payments for 31 

former employees charged to TARP, but could not identify specific amounts, 

and then missed other records. SIGTARP reviewed the agency’s payroll 

records and found an additional $12,523 in severance payments to 13 

employees. SIGTARP also found the Nevada state agency paid severance 

totaling $2,140 to another employee that the agency had not reported to 

SIGTARP. NAHAC’s lack of recordkeeping and inability to provide detail for 

these payments to former employees bolsters SIGTARP’s prior 

recommendation that Treasury discontinue NAHAC’s involvement in the 

Hardest Hit Fund. 

The Kentucky state agency charged TARP $46,811 in severance to three 

former employees who left during a restructuring. 

The Rhode Island state agency charged TARP $14,994 in severance to three 

former employees in August 2013. 

 38 Treasury has not yet required the Nevada state agency to repay this amount to HHF.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 53 August 25, 2017

None of these payments were necessary to modify loans in HHF, as 

former employees do not modify loans. Any severance payments that the 

state agency decides to pay should be borne solely from state agency funds, 

not from TARP.

State Agencies Charged TARP to Pay $229,779 in Unemployment 

Payments to Former Employees, Which Are Not Necessary to 

Modify Loans in HHF

While 14 state agencies did not charge TARP for unemployment payments to 

former employees, 5 state agencies charged TARP $229,779, as set forth in 

Table 12.

Table 12: State Agencies Charging TARP for Unemployment Payments to 

Former Employees

State Agency Unemployment Payments to Former Employees

Oregon $79,742

Rhode Island $75,703

Ohio $63,432

Mississippi $5,343

Tennessee $5,558

Total $229,779*

* Dollars may not add due to rounding.

Source: SIGTARP analysis of the state agency provided data in Hardest Hit Fund program. 

Oregon Affordable Housing Assistance Corporation charged TARP 

$79,742 for unemployment benefits for 11 former employees.

Rhode Island Housing charged TARP $75,703 for unemployment benefits 

for 8 former employees after the state agency closed the program. 

The Ohio Housing Finance Agency charged TARP $63,432 for 

unemployment benefits for 17 former employees.

The Tennessee Housing Development Agency charged TARP $5,558 for 

unemployment benefits for three former employees.

The Mississippi Home Corporation charged TARP $5,343 for 

unemployment benefits for three former employees.

Recovered Taxpayer Dollars: In reviewing records for this audit, 

Rhode Island Housing found that it has mistakenly charged TARP 

$455 for unemployment benefits for an employee who had not 

worked on HHF.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 54 August 25, 2017

Unemployment payments are not necessary to modify loans in HHF, as 

former employees do not modify loans. Paying unemployment to former 

employees is a state responsibility, not a TARP responsibility. These 

expenses are only going to grow as many of these expenses coincided with 

layoffs or other reduction in force related to closing or winding down HHF 

programs in the state, which will happen again in future years.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 55 August 25, 2017

SIGTARP Found Rhode Island Housing 

Charged TARP $1,031,310 Including (1) “Rent” 

Backdated in 2015 for the Prior 3 Years When the 

Program Was Closed, as well as (2) a New 

Customer Center’s Build-Out Charges, Operating 

Expenses, and Online System Expenses that 

Include Non-HHF Use

In August 2012, Rhode Island Housing closed the Hardest Hit Fund office that 

TARP had paid to build out in 2010, sold the furniture TARP had paid for, and 

reduced staff to what one official referred to as “wind down staff.”

After Congress approved an additional $2 billion in TARP for the Hardest Hit 

Fund on December 2015, Treasury began a new wave of funding resulting in 

an additional $36 million in TARP dollars set aside for Rhode Island 

homeowners. 

SIGTARP questions $ $1,031,310 it identified that Rhode Island Housing 

charged TARP, including for 1) “rent” backdated in 2015 for the prior 3 years 

when the program was closed, as well as 2) a new customer center’s buildout charges, operating expenses, and online system expenses that include 

non-HHF use. The Rhode Island agency should, at a minimum, reimburse 

TARP for any portion of these expenses not related to HHF. Even under a 

method used by the agency to allocate some of these expenses to HHF, TARP 

was overcharged by at least $499,496. But the amount could be much 

greater. Therefore, SIGTARP questions the entire amount charged to TARP.39

SIGTARP Questions a $96,590 “Rent” Charge to TARP that Was 

Backdated in 2015 for Files and Wind-Down Staff in the Building 

Owned by the State Agency for the Prior 3 Years When the Hardest 

Hit Fund Closed, and the $2,200 Per Month the Agency Has 

Continued to Pay for that Space

SIGTARP found that although Rhode Island Housing did not initially charge 

TARP to store file cabinets or for rent for “wind-down” employees in the 

3 years after it closed the HHF office. In June 2015, Rhode Island Housing 

backdated a charge of $96,590 to TARP for this “rent,” which SIGTARP 

questions as not necessary to modify loans in HHF. 

 39 After SIGTARP questioned agency officials about these charges, SIGTARP discovered that the Rhode Island 

agency reimbursed TARP for some of these charges, totaling $37,363.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 56 August 25, 2017

SIGTARP found that Rhode Island Housing has continued to charge for 

these rental expenses, charging TARP an additional $47,798 through March 

2017, bringing the total amount the Rhode Island agency charged to TARP 

for file and employee space to $144,388.40

Although required to retain records, Rhode Island Housing could have 

scanned and stored the records electronically, but chose not to do so until 

just before June 2015. In addition, the wind-down staff may have worked on 

matters other than the Hardest Hit Fund during those three years. It would 

be excessive to pay “rent” to itself for space for “wind-down” staff for three 

years. The backdated charges also constitute waste.41

Rhode Island Housing Charged TARP 100% of $351,958 in BuildOut and Start-Up Costs for Its New Customer Center, Despite the 

Fact that It Is Also Used for Non-Hardest Hit Fund Work

SIGTARP found that Rhode Island Housing charged TARP 100% of 

$351,958.13 in build-out and start-up costs for a new customer center, even 

though it uses and will use the center for both HHF and its non-HHF 

HelpCenter. From June 2016 to May 2017, the percentage of homeowners 

visiting the center for Hardest Hit Fund programs was only 29%, versus 71% 

for non-HHF programs.

This center is the second built-out by Rhode Island Housing using TARP 

dollars. When Rhode Island Housing first received TARP dollars in 2010, 

Treasury permitted $274,253 in its contract for one-time, start-up expenses, 

which Rhode Island Housing used to build out a new location. Rhode Island 

Housing used the original center for only 2 years when the Hardest Hit Fund 

was opened in the state. 

When Treasury allocated new TARP dollars to Rhode Island homeowners in 

2016, Treasury’s amended contract listed zero in permitted one-time/startup expenses. SIGTARP identified this major charge to TARP in Rhode Island 

Housing’s “Miscellaneous” category of expenses in reports to Treasury.

