Semiannual Report Semiannual Report Semiannual Report

to Congress to Congress to Congress

U.S. Department of Housing and Urban Development

Office of Inspector General

October 1, 2008, through March 31, 2009
Profile of Performance

Audit profile of performance

for the period October 1, 2008, through March 31, 2009

Results

Recommendations that funds be put to better use

Recommended questioned costs

Collections from audits

Administrative sanctions

Investigation profile of performance

for the period October 1, 2008, through March 31, 2009

Results

Funds put to better use

Recoveries/receivables

Indictments/informations

Convictions/pleas/pretrial diversions

Civil actions

Administrative sanctions

Personnel actions1

Arrests2

Search warrants

Subpoenas issued

Hotline profile of performance

for the period October 1, 2008, through March 31, 2009

Results

Funds put to better use

Recoveries/receivables

1

 Personnel actions include reprimands, suspensions, demotions, or terminations of the employees of Federal, State, or

local governments or of Federal contractors and grantees, as the result of Office of Inspector General (OIG) activities.

In addition, this reporting category includes actions by Federal agencies to suspend, debar, or exclude parties from

contracts, grants, loans, and other forms of financial or nonfinancial transactions with the government, based on

findings produced by OIG.

2

 Included in the arrests is our focus on the nationwide Fugitive Felon Initiative.

$1,638,500,723

This reporting period

$110,885,379

$144,108,065

5

This reporting period

$72,643,348

$91,209,379

561

414

52

616

34

771

75

529

This reporting period

$2,465,727

$374,025
iii

The U.S. Department of Housing and Urban Development Office of

Inspector General (HUD OIG) is proud to present its Semiannual Report

to the Congress for the first half of fiscal year 2009. HUD OIG

employees--auditors, agents, attorneys, and support staff--are filled with

a new spirit of commitment in their mission on behalf of the taxpayers

of the United States. Meetings with my staff around the country have

revealed a deep understanding that the very economic vitality of the

country depends on the work we do here to aid in our Nation's recovery.

Consequently, we have become immersed in the operations of the

Department, specifically activities affecting the housing industry. Our

people have engaged in a strong forward outreach to the States'

comptrollers and auditors, advising them of their part in the American

Recovery and Reinvestment Act, the Housing and Economic Reform

Act, and the Neighborhood Stabilization Program. We are gearing up

to closely monitor stimulus spending and ensuring that the recipients

have the capacity to successfully use the funding for its intended

purposes.

During this reporting period, we had $72.6 million in funds put to better use, questioned costs of

$110.8 million, and $91.5 million in recoveries and receivables while closing 636 cases, a 9 percent

increase over the last reporting period. This exceptional work has had an impact on reducing fraud

and the misuse of taxpayer dollars, and it is with gratitude that I acknowledge the HUD OIG staff who

worked so hard to achieve these results and their associated deterrent effect.

Our high-profile audits and investigations have once again paralleled the Department's strategic

initiatives. HUD OIG staff continues to work with the Department to improve its effectiveness and as

a result, has developed and implemented better and more effective audit recommendations. Agents

from our Office of Investigation have enhanced their partnership with the Department in outreach

programs to warn the public of areas of potential fraud in HUD programs.

HUD OIG has successfully combated fraud in the Federal Housing Administration (FHA)

single-family mortgage insurance program and the Government National Mortgage Association (Ginnie

Mae). An example is the owners of Marathon Mortgage of Detroit, Michigan, who were ordered to

repay $21.5 million to Ginnie Mae when we prosecuted defendants who used the funds they obtained

from terminated or satisfied mortgages for personal investments.

We are deeply immersed in fighting the effects of the mortgage industry crisis. We have joined the

aggressive efforts of the U.S. Department of Justice and our partners in law enforcement in the

nationwide strategy to combat mortgage fraud. I have testified to Congress about potential fraud and

abuse, and my staff has been working diligently with congressional staff on legislation to tighten laws

to protect the FHA and borrowers. We are proud that our efforts have produced new laws that have

recently been signed by the president.

With all of this, we continue our vigorous audit activities. During this reporting period, our audits

shined a light on the San Diego Block Grant program and recommended solutions to Chicago Section

8 subsidized housing problems that we uncovered. We asked HUD to take appropriate actions to

Inspector General Message

Inspector General Message
iv

Inspector General’s Message

Inspector General Message

tighten regulations governing Native American housing to prevent fraud and abuse and to ensure that

FHA-approved lenders comply with federal requirements for FHA loans.

We do all of this while maintaining our vigilance in hurricane-related and flood-related disaster

relief, post-September 11 redevelopment efforts, Section 8 rental subsidy fraud, and any activity

involving waste or abuse in HUD programs or operations.

None of these achievements would have been possible without the staff of HUD OIG, and for them

I am truly thankful.

Kenneth M. Donohue

Inspector General
v

Audit Charts

Audit reports issued by program

Single-family housing, 13%

Multifamily housing, 10%

Public and Indian housing, 36%

Community planning and

development, 30%

Hurricane relief oversight, 3%

Other programs, 8%

Monetary benefits identified by program

Single-family housing, 0%

Multifamily housing, 3%

Public and Indian housing, 6%

Community planning and

development, 3%

Hurricane relief oversight, 1%

Other programs*, 87%

Monetary benefits identified in millions of dollars

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

$0 Single-family

housing

Public and

Indian

housing

$3.9 $50.6

Multifamily

housing

Community

planning and

development

Hurricane

relief

oversight

Other

programs*

$107.8 $56.7 $7.5

$1,523.0

Audit Charts

* Other programs include CFO and CIO related audits

* Other programs include CFO and CIO related audits
vi

Investigation Charts

Investigative cases opened by program area (total: 608)

Investigative recoveries by program area (total: $91,209,379)

Single-family housing, 23% (142)

Public and Indian housing, 53% (320)

Multifamily housing, 8% (46)

Community planning and

development, 12% (74)

Other, 4% (26)

Single-family housing, 59%

($54,204,565)

Public and Indian housing, 10%

($9,110,822)

Multifamily housing, 1% ($1,009,812)

Community planning and

development, 6% ($5,156,194)

Other, 24% ($21,727,986)

Investigation Charts
vii

Acronyms List

AFGE American Federation of Government Employees

AIGA Assistant Inspector General for Audit

AIGI Assistant Inspector General for Investigation

ARIGA Assistant Regional Inspector General for Audit

ASAC Assistant Special Agent in Charge

CDBG Community Development Block Grant

CPD Office of Community Planning and Development

DHAP Disaster Housing Assistance Program

DHS U.S. Department of Homeland Security

DOJ U.S. Department of Justice

EIV Enterprise Income Verification

FEMA Federal Emergency Management Agency

FFI Fugitive Felon Initiative

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FHAP Fair Housing Assistance Program

FHEO Office of Fair Housing and Equal Opportunity

FISMA Federal Information Security Management Act

FSS Family Self-Sufficiency

FY fiscal year

GAO U.S. Government Accountability Office

Ginnie Mae Government National Mortgage Association

GPRA Government Performance Results Act

HECM Home equity conversion mortgages

HERA Housing and Economic Recovery Act (HERA) of 2008

HOME HOME Investment Partnerships Program

HUD U.S. Department of Housing and Urban Development

IAA Interagency agreement

IG Inspector General

IOI Identity of interest

IRS Internal Revenue Service

IT Information technology

NAHASDA Native American Housing Assistance and Self-Determination Act of 1996

NAHRO National Association of Housing and Redevelopment Officials

Acronyms List

Acronyms List
viii

Acronyms List

NCDF National Center for Disaster Fraud

OA Office of Audit

OI Office of Investigation

OIG Office of Inspector General

OMB Office of Management and Budget

PFCRA Program Fraud Civil Remedies Act

PHA Public housing agency

PIH Office of Public and Indian Housing

REAP Resource Estimation and Allocation Process

RESPA Real Estate Settlement Procedures Act

RIGA Regional Inspector General for Audit

SA Special Agent

SAC Special Agent in Charge

SBA Small Business Administration

SEMAP Section Eight Management Assessment Program

SFA Senior Forensic Auditor

SHP Supportive Housing Program

SSA Senior Special Agent

SSA Social Security Administration

SSN Social Security number

TEAM Total Estimation and Allocation Mechanism

U.S.C. United States Code

USMS United States Marshals Service

USPS United States Postal Service

VA U.S. Department of Veterans Affairs

Acronyms List
ix

Table of Contents

Executive Highlights 1

Chapter 1 - HUD’s Single Family Housing Programs 7

Audits 8

Investigations 13

Chapter 2 - HUD’s Public and Indian Housing Programs 23

Audits 24

Investigations 34

Chapter 3 - HUD’s Multifamily Housing Programs 51

Audits 52

Investigations 57

Chapter 4 - HUD’s Community Planning and Development Programs 61

Audits 62

Investigations 69

Chapter 5 - Disaster Relief Oversight 73

Introduction and Background 74

Audits 75

Investigations 78

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline 89

Audits 90

Investigations 93

OIG Hotline 94

Chapter 7 - Outreach Efforts 97

Chapter 8 - Review of Policy Directives 111

Enacted Legislation Related to Single-Family Housing 112

Proposed Rules 112

Chapter 9 - Audit Resolution 113

Audit Reports Issued before Start of Period with No Management Decision 114

Significant Revised Management Decisions 115

Significant Management Decision with Which OIG Disagrees 116

Federal Financial Management Improvement Act of 1996 117

Appendix 1 - Audit Reports Issued 119

Appendix 2 - Tables 125

Appendix 3 - Index 145

HUD OIG Operations Telephone Listing 149

Table of Contents

Table of Contents
x

The specific reporting requirements as prescribed by the Inspector General Act of 1978, as amended

by the Inspector General Act of 1988, are listed below:

Source/Requirement Pages

Section 4(a)(2)-review of existing and proposed legislation and regulations. 112

Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to 1-95, 112

the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with respect to 7-95

significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation described in Appendix 2,

previous semiannual report on which corrective action has not been completed. Table B

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 7-95

prosecutions and convictions that have resulted.

Section 5(a)(5)-summary of reports made on instances in which information or No Instances

assistance was unreasonably refused or not provided, as required by Section 6(b)(2)

of the Act.

Section 5(a)(6)-listing of each audit report completed during the reporting period and Appendix 1

for each report, where applicable, the total dollar value of questioned and unsupported

costsand the dollar value of recommendations that funds be put to better use.

Section 5(a)(7)-summary of each particularly significant report and the total dollar value 7-95

of questioned and unsupported costs.

Section 5(a)(8)-statistical tables showing the total number of audit reports and the Appendix 2,

total dollar value of questioned and unsupported costs. Table C

Section 5(a)(9)-statistical tables showing the total number of audit reports Appendix 2, Table D

and the dollar value of recommendations that funds be put to better use by

management.

Section 5(a)(10)-summary of each audit report issued before the commencement Appendix 2,

of the reporting period for which no management decision had been made by the Table A

end of the period.

Section 5(a)(11)-a description and explanation of the reasons for any No Instances

significant revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with which the 115

Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the Federal Financial 117

Federal Financial Management Improvement Act of 1996.

Reporting Requirements

Reporting Requirements

Reporting Requirements

2 Executive Highlights

HUD Strategic Goal: Increase Homeownership Opportunities

OIG Strategy: Contribute to the reduction of fraud in single-family insurance programs

through

- Audits uncovering single-family and loan origination abuse

- Audits of the U.S. Department of Housing and Urban Development's (HUD) internal policies to

determine whether controls are adequate

- National strategy for single-family mortgage fraud task forces

- Outreach to industry and consumer groups and the Department

Highlights: Results or impact of significant OIG work

- Audits of four Federal Housing Administration (FHA) single-family mortgage lenders found page 9

that lenders did not follow HUD requirements when underwriting loans and performing

quality control procedures

- HUD did not implement a cohesive partial claims process to ensure that partial claims were page 11

processed in a timely manner

- Audit of Government National Mortgage Association's (Ginnie Mae) internal controls over page 12

its "match to terminated process" for mortgages and related documentation of the Mortgage

Backed Securities Information System

- Florida, Pennsylvania, and Texas mortgage fraud schemes cause HUD losses in excess of $13 page 14

million

- Fraudulent appraisals trigger $ 4 million in HUD losses page 14

- False identities and Social Security numbers generate millions in HUD losses page 17

- More than 500 mortgage and real estate professionals attend a mortgage fraud presentation page 101

in Virginia

Emerging Issues: Areas of OIG interest

- American Recovery and Reinvestment Act funding for tax credits

- Dramatic increase in lenders/brokers/issuers seeking to do business with FHA and Ginnie Mae

- FHA's ability and capacity to oversee its expanding market share

- FHAs refinancing of riskier loans than it has historically had in its portfolio

- Foreclosure rescue fraud

- Home Equity Conversion Mortgage program

- Implementation of Secure and Fair Enforcement for Mortgage Licensing Act of 2008

- Loan limitation increases open new metropolitan areas with unknown risks

Strategic Initiative 1
3

Executive Highlights

HUD Strategic Goal: Promote Decent Affordable Housing

OIG Strategy: Contribute to the reduction of erroneous payments in rental assistance

programs through

- Audits of Section 8 Housing Choice Voucher program activities

- Investigative initiatives involving corruption in the management of troubled public housing authorities

and multifamily developments

- Section 8 fraud initiatives in each Office of Inspector General (OIG) region

- Public Housing Fugitive Felon and Sex Offender Initiatives - locate and remove

- Public and Department-wide outreach initiatives

Highlights: Results or impact of significant OIG work

Strategic Initiative 2

- Indianapolis Housing Agency failed to meet HUD's lease-up thresholds for Section 8 page 25

project-based units, resulting in 1,569 households not being housed and $8.7 million in

funds not used to provide decent, safe, and sanitary housing

- More than 79 percent of East St. Louis Housing Authority's Section 8 units materially failed page 28

to meet HUD's housing quality standards

- HUD's policies allowed tribal housing authorities to redirect and abuse about $40 million page 33

in rent revenue per year from Native American Housing and Self-Determination Act of

1996-assisted low-rent program units

- Indian housing developer found liable in U.S. Bankruptcy Court proceeding page 35

- Former East Haven Housing Authority executive director and her husband steal more than page 35