Rhode Island Housing charged TARP $351,958 to renovate an existing 

building to build out the new customer center. For example, TARP was 

 40 These monthly charges likely have continued after that and could continue through the end of the HHF program 

for an additional $92,400 (an estimated $92,400 or $2,200 per month charge for 42 months beginning June 

2017 through December 2020). 41 The Government Accountability Office defines waste as, “the act of using or expending resources carelessly, 

extravagantly, or to no purpose,” in its Standards for Internal Controls in the Federal Government (the Green 

Book). GAO has also described waste as “...taxpayers do not receive reasonable value for their money in 

connection with any government-funded activity due to inappropriate acts or omissions by officials with 

control over or access to government resources.” Statement of David M. Walker, Testimony before the U.S. 

Senate Committee on Appropriations, March 11, 2008. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 57 August 25, 2017

charged $54,000 in building renovations, including demolishing a 

kitchen in the front of the building, and building a new kitchen in the back of 

the building complete with new cabinets, countertops, dishwasher, 

refrigerator, and microwave, and converting what had been racquetball 

courts into office space. TARP was charged more than $42,000 to install 

cables and program a new fiber optic network, and more than $35,000 to 

connect the servers. The agency charged TARP more than $53,000 to 

purchase new computer equipment, and more than $30,000 for a new 

copier/printer. Rhode Island Housing charged all of this to TARP even though 

non-HHF services were provided.

The agency also charged TARP to buy new furniture ($99,096) including 

cubicles and 76 chairs, and hired a furniture “architect” to design the 

furniture in the space ($2,337). SIGTARP questions the agency’s purchase of 

new furniture totaling $104,156.50 when it could have used an existing 

$114,442 vendor credit received in 2013 when it sold the prior furniture 

charged to TARP.42 This reckless spending constitutes a waste and abuse of 

TARP. 

Rhode Island Housing has charged TARP for all of the remaining $335,056 in 

build-out and start-up costs. Rhode Island Housing should reimburse TARP 

at a minimum for 42% of these charges ($140,724), representing the portion 

charged for non-TARP programs that are not necessary to modify loans 

under HHF, and therefore, violate Treasury’s contract.

SIGTARP Questions the Rhode Island State Agency Charging 

TARP 100% of $116,219 in Rent and Other Operating Costs for the 

New Customer Center When It Is Also Used for Non-Hardest Hit 

Fund Programs

SIGTARP found that Rhode Island Housing charged TARP 100% of $116,219 

in rent and other operating expenses for the customer center, even though 

the center covers non-HHF programs. 

 42 SIGTARP found that a credit balance still existed with the company in April 2016 for $89,318.12, which raises 

the question of where the rest of the credit went and why TARP did not receive use of that credit.

Recovered Taxpayer Dollars: After asking state officials about 

these charges, the Rhode Island agency decided to split costs 

for only $16,902 of these charges for a lease expense (split 58% 

to TARP and 42% non-HHF) and reimbursed TARP only $7,099. 

SIGTARP did not validate this allocation. However, Treasury 

should do so given that 71% of all homeowner walk-ins were

seeking non-HHF services.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 58 August 25, 2017

In addition to the operating costs SIGTARP questions above, SIGTARP also 

questions the Rhode Island Housing charge to TARP of $81,086 for 

advertising and 11 months of monthly $4,500 retainer fees to DK 

Communications. This included paying $6,160 for “we’ve moved” brochures, 

which would not make sense to charge to TARP because HHF had been 

closed in the state for 3 years. The monthly retainer is in addition to other 

design, advertising, and printing services also provided by DK 

Communications. Some of these expenses are listed in the “Miscellaneous” 

category in reporting to Treasury, making it hard to find. Paying a $4,500 

monthly retainer is not necessary to modify loans in HHF. Even under a 

method used by the agency to allocate other expenses to HHF, TARP was 

overcharged by at least $34,056 for these costs.

The Rhode Island State Agency Overcharged TARP $124,416.67 for 

a New Homeowner Application System That Is Also Used for NonHardest Hit Fund Programs

SIGTARP questions $247,659 for a new online homeowner application 

system that Rhode Island Housing purchased in 2016 and charged 100% to 

TARP. Even under a method used by the agency to allocate other expenses to 

HHF, TARP was overcharged by at least $104,017 (42% of the total), which 

Rhode Island Housing should reimburse.

SIGTARP also questions $90,000 Rhode Island Housing charged to TARP for 

the second year of maintenance on the system, which had a total cost of 

$120,000. Rhode Island Housing charged 75% (or $90,000) of this cost to 

TARP, rather than the 58% allocation it used for other expenses. Under the

latter allocation, the agency would have paid 42% of the total cost ($50,400) 

using non-HHF funds, instead of $30,000. Rhode Island Housing should 

reimburse at least the $20,400 it overcharged to TARP.

Recovered Taxpayer Dollars: After questioning Rhode Island 

state officials about these charges, Rhode Island Housing 

reimbursed TARP $30,264.30, representing 42% of only a 

portion ($72,059) of the operating expenses. This represents an 

immediate cost savings from SIGTARP’s oversight and this audit. 

However, it is not 42% of the full operating costs charged to 

TARP. Even using that allocation, Rhode Island Housing should 

also reimburse TARP at least an additional $18,548 for the 

remaining costs, including $14,175 for 42% of the salary paid to 

an Administrative Assistant who provides “administrative 

support to the Help Center and Hardest Hit program offices,” 

but whose salary was fully charged to TARP.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 59 August 25, 2017

In Late 2015, 2 Years After the Washington, 

D.C., Agency Shut Down HHF to New 

Homeowners, It Charged TARP a Quarter of a 

Million Dollars Paid to a Contractor for “Storage 

and Data Access” of the Shuttered Homeowner 

Application System, Rather Than Mitigate 

Storage Costs 

SIGTARP questions $258,333 charged to TARP by the Washington, D.C., 

agency in October 2015 to Counselor Direct, an online homeowner 

application system, to pre-pay 5 years of “Storage space and data access” 

after the HHF site shut down in 2013 because the program was closed to new 

homeowners. 

The D.C. agency paid Counselor Direct $44,000 each year for an annual 

license fee for “Storage space and data access.” This included recordkeeping 

for the 748 homeowners assisted, and reporting on open cases. Treasury 

requires agencies to keep HHF records for 3 years (2020 before HHF was 

extended in 2016). In October 2015, when Counselor Direct was raising fees, 

the D.C. agency charged TARP more than a quarter of a million dollars for 5 

years of pre-paid fees to Counselor Direct. Most concerning is the D.C. 

official’s explanation to SIGTARP that the agency’s budget was “very limited,” 

as it had already committed 75% of its available HHF funds but had to make 

them last. The agency was not trying to make TARP funds last for 

homeowners, but for a contractor.