$397,000

- Fake landlord produces almost $300,000 for housing specialist page 35

- San Bernardino Section 8 tenants illegally obtained more than $330,000 in housing assistance page 40

- Section 8 tenant jailed for possession of child pornography page 49

- HUD has not implemented recommendations calling for changes to the performance-based page 53

contract, which could result in payments of up to $1.9 million for services not performed

- Housing fraud schemes and prosecutions presented to 250 multifamily property managers page 105

Emerging Issues: Areas of OIG interest

- HUD's oversight of performance-based contract administrators

- Landlord fraud

- Public housing corruption and multifamily mismanagement

- Rental assistance fraud initiatives targeting public housing agencies (PHA) in receivership or on the

HUD troubled list

Executive Highlights
4

Executive Highlights

HUD Strategic Goal: Strengthen Communities

OIG Strategy:

- Promote integrity, efficiency, and effectiveness of programs

- Contribute to the reduction of fraud, waste, and abuse through

Strategic Initiative 3

- Audits of the Community Development Block Grant (CDBG), Supportive Housing Program, and HOME

Investment Partnerships program

- Audits of disaster activities

- Investigative initiative involving corruption in the administration of State or local community planning

and development programs in each OIG region

- Hurricane relief fraud in HUD CDBG-funded programs

- Public dissemination of HUD OIG activities and outreach activities with State and local government

agencies

Highlights: Results or impact of significant OIG work

- City of San Diego failed to properly administer its CDBG funds, resulting in more than page 63

$1.8 million in ineligible and $11 million in unsupported costs

- City of Durham, NC, did not administer $1.3 million in CDBG funds in accordance with page 63

HUD requirements

- Chief financial officer pleads guilty to embezzling more than $183,000 in Emergency Shelter page 70

Grant funds

- New Brunswick housing preservation and rehabilitation director sent to prison for accepting page 70

bribes from contractors

- Gulfport mayor and wife indicted for allegedly making false statements and committing page 79

theft of government funds

- Hurricane relief fraud involving millions in CDBG funding for homeowners pages 79-83

- HUD homeless and Supportive Housing programs described for more than 50 Louisiana page 87

officials and nonprofit representatives

- An overview of the HUD Neighborhood Stabilization program presented to more than 275 page 105

grant administrators

Emerging Issues: Areas of OIG interest

- American Recovery and Reinvestment Act funding and the Neighborhood Stabilization program

- Gulf Coast hurricane assistance fraud

- Homeless and Emergency Shelter Grants

Executive Highlights
5

Executive Highlights

HUD Strategic Goal: Embrace High Standards of Ethics, Management, and

Accountability

OIG Strategy:

- Be a relevant and problem-solving advisor to the Department

- Contribute to improving HUD's execution and accountability of fiscal responsibilities

 through

Strategic Initiative 4

- Audits of HUD's financial statements

- Audits of HUD's information systems and security management

- Implementation of the U.S. Department of Justice Procurement Fraud Task Force at HUD

- FedRent data match operation - identifying Federal employees who fraudulently receive housing

assistance

Highlights: Results or impact of significant OIG work

- Marathon Mortgage owner and manager swindle $20 million from Ginnie Mae page 20

- HUD's Enterprise Income Verification System discovers U.S. Postal Service employees page 47

fleecing Chicago area housing authorities

- Recommendation that HUD seek $1.4 billion in offsets against PHAs' excess unusable funding page 91

held in net restricted asset accounts

- Identified $122.9 million in excess unexpended funds that could be deobligated and put to page 91

better use

- Recommendation to FHA to continue to modernize its information systems page 91

- Recommendation to strengthen Ginnie Mae's monitoring and management controls in regard page 91

to the Mortgage-Backed Securities program

Emerging Issues: Areas of OIG interest

- Continued modernization and enhancement of HUDs information systems

- Contractor fraud reporting under Federal acquisition reporting

- Issuer accountability in loan portfolio defaults in Ginnie Mae Mortgage-Backed Securities program

- Mortgage crisis impact on soundness of FHA fund

Executive Highlights

8

The Federal Housing Administration’s (FHA) single-family programs provide mortgage insurance

to mortgage lenders that, in turn, provide financing to enable individuals and families to purchase,

rehabilitate, or construct homes. In addition to the audits and investigations described in this chapter,

the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG),

has conducted numerous outreach efforts (see chapter 7, page 98).

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Chapter 1: HUD’s Single-Family Housing Programs

* This does not include disaster relief audits. See chapter 5 for these reviews.

Chart 1.1: Percentage of OIG single-family housing audit reports

during this reporting period

Region 1 - 0%

Region 2 - 11%

Region 3 - 11%

Washington, DC - 22%

Region 4 - 0%

Region 5 - 0%

Region 6 - 22%

Regions 7/8 - 34%

Regions 9/10 - 0%

Region 11 - (N/A)*

Audit

Chapter 1 - Single-Family Housing Programs

Page 9

Page 10

Page 11

Page 12

Key program results Questioned costs Funds put to better use

Audit 9 audits $753,000 $1.9 million

Our

focus

- Mortgagees, loan correspondents, and direct endorsement lenders

- Review of the asset control area program

- Review of HUD's single-family partial claims collection process

- Review of Government National Mortgage Association internal

 control process
9

Chapter 1: HUD’s Single-Family Housing Programs

Mortgagees, Loan Correspondents, and Direct Endorsement Lenders

Audits to uncover single-family lenders and loan origination abuses continued to be a priority

during this semiannual period. Lenders are targeted for audit through the use of data mining

techniques, along with prioritizing audit requests from outside sources. During this period, the U.S.

Department of Housing and Urban Development's (HUD) Office of Inspector General (OIG) reviewed

four Federal Housing Administration (FHA) single-family mortgage lenders. The following section

illustrates the audits conducted in the single-family mortgage lender area.



HUD OIG audited CitiMortgage, Incorporated, in St Louis, MO, to determine whether CitiMortgage

followed HUD requirements for underwriting loans and performing its quality control program for

single-family production.

CitiMortgage did not properly underwrite 20 of the 60 defaulted loans reviewed. These loans had

material underwriting deficiencies that affected the insurability of the loans. In addition, CitiMortgage

did not meet HUD's quality control requirements.

OIG recommended that HUD (1) require CitiMortgage to indemnify HUD against future losses and

reimburse HUD for loans that have already resulted in losses; (2) verify that CitiMortgage implements

adequate controls that allow managers to identify, mitigate, and prevent underwriting problems; and

(3) ensure that CitiMortgage implements a revised quality control plan that complies with HUD

requirements. (Audit Report: 2009-KC-1001)



HUD OIG audited FHA loans originated by CTX Mortgage's Overland Park, KS, branch office to

determine whether CTX Mortgage followed HUD requirements for (1) borrower eligibility and

creditworthiness and property eligibility when underwriting loans and (2) developing a written

quality control plan.

CTX Mortgage did not follow HUD's requirements when underwriting 12 of 23 FHA loans reviewed.

In addition, CTX Mortgage's written quality control plan did not contain all HUD-required elements.

OIG recommended that HUD (1) require CTX Mortgage to indemnify HUD for 12 loans with unpaid

principal balances totaling more than $1.2 million and (2) ensure that CTX Mortgage revises its quality

control plan to fully comply with HUD's requirements. (Audit Report: 2009-KC-1003)



HUD OIG audited Allied Home Mortgage Capital Corporation in Houston, TX, a nonsupervised loan

correspondent, to determine the validity of a hotline complaint that Allied operated its branches in

violation of HUD requirements.

Allied did not fully follow HUD's branch office requirements. It (1) required branch managers to

personally enter into certain contractual agreements, such as office space leases, equipment

contracts, and utility arrangements, at all five branches reviewed; (2) did not consistently pay rental,

utility, and telephone expenses at all five branches; (3) requested that a former employee use

personal funds to cover branch operating losses; and (4) hired an ineligible employee to originate

FHA-insured single-family mortgages.

Chapter 1 - Single-Family Housing Programs
10

Chapter 1: HUD’s Single-Family Housing Programs

OIG recommended that HUD require Allied to (1) immediately discontinue its practices related to

leases/agreements for all branch offices; (2) adopt new practices and controls that require it to

directly enter into leases and/or agreements; and (3) implement the necessary policies, systems, and

controls to ensure that it pays all required branch operating costs. Further, HUD should confirm that

all Allied branch offices have appropriate agreements, take appropriate actions if compliance does

not occur, and pursue civil money penalties and/or administrative sanctions, as appropriate, against

Allied for the violations cited. (Audit Report: 2009-FW-1005)



HUD OIG audited the Leawood, KS, branch office of Clarion Mortgage Capital, an FHA-approved

loan correspondent, to determine whether Clarion Mortgage Capital followed HUD requirements for

implementing a quality control program.

Clarion Mortgage Capital did not fully comply with HUD's or its own quality control process. It did

not (1) ensure that its quality control contractor reviewed loans within the proper timeframes or (2)

document on-site quality control reviews of the branch office or corrective actions taken to address

deficiencies identified in the quality control reports.

OIG recommended that HUD verify that Clarion Mortgage Capital has fully implemented a quality

control program that complies with HUD requirements. (Audit Report: 2009-KC-1002)

Review of the Asset Control Area Program

HUD OIG audited the City of Camden, NJ's asset control area (ACA) program to determine whether

the City complied with requirements in the ACA agreement pertaining to the resale of properties it

acquired from HUD.

The City did not comply with the provisions in the ACA agreement pertaining to the resale of its

acquired ACA properties. It did not (1) ensure that 17 of 68 properties that it acquired from HUD were

rehabilitated and sold within the required timeframe, (2) ensure that all expenses included in net

development costs for rehabilitated properties were eligible, and (3) verify home buyers' eligibility

and maintain the appropriate related supporting documentation. As a result, the City was unable to

support property discounts from HUD for the 17 outstanding properties. It also included ineligible

expenses in the net property development costs for four properties, which increased their sales prices

and, consequently, the related mortgages by more than $11,700.

OIG recommended that (1) HUD direct the City to obtain and provide evidence that it has the

necessary resources to complete the rehabilitation and sale of the 17 outstanding properties or pay

HUD $441,500, (2) the City buy down the mortgages for the four properties which had more than

$11,600 in ineligible expenses included as part of their net development costs and verify and

document the eligibility of each home buyer in the future, and (3) HUD not renew the ACA agreement

with the City until it has demonstrated that it is in compliance with the requirements of the agreement.

(Audit Report: 2009-PH-1004)



HUD OIG audited the City of Rochester, NY's ACA program to determine whether the City

administered its program in compliance with program requirements to increase homeownership for

low- and moderate-income borrowers and contribute to the revitalization of blighted communities.

Chapter 1 - Single-Family Housing Programs
11

The City's ACA program generally met the program objectives for increasing homeownership for

low- and moderate-income borrowers and contributed to the revitalization of blighted communities

but was not always administered in compliance with program requirements. Specifically, the City did

not (1) obtain HUD approval for a nonprofit organization to participate in its ACA program, (2) resell

ACA properties within the required timeframe, (3) sell an ACA property within the price limit imposed

by HUD, (4) obtain HUD's approval for conflict-of-interest issues, and (5) accurately calculate or

report to HUD net development costs for each ACA property.

OIG recommended that HUD instruct the City to (1) develop procedures to ensure that any

nonprofit hired to administer or participate in the ACA program is approved by HUD in accordance

with ACA policies, (2) ensure that ACA properties are resold within the established timeframe, (3) buy

down the mortgage for an ACA property that was resold to the eligible purchaser for $4,700 more than

the established limit, (4) cease participation with individuals or entities that have conflict-of-interest

relationships unless HUD approval can be obtained, (5) establish procedures to ensure accurate

calculation and reporting of net development costs and compliance with program requirements, and

(6) review the noncompliance issues identified and decide whether to impose sanctions in

accordance with section 8 of the ACA standard operating procedures. (Audit Report: 2009-NY-1007)



HUD OIG audited Enterprise Home Ownership Partners-Dallas, Inc. (EHOP-Dallas), in Dallas, TX, to

determine whether EHOP-Dallas administered its ACA program in compliance with the agreement and

the program objective to promote revitalization through expanded homeownership opportunities.

EHOP-Dallas administered its ACA program in an effective manner, increasing homeownership in

revitalization areas and contributing to reducing blight in some neighborhoods. However, it did not

comply with requirements when it (1) provided home buyers excess equity in the homes it resold, (2)

did not resell all homes within the time limits established under the agreement, and (3) included

ineligible expenses associated with theft and vandalism in net development costs.

OIG recommended that HUD require EHOP-Dallas to calculate home-buyer enforcement notes as

defined in the agreement and exclude expenses associated with casualty losses in its calculations of

net development costs. In addition, OIG recommended that HUD revise the agreement to address

disposition of properties the purchaser cannot sell within 18 months because of market conditions or

other factors beyond its control. (Audit Report: 2009-FW-1006)

Review of HUD's Single-Family Partial Claims Collection Process

HUD OIG audited HUD's single-family partial claims collection process and its effectiveness in

protecting the FHA insurance fund to determine whether the single-family partial claims program

operated effectively and efficiently to minimize the costs to the insurance fund and collect amounts in

a timely manner. A partial claim is a loss-mitigation option that is used when a lender advances funds

on behalf of a borrower in an amount necessary to reinstate a delinquent loan (not to exceed the

equivalent of 12 months’ principal, interest, taxes, and insurance).

HUD and its contractors did not properly implement a cohesive partial claims collection process

to ensure that partial claims were serviced in a timely manner. HUD did not (1) fully develop and

implement written policies and procedures, (2) define follow-up procedures for the forbearance plan

option, (3) promptly transfer partial claims to the Albany Financial Operations Center, and (4) actively

track and monitor lender billing.

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs
12

OIG recommended that HUD (1) formulate and implement procedures to comply with Federal

regulations and enhance training provided to its contractors so that debts can be transferred to the

Albany Financial Operations Center in a timely manner, (2) develop procedures to pursue lenders for

administrative offsets in a timely manner and improve the forbearance plans, and (3) fully implement

the Single Family Mortgage Asset Recovery Technology system as the one system of record for partial

claims. (Audit Report: 2009-DP-0001)

Review of Government National Mortgage Association Internal

Control Process

HUD OIG audited the internal controls of the Government National Mortgage Association (Ginnie

Mae) to assess the "match to terminated" process and related documentation of the Mortgage Backed

Securities Information System. OIG determined that the contents of this report would not be

appropriate for public disclosure and has limited its distribution to selected HUD officials. (Audit

Report: 2009-DP-0002)



Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs
13

Chapter 1: HUD’s Single-Family Housing Programs

Some investigations discussed in this report were generated from leads provided by HUD

single-family housing program staff or conducted jointly with Federal, State, and local law

enforcement agencies. The results of various significant investigations are described below.