SIGTARP questions these charges because they were not necessary to modify 

loans. In addition, they constitute waste. Rhode Island Housing stored HHF 

records for free in a file room for several years after it closed its site to new 

homeowners, eventually scanning and storing them electronically. The D.C. 

agency could have been converting data to a different electronic format (e.g., 

pdfs), presumably at very little cost. TARP should not be paying exorbitant 

fees to Counselor Direct of $50,000 a year to store data and access records. 

TARP is at risk of waste and significant overcharging if state agencies do not 

mitigate costs to TARP for storage and data access once they close the 

program to new homeowner applications. Many of the state agencies use 

Counselor Direct as their online application system. Multiplied by 10 or more 

state agencies, TARP could be paying Counselor Direct $500,000 or higher 

each year for data storage. HHF should not be a windfall for Counselor Direct 

or any contractor. Treasury should require state agencies to mitigate costly 

data storage and access, especially as state agencies look toward closing their 

HHF programs in coming years. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 60 August 25, 2017

State Agencies in South Carolina, Nevada, 

Michigan, Rhode Island, Ohio, and California 

Charged TARP $609,374 for Cars for Two 

Executives, “Free Parking” Paid by TARP, or a 

Monthly Payment to Employees and Contractors 

for Parking and Bus Passes

SIGTARP found that state agencies in South Carolina, Nevada, Michigan, 

Rhode Island, Ohio, and California charged TARP $609,374 for a car for two 

executives, “free parking,” or payments to cover transportation costs (Table 

13). 

Table 13: Charges to TARP for Cars or Other Transportation Perquisite 

State Agency Charge to TARP

Transportation Perquisite 

Charged to TARP

Nevada (NAHAC) $11,000a $500 Monthly car allowance for CEO to 

drive Mercedes Benz

South Carolina

$16,241

$13,250 car lease + 

$2,991 mileage

Executive’s exclusive use of leased 

“TARP” car for 4 years + payment for 

mileage with missing logs

South Carolina $4,386b “TARP” car no longer used after 

executive left, missing mileage logs,

non-HHF use, and errors

Ohio $14,079

Portion of vehicle fleet charged to TARP 

based on number of hours worked on 

HHF

Michigan $330,575 “Free parking”

Rhode Island $114,596

$105 per month benefit given to all 

employees to defray parking and 

transportation costs

Ohio $113,853 Bus pass or parking for all employees 

($90-$110 per month)

California $4,644 Parking for contractors

Total $609,374* a Charge identified in SIGTARP’s September 9, 2016, audit. The Nevada agency repaid Treasury $8,000 of 

the $11,000. 

b Includes $3,067 subsequently reimbursed during SIGTARP’s onsite visit.

* Dollar amounts may not add up due to rounding.

Source: SIGTARP analysis of state agency-provided data in the Hardest Hit Fund.

TARP Cars

As SIGTARP previously reported, the Nevada state agency NAHAC charged 

TARP $11,000 ($500 a month) to its CEO, who was later terminated, to drive 

his Mercedes Benz. SIGTARP identified this as waste, particularly in light of 

the fact that the agency had all but stopped helping homeowners in HHF, 

despite continued need in the state and availability of TARP dollars.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 61 August 25, 2017

The South Carolina state agency charged TARP $13,250 for an 

executive’s exclusive use of a “TARP” car for more than 4 years (50 months), 

plus payments for mileage costs that would sometimes equal just as much as 

the monthly lease. SIGTARP found that the South Carolina state agency 

lacked effective controls to mitigate the risk of overcharging TARP, with no 

policy, no management review of fleet expenses charged to TARP, and 18 

months of missing mileage records. 

SIGTARP also found several instances where the South Carolina agency 

charged TARP for the use of cars for non-HHF purposes, including at least 

$445.37 in lease and mileage charges. Due to the agency’s lack of controls 

and missing mileage records, there is a risk that TARP may have been 

charged even more. The South Carolina agency also overcharged TARP $30 

due to a mileage calculation error.

TARP continued to pay the lease on the TARP car for 4 months after the 

executive left. Mileage logs were missing on this and another car, leading to 

additional questioned costs of $3,835. 

The Ohio state agency charged TARP $14,079 for partial use of state cars. 

The state agency’s methodology does not show that this charge was 

necessary to modify loans in HHF. The state agency allocated a percentage of 

its vehicle fleet expense to TARP based on the number of timesheet hours 

that employees worked on HHF. While the percentage was often very small, 

this methodology was not based on the mileage of state cars for HHF specific 

work.

There should be no “TARP cars,” or even “Partial TARP cars.” These charges 

violated Treasury’s contract because they were not necessary to modify 

loans in HHF. Other states did not charge TARP to provide a car or car 

allowance to an executive. TARP charges should be limited. Any official travel 

by an employee’s personal car should be reimbursed through standard 

mileage reimbursement, but only with internal controls, such as supporting 

documentation to prove the travel was necessary to modify loans in HHF and 

with management review. Any official travel by a state car should be 

calculated by mileage on a state vehicle for driving that was necessary to 

modify loans in HHF, with supporting documentation and management 

review.

Recovered Taxpayer Dollars: After questioning South Carolina 

officials about these charges, the state agency said it would 

reimburse $3,067 to TARP. This is an immediate savings to 

taxpayers as a result of this audit.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 62 August 25, 2017

Cash for Parking and “Free Parking”

The Rhode Island state agency charged TARP $114,596 to pay all 

employees an additional $105 per month ($1,260 per year) that can, but does 

not have to, be used to defray parking and transportation costs. This is the 

equivalent of cash.

The Ohio state agency charged TARP $113,853 to buy parking or a bus pass 

for all employees. The Ohio state agency charges TARP $90-$110 per month 

for parking or a bus pass for every employee, full or part-time. 

The Michigan state agency charged TARP $330,575 to give all employees 

the perk of free parking. The Michigan state agency decided at a Board of 

Directors meeting in February 2011 to provide “free parking” for employees 

working on the Hardest Hit Fund. The parking would not be “free” to 

taxpayers funding HHF as the board voted to use TARP dollars to pay this 

employee perk.

The California state agency, who did not charge TARP for employee “free 

parking,” charged TARP $4,644 for parking for contractors.

When a state agency decides to provide a perquisite such as cash for parking, 

free parking, or a bus pass, it should be paid out of state dollars, not TARP 

dollars. SIGTARP questions these charges as violating Treasury’s contract 

because they are not necessary to modify loans in HHF. Other state agencies 

do not charge TARP for these perquisites. Parking and bus passes are not 

listed as “Permitted Expenses” in Treasury’s contract. These charges could 

have been provided to homeowners for assistance, rather than state 

employees, or to reduce the cost of this program on taxpayers. 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 63 August 25, 2017

Conclusion

State agencies will spend $1.1 billion in administrative expenses to distribute 

$8.5 billion in TARP’s Hardest Hit Fund. Every dollar spent on administrative 

expenses is one dollar less for homeowner assistance or one dollar saved for 

taxpayers. At the beginning of the program, then-Treasury Secretary Timothy 

Geithner determined that Treasury’s authority under the Emergency 

Economic Stabilization Act did not allow TARP to pay for unnecessary state 

agency expenses, including legal aid or counseling programs. In Treasury’s 

contracts with state agencies, TARP dollars spent on expenses must be 

“necessary” to modify homeowner loans through HHF, which is the authority 

in EESA for HHF. To give state agencies notice as to which expenses Treasury 

considered “necessary,” Treasury included in each contract a list of 

“Permitted Expenses.” 