$

recovered

Admin/civil

actions

Investigations 93 $54,204,565 88

Our

focus

Page 14

Page 17

Page 18

Page 20

- Loan origination fraud

- Identity fraud and false Social Security numbers

- Civil and administrative actions

- Other single-family fraud

Convictions/pleas/

pretrials

Cases

closed

Key program

results

90

Chart 1.2: Percentage of OIG single-family housing closed investigation cases

during this reporting period

Investigations

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Region 1 - 3%

Region 2 - 14%

Region 3 - 11%

Region 4 - 12%

Region 5 - 21%

Region 6 - 9%

Regions 7/8 - 13%

Regions 9/10 - 16%

Region 11 - 1%

Chapter 1 - Single-Family Housing Programs
14

Loan Origination Fraud

Robert and Patrick Singletary and Peter Russo, owners of CAL

Investments, Universal Title Company, and Tropical and Sunshine

Mortgage Companies, each pled guilty in U.S. District Court,

Jacksonville, FL, to committing wire fraud and a conspiracy to make

false statements to HUD. From 1997 to January 2004, the above

defendants and others conspired and provided fraudulent gift fund

checks used by unqualified borrowers to obtain FHA-insured mortgages.

HUD realized losses in excess of $9 million after 139 mortgages defaulted.



Ciriaco Gatta, an appraiser doing business as Gatta and Associates;

Anthony Giampietro and Mary Diantonio, settlement agents for

Rittenhouse Abstract or First City Abstract; and Trung Tam Dang and

Zu Yun Kim, also known as Andy Kim, were collectively sentenced in

U.S. District Court, Philadelphia, PA, to 92 months incarceration and 15

years probation and ordered to pay HUD more than $4.46 million in

restitution, jointly and severally, for their earlier guilty pleas to making

false statements to HUD and committing wire and identity fraud and a

conspiracy. The above defendants and others created fraudulent

appraisals or documents used by unqualified borrowers to obtain

FHA-insured mortgages. HUD realized losses in excess of $4.46

million after 183 mortgages defaulted.



Kandace Yancy Marriott, the former owner of One Way Home and Land, was sentenced in Navarro

County District Court, Corsicana, TX, to 99 years incarceration and fined $10,000 for her earlier

conviction of engaging in an organized criminal activity and misapplication of fiduciary funds. From

October 2003 through August 2004, Marriott forged home buyers' signatures and provided fraudulent

information or documents used by unqualified borrowers to obtain FHA-insured mortgages. HUD

realized losses in excess of $4 million after 68 mortgages defaulted.



LaDonna Mullins, the owner of LaDonna's Realty and Management,

was sentenced in U.S. District Court, Denver, CO, to 15 months home

detention and 36 months probation and ordered to pay HUD $66,459 in

restitution and forfeit $44,292 for her earlier conviction of committing

wire fraud and aiding and abetting. Mullins and others submitted or

caused the submission of fraudulent documents used by unqualified

borrowers to obtain FHA-insured mortgages. HUD realized losses of

about $1.25 million after 25 mortgages defaulted.



Copyright, 2008. The Times Union -

Jacksonville, FL. Reprinted with

permission.

Chapter 1: HUD’s Single-Family Housing Programs

Copyright, 2009. Rocky Mountain

News - Denver, CO. Reprinted

with permission.

Chapter 1 - Single-Family Housing Programs
15

Chapter 1: HUD’s Single-Family Housing Programs

Carey O'Laughlin, the president of National Housing Foundation, a nonprofit approved by HUD to

obtain FHA-insured mortgages, was sentenced in U.S. District Court, Chicago, IL, to 33 months

incarceration and 3 years probation and ordered to pay HUD $1.1 million and American Charter Bank

$900,000 in restitution for his earlier guilty plea to making false statements to a federally insured bank.

O'Laughlin provided false statements and documents to secure and later default on $1 million in credit

from American Charter Bank, failed to disclose this liability on National Housing Foundation mortgage

loan applications, and obtained and defaulted on about $2.47 million in FHA-insured mortgages. HUD

realized losses of $1.1 million after 18 mortgages defaulted.



Arvin Weiss, a real estate broker and president of Reserve Capital Funds

(Reserve), and Reserve real estate sales assistant Jesus Guevara were

collectively sentenced in U.S. District Court, Denver, CO, to 105 months

incarceration and 72 months supervised release and ordered to jointly

pay HUD $852,000 in restitution for their previous conviction or guilty

plea to committing mail and wire fraud and tampering with a witness.

From June 1998 to February 2002, Weiss, Guevara, and others submitted

fraudulent documents or provided downpayment funds used by

unqualified borrowers to obtain FHA-insured mortgages. HUD realized

losses of about $852,000 after 18 mortgages defaulted.



Juan Garcia, a mortgage broker for All Star Mortgage and president of

J.G. Home Investment, and nine additional defendants were each indicted

in U.S. District Court, Miami, FL, for allegedly making false statements

and committing wire fraud and a conspiracy to commit wire fraud. Garcia

allegedly provided fraudulent documents and downpayment funds used

by the above defendants and others to obtain FHA-insured and

conventional mortgages. HUD realized losses of about $727,000 after three

mortgages defaulted. Garcia and eight of the above defendants were

arrested after their indictments.



Henry and Elizabeth Robertson, doing business as Elohim, Inc., were each indicted in U.S. District

Court, Chicago, IL, for allegedly committing bank and wire fraud. Henry and Elizabeth Robertson

allegedly provided fraudulent documents and downpayment funds used by unqualified borrowers to

obtain FHA-insured and conventional mortgages. HUD realized losses of about $459,000 after 20

mortgages defaulted.



Alberto Hernandez, president of ASH Homes Investment, Inc., and his partner John Fraga were

collectively sentenced in U.S. District Court, Miami, FL, to 45 months incarceration and ordered to pay

HUD $232,060 and others $201,086 in restitution, jointly and severally, for their earlier guilty pleas to

committing mail fraud and a conspiracy. Hernandez sold properties he owned and provided the

Copyright, 2008. Rocky Mountain

News - Denver, CO. Reprinted

with permission.

Chapter 1 - Single-Family Housing Programs
16

downpayment or gift funds used by unqualified borrowers to obtain FHA-insured mortgages. Fraga

and others converted the downpayment or gift funds provided by Hernandez to financial instruments

used by the unqualified borrowers. In addition, Fraga obtained an FHA-insured mortgage on

investment property he purchased from Hernandez. HUD realized losses of $232,060 after four

mortgages defaulted.



Scott Hinkley, a loan officer for ABK Mortgage, was sentenced in Colorado District Court, Brighton,

CO, to 10 years community corrections for his earlier guilty plea to committing forgery and violating

the Colorado Organized Crime Control Act. Hinkley and others provided fraudulent loan applications

used by unqualified borrowers to obtain FHA-insured and conventional mortgages. HUD realized

losses of $153,814 after three mortgages defaulted.



Uriel Ortiz, a former office manager for Exclusive Rights Realty, was sentenced in U.S. District

Court, Los Angeles, CA, to 36 months probation and ordered to pay HUD $143,384 in restitution for his

earlier guilty plea to committing a conspiracy. Ortiz and others provided false documents used by

unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses of $143,384 after 13

mortgages defaulted.



Rebecca Loeffler was indicted in U.S. District Court, Kansas City, MO, for allegedly making false

statements and committing wire fraud. Loeffler allegedly provided false information to obtain an

FHA-insured mortgage. HUD realized a loss of $115,051 after her mortgage defaulted.



Maria Gallucci, a realtor for Keller Williams Realty and loan officer for Uptown Mortgage Service,

was sentenced in Adams County District Court, Brighton, CO, to a 2-year deferred sentence for her

earlier guilty plea to committing forgery. Gallucci forged the signature of her former spouse on

documents associated with her jointly owned FHA-insured mortgage. HUD realized a loss of $81,626

after her mortgage defaulted.



Ricardo Bonilla and Abraham Rezex, former mortgage brokers for Consorcio Lending or American

Loan Services, Inc., and Kathy Kilmer, a former real estate agent for Mortgage One Corporation, were

each charged in U.S. District Court, Riverside, CA, with allegedly making false statements. Bonilla,

Rezex, and Kilmer allegedly created or provided fraudulent information or documents used by

unqualified borrowers to obtain FHA-insured mortgages. HUD losses are not yet determined.



Real estate closing attorney Anthony Natale and Kenneth Lagonia, the president of Quality Homes

Are Us, each pled guilty in U.S. District Court, Newark, NJ, to making false statements to HUD or

committing a conspiracy to commit wire fraud. From March 2003 through August 2005, Natale and

others created and provided fraudulent documents used by unqualified borrowers to obtain

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs
17

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs

FHA-insured mortgages, and Lagonie and others created and provided fraudulent information and

documents used by real estate investors to obtain FHA-insured or conventional mortgages. HUD

losses are not yet determined.



Dorie Dimarca, an individual claiming to be an FHA appraiser, was indicted in U.S. District Court,

Concord, NH, for allegedly committing wire fraud. Dimarca allegedly used the FHA license of another

and fraudulently prepared and submitted appraisals for 17 FHA-insured and 18 non-FHA mortgage

loans. HUD losses are not yet determined.



Julie Weaver, a former loan officer for Alliance Guaranty Mortgage Corporation, was charged in

Denver County Court, Denver, CO, with allegedly committing theft. Weaver allegedly signed closing

documents for a straw buyer and stole $24,310 in mortgage loan proceeds from an FHA-insured

refinance loan. HUD losses are not yet determined.



Frank Conti and Keith Rice, a manager and assistant mortgage broker for Regal Mortgage, each

pled guilty in U.S. District Court, Erie, PA, to committing a conspiracy or mail fraud. In addition, Greg

Finney, a former owner of the now-defunct A&M Homes, was sentenced to 53 months incarceration

and 5 years probation and ordered to pay six FHA-insured mortgagors $56,500 and other victims $77,500

in restitution for his earlier guilty plea to committing a conspiracy, mail fraud, and money laundering.

Finney and others provided fraudulent property information and values to prospective buyers and

directed them to Conti, Rice, and others, who provided the unqualified borrowers with false

information and documents used to obtain FHA-insured and conventional mortgages.

Identity Fraud and False Social Security Numbers

Antonio Vitale, also known as Tony Vitale, a former loan officer for Sterling Capital Mortgage

Company, was sentenced in Adams County District Court, Brighton, CO, to 60 months probation and

ordered to perform 200 hours of community service for his earlier guilty plea to offering a false

instrument for recording and attempting to influence a public servant. In addition, Iris Rodriguez pled

guilty to offering a false instrument for recording, Jorge Barajas was sentenced to 24 months

probation for his earlier guilty plea to offering a false instrument for recording, and previously

sentenced Claudia Hernandez-Martinez was arrested when she attempted to reenter the United States.

Vitale provided forged documents and a fraudulent Social Security number (SSN) used by an

unqualified borrower to obtain an FHA-insured mortgage, Rodriguez sold her FHA-insured property to

her undocumented immigrant spouse who fraudulently obtained an FHA-insured mortgage, Barajas

provided a false SSN and other fraudulent documents to obtain and later default on his FHA-insured

mortgage, and Hernandez-Martinez violated the terms of her probation. HUD realized losses of $3.2

million after 49 mortgages defaulted.



Asifali Mahomed, a real estate broker formerly doing business as Luxor Real Estate Investment,

was sentenced in U.S. District Court, Ft. Worth, TX, to 37 months incarceration and 36 months

probation and ordered to pay HUD $445,862 in restitution for his earlier guilty plea to committing a
18

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs

conspiracy to make false entries to HUD. Mahomed inflated financial information and provided

downpayment funds and fraudulent SSNs used by unqualified borrowers to obtain FHA-insured

mortgages. HUD realized losses of $445,862 after 12 mortgages defaulted.



Straw buyers John Prados and Caridad Paz were each sentenced in U.S. District Court, Newark,

NJ, to 6 months home detention and 36 months probation for their earlier guilty pleas to using false

SSNs to obtain FHA-insured mortgages and committing bankruptcy fraud or a conspiracy to defraud

HUD. In addition, Prados was ordered to pay HUD $80,232 in restitution and was suspended from

procurement and nonprocurement transactions with HUD and throughout the Executive Branch of

the Federal Government pending the outcome of criminal proceedings or any related debarment

action. Prados, Paz, and others used or supplied fraudulent identity and other documents to obtain

FHA-insured mortgages. HUD realized losses of $349,000 after 12 mortgages defaulted.



Karla Preciado, also known as Karla Venegas, a former loan processor for JLF Properties, pled

guilty in U.S. District Court, Los Angeles, CA, to committing a conspiracy. Preciado and others

created false identity and financial documents used by unqualified borrowers to obtain FHA-insured

mortgages. HUD realized losses of about $220,695 after 10 mortgages defaulted.



FHA-insured mortgagors Juan Cantu, Jair Almaguer, and Jose Arellano Lopez were each indicted in

Dallas County District Court, Dallas, TX, for allegedly securing execution of a document by deception.

The above defendants allegedly used fraudulent SSNs and other documents to obtain FHA-insured

mortgages. HUD realized losses of $83,855 after their mortgages defaulted.



Karla Martinez-Porras and Ludibeth Salazar, former loan officers for American United Mortgage

Corporation or Primero Home Loan; Xochilt Alamillo, a former realtor for Frontier GMAC Real Estate;

and FHA-insured mortgagors Prisciliano and Alma Peralta-Lopez, Alfredo Gomez-Rosales, and Rigoberto

Olivas were each charged in Adams County Court, Brighton, CO, with allegedly attempting to

influence a public servant; offering a false instrument for recording; and committing theft, conspiracy,

forgery, and criminal impersonation. Martinez-Porras, Salazar, and Alamillo allegedly assisted

undocumented immigrants who used fraudulent SSNs or documents to obtain FHA-insured mortgages;

and Prisciliano and Alma Peralta-Lopez, Gomez-Rosales, and Olivas allegedly used false SSNs and

other fraudulent documents to obtain FHA-insured mortgages. HUD realized a loss of $54,753 after

one mortgage defaulted.