SIGTARP is conducting a series of audits on state agency expenses in HHF, 

initially prompted by poor performance and rising costs in HHF in Nevada, 

and, subsequently, by a request from Chairman Charles Grassley. In 

SIGTARP’s first audit in this series released in September 2016, SIGTARP 

identified $8.2 million in wasted TARP dollars in HHF in Nevada on expenses 

like parties, gifts, excessive rent, and legal costs to defend against Federal 

investigations and lawsuits. The chief executive officer of the Nevada agency 

was given a monthly allowance of $500 to drive a Mercedes, and was paid 

$20,000 in severance after he was fired— all charged to TARP.

In this second report in the series, SIGTARP identifies nearly $3 million in 

state agency expenses that violate Treasury’s contract, including TARP 

dollars spent on barbeques, parties and celebrations, food and beverages, 

employee bonuses and gifts, payments to former employees, employee gifts, 

employee gym memberships, and employee transportation perquisites. This 

also includes $258,333 for avoidable data storage costs, and a 2016 build-out 

of a state customer center that was charged 100% to TARP despite most 

people using the center for non-TARP programs. This is the second center 

TARP paid for in that state. SIGTARP found no consistency in charging TARP 

for expenses. Some state agencies were far more egregious than others. In 

addition to violating Treasury’s contract, the most egregious wasted TARP 

dollars. 

The North Carolina Housing Finance Agency was particularly egregious in 

charging TARP for unnecessary expenses, including:

• $10,000 for employee parties, celebrations, and outings, for example:

o 4 barbeques with Treasury employees with 50, 60 or 90 people 

in attendance: $2,587
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 64 August 25, 2017

o Steak and seafood dinner for 18 employees when HHF 

opened in 2010 (ribeye, prime rib, grilled tuna, salmon, shrimp 

and grits, and a gratuity): $734

o Barbeque for employees working on Treasury audit: $660

o Barbeque after reaching a milestone on the number of people 

helped: $290

o Holiday lunches, holiday breakfasts, employee farewell ice 

cream party, birthday cake

o Family picnic with piñatas and candy: $348

o Valentine’s Day celebration with red velvet cake, flowers, and a 

“V-day Mailbox”:$277

• Employee gifts including:

o Land’s End shirts with the agency logo: $1,113

o Visa gift cards, other gift cards, flowers, balloons, chocolates: 

$715

• Gym memberships for six employees at $30 per month each: $8,880

• $30,00 in food and beverages for employees, and sometimes as 

hospitality with others

o Employees regularly charged TARP for restaurant meals, and 

to deliver food to (or carry food into) the office, for example:

 Seafood lunches at restaurants were regularly charged as 

“working lunches”

 One employee charged TARP for a “working breakfast” at 

IHOP and a “working lunch,” ordering seared tuna and crab 

cakes on the same day

 Two employees even charged $4.72 for Dunkin Donuts 

coffee as a “working breakfast”

 Even a single water bottle bought at CVS for $1.81 was 

charged to TARP

o In a $5,590 dinner to celebrate housing counselors, agency 

employees and counselors ate tilapia, chicken, and pork chops 

drank virgin cocktails at a cost of $400; finished it off with mini 

cupcakes at a cost of $200; and paid a $770 gratuity, all 

charged to TARP
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 65 August 25, 2017

• $35,000 in costs for an annual housing counselor conference and 

other counselor events

• $18,000 in employee cash bonuses

The North Carolina agency had a culture of treating TARP as a windfall. TARP 

dollars were 38 times the total grants the agency previously received. Calling 

TARP a “game changer,” the agency regularly charged TARP for unnecessary 

expenses that other state agencies were not charging. Many of these charges 

also constitute waste.

Some of these charges by agencies in North Carolina and other states were 

low in dollar amount. However, every taxpayer dollar matters. Spending 

decisions on small purchases set the tone for spending decisions on larger 

ticket items. In addition to state agencies in Nevada and North Carolina, other 

state agencies charged TARP for parties (an employee retirement party in

Illinois), picnics (a picnic with food trucks in Kentucky), and employee 

celebrations (employee appreciation day in Michigan). This is not what 

Congress intended in authorizing TARP or Treasury intended in its contracts.

These charges constitute waste.

In 2016, after Congress approved an additional $2 billion for HHF, employees 

at two state agencies became the first recipients of these TARP dollars in 

celebrations. The North Carolina agency charged TARP for a $50 gift card for 

an employee in recognition of getting new HHF funding. The Illinois Housing 

Development Authority charged TARP $549 at a pizza restaurant to celebrate 

getting new HHF funds and an employee’s upcoming wedding.

The Alabama agency also threw a barbeque for Treasury employees and 

state agency employees, charging hundreds to TARP for the barbeque and 

catered lunches with Treasury employees. The Kentucky and Oregon 

agencies also charged TARP for catered lunches with Treasury employees. 

In conducting this review, SIGTARP applied Treasury’s contracts and 

Treasury’s public interpretation of what is “necessary,” each of which state 

agencies have had notice of since 2010. Treasury’s contract limited expenses 

to only those expenses “necessary to carry out the services.” The “services” 

were the specific HHF programs defined in “service schedules” attached to

the contract. Treasury even included a list of “Permitted Expenses” in the 

contract that could be necessary to carry out the services. State agencies also 

knew that, in 2010, then-Treasury Secretary Geithner turned down multiple 

state requests to spend TARP on legal aid or counseling programs because it 
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 66 August 25, 2017

was not authorized by EESA.43 Treasury’s contracts applied a strict test, 

as explained by Treasury’s then-general counsel, that all expenses must be 

necessary to “facilitate loan modifications to prevent avoidable foreclosures,” 

the EESA authority for HHF. Treasury applied two criteria: (1) that legal aid 

services frequently would result in outcomes other than loan modifications, 

and accordingly, they are not-by-definition necessary or essential to loan 

modifications in HHF; and (2) that if borrowers can obtain loan modifications 

without the legal services, they were not necessary expenses. Applying this 

test to each of the expenses that SIGTARP questions in this report leads to 

the conclusion that these are unnecessary expenses.