Civil and Administrative Actions

RBC Mortgage Company (RBC), a HUD direct endorsement lender, entered into a False Claims Act

civil settlement filed in U.S. District Court, Chicago, IL, and agreed to pay the U.S. Department of

Justice (DOJ) more than $10.9 million. From February 2001 to April 2004, RBC allegedly approved

FHA-insured mortgages for unqualified borrowers and falsely certified that mortgages were current

when they submitted loans for FHA insurance. HUD realized losses of about $2.6 million after 75

mortgages defaulted.


19

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs

Devon Bowie, the former owner and president of Neighborhood Mortgage Bankers who was

previously sentenced in U.S. District Court, Newark, NJ, for his earlier guilty plea to committing a

conspiracy to submit false documents to HUD, entered into a PFCRA settlement and agreed to pay

HUD $10,000. Bowie conspired with others and provided false information or documents used by

unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses in excess of $1.2 million

after 33 mortgages defaulted.



Dolphin Mortgage Corporation (Dolphin), previously named in a False Claims Act complaint filed

in U.S. District Court, Chicago, IL, was found liable and ordered to pay the U.S. Government and HUD

more than $1.1 million. Dolphin failed to prevent the fraudulent actions of two employees who

previously pled guilty to originating six fraudulent FHA-insured mortgages. HUD realized losses of

more than $1.1 million after the six mortgages defaulted.



Demetri Coffee, an appraiser for Chase Residential Appraisal, Inc., who was previously sentenced

in U.S. District Court, Atlanta, GA, for his earlier guilty plea to committing wire fraud; money

laundering; and a conspiracy to commit mail, wire, bank, and bank loan frauds, was debarred from

procurement and nonprocurement transactions with HUD and throughout the Executive Branch of

the Federal Government for 7 years. Coffee and others created or submitted false appraisals or

documents used by straw borrowers to obtain FHA-insured and conventional mortgages. HUD

realized losses of $300,000 after two mortgages defaulted.



Denise Baskerville, an administrative assistant for M.T. Real Estate Development, Inc., who

previously pled guilty in U.S. District Court, Newark, NJ, to committing a conspiracy to make false

statements, was debarred from procurement and nonprocurement transactions with HUD and

throughout the Executive Branch of the Federal Government for 3 years. Baskerville and others

created and provided fraudulent documents used by unqualified borrowers to obtain FHA-insured

mortgages. HUD realized losses of $242,981 after 16 mortgages defaulted.



Wachovia Mortgage Company, a successor in interest for First Union Mortgage Corporation (First

Union) located in Rochester, NY, entered into a PFCRA settlement and agreed to pay HUD $64,132.

First Union allegedly certified a fraudulent FHA-insured mortgage submitted by previously sentenced

Morgan Haines. Haines and others purchased homes in the Rochester area, flipped the properties to

each other at inflated values, and provided fraudulent documents to obtain and later default on FHA

and conventional mortgages. HUD realized losses of $186,475 after two FHA-insured mortgages

defaulted.



Sammie Parr III, a HUD Officer/Teacher Next Door (Officer/Teacher) program participant and an

officer with the Chicago Police Department, was ordered to pay DOJ $149,850 in a civil default

judgment entered in U.S. District Court, Chicago, IL. Parr obtained a HUD-owned property and

received a $49,950 discount, but Parr allegedly failed to report his ownership of additional real estate

on HUD certifications.


20

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs

Burrell Robinson, a HUD Good Neighbor Next Door (Good Neighbor) program participant and an

officer with the Baton Rouge Police Department, entered into a civil settlement filed in U.S. District

Court, Baton Rouge, LA, and agreed to pay HUD $22,500. Robinson obtained a HUD-owned property

and received a $22,500 discount, but Robinson failed to reside in the property or report his

nonresidency on HUD certifications.



Madison Home Equities (Madison Home) and Nadine Malone, president of Madison Home, were

each named in a civil complaint filed in U.S. District Court, Brooklyn, NY, and issued a temporary

restraining order preventing them from using the mails or wire to fraudulently obtain mortgage

insurance from the FHA; advertising or soliciting business to originate federally insured home

mortgage loans; or originating, underwriting, or submitting any new loans or defaulted loan claims to

HUD. Malone and Madison Home allegedly overstated assets, understated debts, or provided other

false information on loan applications used by unqualified borrowers to obtain about $4 million in

FHA-insured mortgages. HUD losses are not yet determined.



Richard Banach, a HUD-approved mortgage broker doing business as North Shore Financial

located in East Meadow, NY, was suspended from procurement and nonprocurement transactions

with HUD and throughout the Executive Branch of the Federal Government pending the outcome of

criminal proceedings or any related debarment actions. Banach, who previously pled guilty to

committing bank fraud, allegedly assisted unqualified borrowers who obtained fraudulent mortgages

and failed to report his criminal history on annual HUD certifications.



Aspen Builders, Inc. (Aspen); Robert and Michelle Benes, the owners of Aspen; Lincoln Mortgage,

Inc. (Lincoln); Lu Friend, the owner of Lincoln; Amy Wooten, a loan officer for Lincoln; appraisers Liga

Coons and Aaron Wilson; and Jeremy Stickney were each named in a civil complaint filed in Lancaster

County Court, Lincoln, NE, for allegedly committing a civil conspiracy and violating the Uniform

Deceptive Trade Practices and the Nebraska Consumer Protection Acts. The above defendants

allegedly made false representations and harmed mortgage lenders who approved undercollateralized

FHA-insured and conventional mortgages and home buyers who owned properties with market values

lower than their purchase price.

Other Single-Family Fraud

Aubrey Terbrack, the owner of Marathon Mortgage (Marathon), and Marathon manager Denise

Money were collectively sentenced in U.S. District Court, Detroit, MI, to 78 months and 1 day

incarceration, 180 days in a half-way house, 6 months home confinement, and 3 years supervised

release and ordered to jointly pay Ginnie Mae more than $21.4 million in restitution for their earlier

guilty pleas to committing wire fraud. From July 1998 to October 2007, Terbrack and Money failed to

report 2,041 terminated or satisfied loans to Ginnie Mae and fraudulently used the funds they

obtained from the terminated or satisfied mortgages for personal stock investments or to continue

payments for nonexistent loans. Ginnie Mae realized losses of about $20 million.


21

Chapter 1: HUD’s Single-Family Housing Programs

Reprinted with permission of the Chicago Tribune; copyright Chicago Tribune; all rights reserved.

Chapter 1 - Single-Family Housing Programs

Jermaine Spencer, an Officer/Teacher program participant and Bureau of Prisons employee, pled

guilty in U.S. District Court, Denver, CO, to making false statements and was suspended from

procurement and nonprocurement transactions with HUD and throughout the Executive Branch of

the Federal Government. Spencer obtained a HUD-owned property and received a $72,500 discount,

but Spencer failed to reside in the property or report his nonresidency on HUD certifications.