It is critically important to limit spending to what Congress intended when it 

authorized TARP. In 2010, Treasury’s then-general counsel George Madison 

stated in a memorandum that became public: 

Here, one could argue that a general statutory purpose of EESA 

is to prevent foreclosures and that any expenditure reasonably 

related to that purpose are permissible. We believe that such an 

interpretation sweeps too broadly. It would authorize an almost 

unlimited number and variety of government expenditures – i.e. 

anything that is reasonably related to preventing foreclosures. It 

also would render meaningless the express provisions in EESA 

that together provide authority for the Hardest Hit Fund: Section 

101 authorizes the Secretary to purchase “troubled assets from 

any financial institution,” and 109(a) authorizes the Secretary to 

use “loan guarantees and credit enhancements to facilitate loan 

modifications to prevent avoidable foreclosures. Lastly, such an 

interpretation would be contrary to how Treasury implemented 

EESA.

SIGTARP identified a number of state agency expenses that may be 

reasonably related to foreclosure prevention, but violate Treasury’s contract 

because they are not necessary to modify loans in HHF. Each of these 

expenses is not listed in Treasury’s list of Permitted Expenses. Each of these 

expenses frequently could have successful outcomes other than in HHF, and 

for each there were state agencies that modified loans in HHF without 

charging TARP for the expense. 

• Food and beverages of more than $100,000 (including in North 

Carolina), sometimes for their own employees, other times as 

hospitality for others were charged to TARP. The California state 

 43 Secretary Geithner wrote public letters to 35 Members of Congress explaining Treasury’s analysis of 

appropriations law and Treasury’s interpretation of the authority provided to Treasury under EESA. 

Subsequently, some of these Members introduced bills in the House and Senate to allow this TARP spending. 

The bills did not receive the votes necessary to become law. In its contracts, Treasury limited TARP dollars for 

counseling to file intake, decision costs, successful file, and key business partners ongoing.
UNNECESSARY EXPENSES CHARGED TO THE HARDEST HIT FUND

SIGTARP-17-002 67 August 25, 2017

agency, which is allocated the most TARP dollars in HHF, and the 

Arizona state agency, each modified loans in HHF without charging 

TARP for food and beverages.

• Unlike other state agencies, three state agencies charged TARP for 

employee transportation perquisites. These perks included $330,000 

in “free parking” for Michigan state employees charged to TARP, 

$114,000 charged to TARP for Rhode Island agency employees to each 

receive an extra $105 each month in their paycheck to defray parking 

costs, and $113,000 to buy every Ohio agency employee a $90-110 

monthly bus pass or parking.

• Unlike other state agencies, the South Carolina agency charged TARP 

for a senior official to have exclusive use of a state leased car for more 

than 4 years. 

• Nearly $1 million in cash bonuses or employee gifts by eight state 

agencies, settlements or litigation with former employees who had 

wrongful termination or discrimination complaints by three state 

agencies, severance payments to resigning or former employees by 

three state agencies, and unemployment payments to former 

employees by five state agencies, were all charged to TARP. To the 

extent that these state agencies are either required or choose to pay 

these expenses, they should do so using state funds as they are not 

necessary to modify loans in HHF. Other state agencies modified loans 

in HHF without charging TARP for these payments.

Particularly egregious was the Nevada state agency that paid more than 

$43,000 in bonuses (including severance) to the CEO who was fired by the 

board, despite the fact that homeowner admissions to HHF had dropped 

94%. Also egregious was more than $100,000 in bonuses to Florida agency 

employees, including bonuses to senior Florida officials that doubled and 

tripled after SIGTARP issued an audit in December 2015 on the state agency’s 

severe underperformance in HHF. The executive director of the Florida 

agency was asked to resign by the governor in December 2016 for statefunded bonuses and a lavish dinner, while Floridians were waiting for 

foreclosure prevention assistance. Bonuses at both agencies constitute waste.

SIGTARP also questioned two large state expenses. Lumped into the 

“Miscellaneous” category of Permitted Expenses, SIGTARP found that the 

Rhode Island agency had charged TARP $$351,958 in 2016 to build out and 

start up a new customer center, including building a new kitchen and new 

furniture. TARP had already paid for the build-out of an office in 2010.44 In 

 44 In its 2010 contract, Treasury included “permitted expenses” of $274,253 for one-time, start-up expenses, 

which Rhode Island Housing used to build out a new location. Rhode Island Housing used the location for only 2

years when HHF was open in the state.
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SIGTARP-17-002 68 August 25, 2017

2016, when Treasury allocated new TARP dollars to the Rhode Island 

agency, Treasury did not provide for any further permitted expenses for 

“one-time/start-up” expenses such as “building,” “equipment,” and 

“technology.” The agency charged 100% of build-out/start-up costs, and then 

$116,219 in operating expenses to TARP despite the center also being used 

for non-HHF services. From June 2016 to May 2017, the percentage of 

homeowners visiting the center for HHF programs was only 29% versus 71% 

for non-HHF programs. Additionally, even though the Rhode Island agency 

had not charged TARP for any space for files and staff in their own building 

for 3 years when the program was closed, in 2015 the agency back-dated a 

“rent” charge of $96,590. 

Additionally, in 2015, the Washington, D.C. agency charged TARP $258,333 in 

avoidable storage costs. The Washington, D.C. agency paid this amount to 

Counselor Direct, an online application system contractor, for 5 years of data 

storage when the program was closed to homeowner applications. With 

many of the agencies contracting with Counselor Direct, taxpayers could end 

up paying $50,000 per month or more for each state agency for years of data 

storage. These costs should be mitigated, as TARP was not meant to be a 

windfall for one IT contractor. 

Taxpayers have paid more than they needed to for state agency expenses in 

HHF and state agencies have spent TARP dollars not as Congress and 

Treasury intended. SIGTARP found an elevated risk of fraud, waste, abuse, 

and overpayment because state agencies are lumping unnecessary expenses 

into “Permitted Expense” categories, limiting transparency, and shielding 

these expenses from oversight.

Treasury did not hold state agencies accountable to the requirement in 

Treasury’s contract that expenses must be necessary for the specific services 

in HHF. In 2012, GAO reported on rising administrative expenses in HHF, 

warning, “Treasury’s rigorous oversight of spending decisions throughout 

the life of the program will be critical to helping ensure that funds are spent 

as intended.”45 Treasury regularly reviewed state agency expenses, but only 

on a small sample basis with minimum dollar thresholds. These reviews 

appear to be focused on compliance with Federal cost principles (OMB A-87). 

Cost principles do not authorize Federal spending, but instead, as Treasury’s 

contract states, serve as an additional limitation.46 For example, after 

SIGTARP’s 2016 audit identified waste in HHF including a $20,000 severance 

payment to the fired CEO in Nevada, Treasury officials did not recover this 

payment, despite that it was not necessary to modify loans in HHF. Treasury 

 45 See GAO, “Further Actions Needed to Enhance Assessments and Transparency of Housing Programs,” July 2012, 

http://www.gao.gov/assets/600/592707.pdf. 46 Treasury’s contract states, “...the administrative expenses necessary to carry out the services (the “Permitted 

Expenses.”)...Additionally, all administrative expenses paid with HHF program funds shall be accounted for and 

are subject to OMB Circular A-87.”
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officials appear to not even be applying Treasury’s own test under the 

contracts—whether the expense was necessary to modify loans.

Responsible stewardship by state agencies and rigorous oversight are 

needed to protect taxpayers. With more than $1 billion in taxpayer dollars on 

the line, state agencies must limit their expenses to only those necessary to 

modify loans in HHF. That has always been what Treasury’s contracts 

require. The expenses SIGTARP questions in this report are out of $733 

million already spent, and SIGTARP will conduct future audits of spent TARP 

dollars. Treasury should recover every dollar in unnecessary charges to 

TARP identified by SIGTARP in this report.

This report should deter future unnecessary spending when state agencies 

can see that other state agencies modify loans in HHF without charging TARP 

for these same expenses. However, the responsibility to stop TARP spending 

on unnecessary expenses rests with Treasury. SIGTARP can only make 

recommendations to Treasury and cannot recover TARP dollars spent in 

violation of the contract or force Treasury to right the ship. To ensure that 

TARP dollars are used only as Congress and Treasury intended, and that 

taxpayers do not spend more than is necessary, Treasury should enforce the 

terms of its contracts for the $373 million that Treasury has allocated for 

future state expenses in HHF. 
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Recommendations

1. To prevent further unnecessary spending and waste in the 

Hardest Hit Fund, Treasury should enforce its contracts with the 

19 state agencies, including the schedule of “Permitted Expenses,” 

so that TARP dollars for Hardest Hit Fund administrative expenses 

are only used for expenditures necessary to facilitate a loan 

modification or demolish a blighted house, as authorized under 

EESA and Treasury’s contracts.

2. To prevent further unnecessary expenditures in the Hardest Hit 

Fund and bring transparency and improved oversight, Treasury 

should perform more rigorous oversight of the 19 state agencies 

“Permitted Expenses” by applying its own test and criteria to 

determine whether an expense is necessary to modify a loan or 

demolish a blighted house, as authorized under EESA and 

Treasury’s contracts.

3. To enforce its contract with the Nevada Affordable Housing 

Assistance Corporation (the Nevada state agency’s contractor)

Treasury should apply its own test and criteria to recover the 

remaining $8.1 million of waste and abuse that SIGTARP identified 

previously that NAHAC has not yet repaid. 

4. To prevent further unnecessary expenditures in the Hardest Hit 

Fund and bring transparency and improved oversight, Treasury 

should prohibit the 19 state agencies from lumping unnecessary 

expenses in the “Permitted Expenses” category and require the 

state agencies to disclose details of any expenses in the 

“Miscellaneous” category in their quarterly financial reports to 

Treasury. 

5. To enforce its contract with the 19 state agencies and prevent 

further waste and abuse of Hardest Hit funds Treasury should 

determine the amount of unnecessary expenditures charged to 

TARP for: meals and catered barbeques with Treasury, 

parties, barbeques, restaurant outings, gifts, gym 

memberships, meals and refreshments, and cash bonuses.

6. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $4,179 of questioned costs that eight state agencies North 

Carolina ($2,587), Oregon ($430), Mississippi ($369), Alabama 

($341), Washington D.C. ($202), Kentucky ($159), Michigan ($77), 

and Illinois ($14) charged TARP for meals and catered 

barbeques with Treasury employees, as none of these expenses 
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SIGTARP-17-002 71 August 25, 2017

are necessary to modify a loan or demolish a blighted house 

and, therefore, violate Treasury’s contract. 

7. To enforce its contract with the North Carolina agency and prevent 

further waste and abuse of Hardest Hit Funds, Treasury should

recover at least the amount of $104,991 that the North Carolina

agency charged to TARP for: 

(a) $8,219 in employee parties, celebrations and outings;

(b) $1,965 for gift certificates and other gifts, including$681 for 

employee recognition awards;

(c) $8,880 in gym memberships; 

(d) $18,091 for employee cash bonuses;

(e) $14,124 for local employee breakfasts, lunches, and dinners 

unrelated to travel, and sometimes with external parties; 

(f) $53,712 in costs at events with housing counselors, including 

$18,262 in food and beverages. 

8. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $106,774 of questioned costs that the Florida state agency 

charged TARP in bonuses, as well as the $636 in gift certificates

to employees and the $454 in a barbeques and lunches with 

employees and external parties, as none of these expenses are 

necessary to modify a loan or demolish a blighted house and, 

therefore, violate Treasury’s contract.

9. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $35,000 of questioned costs that the Nevada contractor 

charged TARP for employee bonuses paid to an ousted Nevada 

Chief Executive Officer, and a remaining $19 deposit to reserve a 

location for a 2016 picnic not yet reimbursed, as none of these 

expenses are necessary to modify a loan or demolish a blighted 

house and, therefore, violate Treasury’s contract.

10. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

$3,287 in unreimbursed charges by the following state agencies to 

TARP for barbeques, parties, picnics, celebrations, and 

outings, as none of these expenses are necessary to modify a loan 

or demolish a blighted house and, therefore, violate Treasury’s 

contract: Illinois ($792), New Jersey ($749), Michigan ($701), Rhode 

Island ($573), Nevada ($225), Oregon ($150), and Kentucky ($97).
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11. To enforce its contract with state agencies and prevent 

further waste and abuse of Hardest Hit Funds, Treasury should 

recover the $7,412 charged by the following state agencies to 

TARP for food and beverages for employees unrelated to 

travel, as none of these expenses are necessary to modify a loan or 

demolish a blighted house and, therefore, violate Treasury’s 

contract: Illinois ($4,779), Nevada ($1,604), Oregon ($608), 

Alabama ($157), Michigan ($144), and Kentucky ($120). 

12. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $26,101 charged by the following state agencies to TARP for 

employee water, coffee, and an ice machine, as none of these 

expenses are necessary to modify a loan or demolish a blighted 

house and, therefore, violate Treasury’s contract: Illinois ($10,042), 

Georgia ($6,813), Michigan ($5,321), Indiana ($1,558), Kentucky 

($1,309), and Nevada ($1,058).

13. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $32,619 charged by the following state agencies to TARP for 

food and beverages for meetings with lenders, counselors, 

legislative staff or others, or for training, as none of these 

expenses are necessary to modify a loan or demolish a blighted 

house and, therefore, violate Treasury’s contract: Ohio ($13,158),

South Carolina ($12,735), Mississippi ($2,399), New Jersey ($836),

Oregon ($809), Rhode Island ($780), Washington D.C. ($482), Illinois 

($476), Michigan ($476), Tennessee ($427), and Alabama ($41).

14. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $166,340 of questioned costs that the following state agencies 

charged to TARP for employee bonuses/awards/gifts, as none of 

these expenses are necessary to modify a loan or demolish a 

blighted house and, therefore, violate Treasury’s contract: Illinois 

($98,305), Indiana ($45,100), South Carolina ($16,040), Nevada 

($3,997), Arizona ($2,244), and Kentucky ($654). 

15. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $166 of questioned costs that the Alabama agency charged 

TARP for a gift card and fruit baskets and another $55 that the 

Michigan agency charged TARP for gifts to the state agency 

employees.
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16. To enforce its contract with state agencies and prevent 

further waste and abuse of Hardest Hit Funds, Treasury should 

recover the $90,629 of questioned costs that the following state 

agencies charged TARP for settlement payments/legal 

fees/other expenses for claims/disputes by former 

employees, as none of these expenses are necessary to modify a 

loan or demolish a blighted house and, therefore, violate 

Treasury’s contract: Oregon ($84,256), Nevada ($4,000), and 

California ($2,373).

17. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $112,036 of questioned costs that the following state agencies 

charged to TARP for severance payments to 

former/resigning/terminated employees, as none of these 

expenses are necessary to modify a loan or demolish a blighted 

house and, therefore, violate Treasury’s contract: Nevada 

($50,231), Kentucky ($46,811), and Rhode Island ($14,994).

18. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the $229,779 of questioned costs that the following state agencies 

charged to TARP for unemployment payments to former 

employees, as none of these expenses are necessary to modify a 

loan or demolish a blighted house and, therefore, violate 

Treasury’s contract: Oregon ($79,742), Rhode Island ($75,703), 

Ohio ($63,432), Mississippi ($5,343), and Tennessee ($5,558).

19. To prevent further waste and abuse of Hardest Hit Funds, 

Treasury should recover the $96,590 of questioned costs that the 

Rhode Island state agency charged TARP as a backdated rent 

payment in the building that it owned for storing files and for 

wind-down staff 3 years after it closed the Hardest Hit Fund office, 

since paying rent to “itself” for space is excessive and constitutes 

waste. 

20. To prevent further waste and abuse of Hardest Hit Funds, 

Treasury should recover the additional $47,798 of wasteful 

spending that the Rhode Island state agency charged TARP 

through March 2017 for rent to “itself” in the amount of $2,200 

monthly plus any additional payments since that time and 

going forward and put an estimated $92,400 of funds to better use 

(an estimated $92,400 or $2,200 per month charge for 42 months 

beginning June 2017 through December 2020). 
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SIGTARP-17-002 74 August 25, 2017

21. Treasury should determine the total non-HHF portion of 

the new customer center start-up expense that the Rhode 

Island state agency charged to TARP and recover at least the 

$140,724 (42% of $351,958, less a reimbursement of $7,099) 

identified by SIGTARP, as these expenses exceed the portion that 

should be allocated to the Hardest Hit Fund according to the 

Rhode Island agency’s allocation methodology.

22. Treasury should determine the total non-HHF portion of the new 

customer center operating expense that the Rhode Island state 

agency charged to TARP and recover at least the $18,548 (42% of 

$116,219, less a reimbursement of $30,264) identified by 

SIGTARP, as these expenses exceed the portion that should be 

allocated to the Hardest Hit Fund according to the Rhode Island 

agency’s allocation methodology.

23. Treasury should determine the total non-HHF portion of the new 

customer center marketing and advertising expense that the 

Rhode Island state agency charged to TARP and recover at least 

the $34,056 (42% of $81,086) identified by SIGTARP, as these 

expenses exceed the portion that should be allocated to the 

Hardest Hit Fund according to the Rhode Island agency’s 

allocation methodology.

24. Treasury should determine the total non-HHF portion of the new 

homeowner application system expense for year 1 that the 

Rhode Island state agency charged to TARP and recover at least 

the $104,017 (42% of $247,659) identified by SIGTARP, as these 

expenses exceed the portion that should be allocated to the 

Hardest Hit Fund according to the Rhode Island agency’s 

allocation methodology.

25. Treasury should determine the total non-HHF portion of the new 

homeowner application system expense for year 2 that the 

Rhode Island state agency charged to TARP and recover at least 

the $20,400 (42% of the total $120,000 paid, representing the 

non-HHF portion less $30,000 paid directly with non-HHF funds)

identified by SIGTARP, as these expenses exceed the portion that 

should be allocated to the Hardest Hit Fund according to the 

Rhode Island agency’s allocation methodology.

26. To prevent waste, SIGTARP reiterates its previous 

recommendation that Treasury should prohibit all state agencies 

from charging the Hardest Hit Fund 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 
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SIGTARP-17-002 75 August 25, 2017

Fund. Treasury should require that each state agency has a 

cost-sharing methodology approved by Treasury that accurately 

reflects the sharing of overhead of 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. 

27. To improve the efficiency and effectiveness of TARP and prevent 

further unnecessary expenditures in the Hardest Hit Fund, 

including for data storage and access when programs have wound 

down, Treasury should hold state agencies accountable for 

implementing risk management practices that identify, assess, 

mitigate and report on risks to avoid overpaying exorbitant fees, 

including to contractors.

28. Treasury should recover $258,333 that the Washington, D.C. 

agency charged TARP for its multi-year, pre-paid 2015 contract 

with Counselor Direct for Hardest Hit Fund data storage and 

access.

29. To prevent further waste and abuse, Treasury should conduct 

oversight beyond the limited reviews being conducted by 

Treasury Compliance staff of all state HFA expenses charged to 

HHF to determine whether the charges are necessary for loan 

modifications or to demolish a blighted house, and if so, whether 

an expense fell with the cost principles under OMB Circular A-87 

and take appropriate corrective action within 60 days of the 

completion of the oversight review to obtain reimbursement of all 

non HHF expenses, non-supported expenses, and expenses not 

necessary to provide loan modifications. 

30. To enforce its contract with state agencies and prevent further 

waste and abuse of Hardest Hit Funds, Treasury should recover 

the unreimbursed amount of $595,307 charged by the following 

state agencies to TARP for cars for two executives, “free parking”, 

or a monthly payment to employees and contractors for parking 

and other transportation costs, including for non-HHF use: South 

Carolina ($17,560), Ohio ($127,932), Michigan ($330,575), Rhode 

Island ($114,596), and California ($4,644).
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Management Comments and SIGTARP’s 

Response

Treasury responded by saying they appreciate SIGTARP’s oversight and 

thorough review of the administrative expenses charged to TARP and agree 

that Treasury should recover the amounts expended in violation of program

requirements.
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Appendix A – Objective, Scope, and 

Methodology

SIGTARP performed this performance 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. 

After SIGTARP identified wasteful spending by a Nevada contractor in the 

Hardest Hit Fund,47 Senator Charles Grassley asked SIGTARP to audit 

spending on administrative expenses in the program. Because the 

expenses spanned 19 state agencies over 7 years, SIGTARP sent a survey 

to each agency on categories of expenses not likely to be allowed under 

Treasury’s contract, requesting that responses be certified under penalty 

of perjury. SIGTARP’s request for a certification under perjury resulted in 

state agencies catching expenses that had been charged to TARP, and 

reimbursing TARP for those expenses—a positive savings for taxpayers. 

The audit’s objective was to review the use of TARP funds for 

administrative expenses, operating expenses, or other spending by the 19 

state housing finance agencies (and/or their contractors or partners) 

who receive Hardest Hit Fund dollars. The scope of this audit covered a 

review of certain administrative expenses charged to TARP in the Hardest 

Hit Fund since its inception in 2010 to identify questioned costs or costs 

constituting waste or abuse.48

To accomplish the objective of the audit, SIGTARP applied GAO standards 

to determine waste and abuse. A questioned cost means a cost that is 

questioned because of an audit finding: (a) Which resulted from a 

violation or possible violation of a statute, regulation, or the terms and 

conditions of a Federal award, including for funds used to match Federal 

funds; (b) Where the costs, at the time of the audit, are not supported by 

adequate documentation; or (c) Where the costs incurred appear 

unreasonable and do not reflect the actions a prudent person would take 

in the circumstances.49

As part of its analysis of administrative expenditures, SIGTARP examined 

whether each charge violated Treasury’s contract as unnecessary to 

modify loans (or demolish blighted houses) in the Hardest Hit Fund. In 

 47 See SIGTARP Audit Report: “Waste and Abuse in the Hardest Hit Fund in Nevada,” 9/9/2016, 

https://www.sigtarp.gov/Audit%20Reports/HHF%20Nevada_090916.pdf, accessed 1/13/2017. 48 For this report, SIGTARP is not including other expenses such as travel, conferences, professional expenses, 

marketing, IT, salaries, or counseling (except for a limited number of items identified in the course of the 

audit). SIGTARP is continuing to review these expenses. 49 2 CFR § 200.84 – “Questioned Cost.”
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that determination, SIGTARP considered: (1) criteria articulated by 

Treasury’s Office of General Counsel; (2) Treasury’s list of “Permitted 

Expenses” in its HHF contracts with state agencies; and (3) Treasury’s 

and state agencies reporting on their performance in modifying loans.

SIGTARP obtained, reviewed and analyzed data from the housing finance 

agencies in 18 states and the District of Columbia participating in the 

Hardest Hit Fund program, to include the agencies’ certified survey 

responses, Hardest Hit Fund general ledgers, certain invoices and 

receipts for selected administrative expenses based on a risk assessment 

of expenditures, quarterly performance and financial reports submitted 

to Treasury, Treasury’s compliance reviews, and other relevant 

correspondence and memoranda. SIGTARP also, as appropriate, 

conducted on-site and telephonic interviews with state agency officials 

and analyzed state agency policies and procedures and certain 

administrative contracts or agreements. 

SIGTARP conducted this performance audit from October 2016 through 

August 2017 in Washington, D.C., and also performed on-site visits at 

selected housing finance agencies, including those in Nevada, North 

Carolina, Rhode Island, South Carolina, and 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 and state agencies to provide 

relevant documentation, including certified responses to SIGTARP’s 

survey, general ledgers, and supporting documentation. To the extent 

that the documentation provided to SIGTARP by these entities did not 

reflect a comprehensive response to SIGTARP’s documentation requests, 

SIGTARP’s review may have been limited. SIGTARP’s audit program was 

based on an assessment of risks in the Hardest Hit Fund and, although it 

identified some questioned costs and expenditures constituting waste or 

abuse, our work was not designed to identify all occurrences of such 

transactions.
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Use of Computer-Processed Data

To perform this audit, SIGTARP relied on general ledger data provided by 

state agencies, and on quarterly performance and financial data provided 

by those agencies and by Treasury. SIGTARP did not validate the accuracy 

of the data. 

Internal Controls

To address the reporting objective in this audit, SIGTARP performed a 

limited review of internal controls by interviewing state agency officials 

and reviewing Treasury compliance reports and state agency policies and 

procedures.

Prior Coverage

SIGTARP has covered the HHF program in six previous reports:

• On April 12, 2012, SIGTARP released an audit report titled, 

“Factors Affecting Implementation of the Hardest Hit Fund 

Program.” 

• On April 21, 2015, SIGTARP released an audit report titled, 

“Treasury Should Do Much More to Increase the Effectiveness of 

the TARP Hardest Hit Fund Blight Elimination Program.” 

• On October 6, 2015, SIGTARP released an evaluation report titled, 

“Factors Impacting the Effectiveness of Hardest Hit Fund Florida.” 

• On June 16, 2016, SIGTARP released an audit report titled, 

“Treasury’s HHF Blight Elimination Program Lacks Important 

Federal Protections Against Fraud, Waste, and Abuse.” 

• On September 9, 2016, SIGTARP released an audit report titled, 

“Waste and Abuse in the Hardest Hit Fund in Nevada.” 

• On January 11, 2017, SIGTARP released an evaluation report titled, 

“Improving TARP’s Investment in American Workers.”

SIGTARP also issued an alert letter on December 14, 2015, that addressed 

a risk related to diverting TARP funds to demolish lived-in properties, 

which could undermine the success of HHF’s Blight Elimination Program.
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Appendix B – Acronyms and Abbreviations

CEO Chief Executive Officer

EESA Emergency Economic Stabilization Act

GAO Government Accountability Office

HFA Housing finance agency

HHF Housing Finance Agency Innovation Fund for the Hardest Hit 

Housing Markets (also “Hardest Hit Fund”)

NAHAC Nevada Affordable Housing Assistance Corporation

OMB Office of Management and Budget

SIGTARP Office of the Special Inspector General for the Troubled Asset 

Relief Program

State agency Housing finance agency of any of the 18 states and the District 

of Columbia participating in the Hardest Hit Fund

TARP Troubled Asset Relief Program

Treasury U.S. Department of the Treasury
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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.

In addition to the contacts named above, Caroline Ashe, Vonda Batts, 

Leslye Burgess, Craig Meklir, Dennis Lee, Amber Lyons, Yvonne Monyei, 

Andrew Sinclair, Tracy Davis-Ross, Corrin King, Rodney Purnell, William 

Saunders, and Kamruz Zaman made significant contributions to all 

aspects of this report. 

Luis Sustache-Davila, Yusuf House, Sylvester Tang, and Lisa Rose-Pressley

provided additional technical assistance.
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Appendix D – Management Comments
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SIGTARP-17-002 August 25, 2017

SIGTARP Hotline

If you are aware of fraud, waste, abuse, mismanagement, or misrepresentations associated with the Troubled 

Asset Relief Program, please contact SIGTARP.

By Online Form: www.SIGTARP.gov 

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 www.SIGTARP.gov.