Jason Lindsey, a Good Neighbor program participant and former University of Kansas police

officer, was sentenced in U.S. District Court, Kansas City, MO, to 36 months probation and ordered to

pay HUD $27,000 in restitution for his earlier guilty plea to making false statements. Lindsey obtained

a HUD-owned property and received a $45,000 discount, but Lindsey failed to reside in the property or

report his nonresidency on HUD certifications.



FHA-insured mortgagor Taeana Stokes was charged in U.S. District Court, Springfield, IL, with

allegedly committing bankruptcy fraud. Stokes allegedly failed to report four prior bankruptcy

petitions and delayed foreclosure proceedings relating to her FHA-insured property.



Twenty-two individuals employed as attorneys, appraisers, mortgage brokers, loan officers and

processors, and others were each indicted in U.S. District Court, Chicago, IL, for allegedly committing

wire and mail fraud. The above defendants allegedly obtained and flipped HUD real estate-owned

properties and provided fraudulent appraisal, identity, income, and other documents used by

unqualified borrowers to obtain conventional mortgages.



Darrell Underwood, the owner of Walkwood Properties, a real estate company promoting

foreclosure relief for distressed homeowners, was indicted in U.S. District Court, Richmond, VA, for

allegedly engaging in unlawful monetary transactions and committing money laundering and mail,

wire, and bank fraud. Underwood allegedly operated a "Ponzi" scheme through Walkwood Properties

when he fraudulently obtained more than $18 million in investors' funds to purchase distressed or
22

Chapter 1: HUD’s Single-Family Housing Programs

Chapter 1 - Single-Family Housing Programs

foreclosed properties, but Underwood only purchased about $2.1 million in properties, used about

$13.4 million in subsequent investments to repay earlier investors, and misused the remaining funds.

In addition, real estate closing attorney Colin Connelly, doing business as Connelly & Associates, pled

guilty to committing a conspiracy to commit wire fraud. Connelly transferred the ownership of

distressed properties to Walkwood Properties, falsified HUD-1 settlement statements, and stole about

$376,465 in equity belonging to six homeowners, including three homeowners with FHA-insured

mortgages.



Andre Johnson, doing business as Hat General Contractors, Inc., a HUD Rehabilitation Loan

Insurance program contractor, and former HUD-approved Rehabilitation Loan Insurance program

inspector Brian Lillie were each indicted in U.S. District Court, Chicago, IL, for allegedly committing

mail fraud. Johnson and Lillie allegedly submitted fraudulent work completion documents and

obtained $91,891 in rehabilitation loan escrow funds they were not entitled to receive.



Charlotte Schuett, a mortgage broker for Wall Street Mortgage, was sentenced in U.S. District Court,

Chicago, IL, to 1 year incarceration and 3 years probation for her earlier guilty plea to committing mail

fraud. Schuett used straw buyers to purchase FHA-insured and other distressed properties through

companies she controlled, helped the distressed homeowners to file fraudulent Chapter 7 bankruptcy

petitions, and then leased the properties back to the debtors and allowed the properties to go into

foreclosure.



Robert Miller was sentenced in U.S. District Court, Washington, DC, to 17 years incarceration and

3 years supervised release and ordered to pay numerous victims $495,000 in restitution for his earlier

conviction of committing wire fraud and inducement to travel in interstate commerce in execution of

a scheme to defraud. Miller posed as a lawyer, realtor, mortgage broker, foreclosure expert, and other

professionals; obtained about $500,000 from investors to purchase HUD-owned and other properties

to "flip" for a profit; and then failed to purchase the investment properties and personally used

investor funds.



Henry Broussard, a real estate investor doing business as HBRE Development, pled guilty in U.S.

District Court, St. Louis, MO, to committing mail fraud. Broussard purchased and flipped HUD real

estate-owned properties and provided fraudulent loan documents used by unqualified buyers to

obtain conventional mortgages.


Acronyms List
24

Region 1 - 17%

Region 2 - 4%

Region 3 - 17%

Region 4 - 8%

Region 5 - 12%

Region 6 - 8%

Regions 7/8 - 13%

Regions 9/10 - 21%

Region 11 - (N/A)*

The U.S. Department of Housing and Urban Development (HUD) provides grants and subsidies to

3,496 public housing agencies (PHA) nationwide. Many PHAs administer both public housing and

Section 8 programs. HUD also provides assistance directly to PHAs' resident organizations to

encourage increased resident management entities and resident skills programs. Programs

administered by PHAs are designed to enable low-income families, the elderly, and persons with

disabilities to obtain and reside in housing that is safe, decent, sanitary, and in good repair. In addition

to the audits and investigations described in this chapter, the Office of Inspector General (OIG), has

conducted numerous outreach efforts (see chapter 7, page 102).

Chapter 2: HUD’s Public and Indian Housing Programs

Page 25

Page 25

Page 29

* This does not include disaster relief audits. See chapter 5 for these reviews.

Key program results Questioned costs Funds put to better use

Audit 24 audits $7.4 million $95.5 million

Our

focus

- Native American program activities

- Section 8 Housing Choice Voucher and leased housing program

 activities at public housing agencies

- Public housing program activities

Chart 2.1: Percentage of OIG public and Indian housing audit reports

during this reporting period

Audit

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Chapter 2 - Public and Indian Housing Programs
25

Chapter 2: HUD’s Public and Indian Housing Programs

During this reporting period, OIG reviewed HUD's controls over the Native American program

activities, Section 8 Housing Choice Voucher and leased housing program activities, and public

housing activities.

Native American Program Activities

HUD OIG audited HUD's rules regarding calculation of program income under the Native American

Housing and Self-Determination Act of 1996 (NAHASDA) to determine whether HUD's guidance for

calculating program income for the NAHASDA-assisted United States Housing Act of 1937 (1937 Act)

housing projects was consistent with generally accepted accounting principles and whether the

effects of implementing this guidance were consistent with the purpose and goals of NAHASDA.

HUD policies allowed tribal housing authorities to redirect and abuse rent revenue from NAHASDAassisted low-rent program units developed under the 1937 Act. Further, HUD allowed tribal

authorities to claim these funds as unrestricted income retroactively to 1998 and use the funds to

cover expenditures not permitted under NAHASDA. As a result, tribal housing authorities redirected

and abused millions of dollars in rent collected from low-income Native Americans living in NAHASDAassisted units. About $400 million in NAHASDA-assisted rental revenue is currently unrestricted or

available to be retroactively reclassified as unrestricted by restating accounting records back to 1998.

HUD lacks assurance that all of these funds have been used to maintain existing rental properties or to

assist other families in obtaining affordable housing in conformance with the purpose and goals of

NAHASDA.

OIG recommended that HUD (1) take immediate action to suspend the redirecting of revenue from

NAHASDA-assisted 1937 Act units unless all costs for operation, maintenance, rehabilitation, and

capital improvement have been reimbursed by offsetting expenses against revenue of those units in a

method consistent with self-sufficiency and (2) rescind Public and Indian Housing Notice 2000-18 and

associated guidance, such as Program Guidance Memorandums 2001-3T and 2002-12, until

appropriate guidance can be designed that supports the purpose and goals of NAHASDA. (Audit

Report: 2009-SE-0002)

Section 8 Housing Choice Voucher and Leased Housing Program

Activities at Public Housing Agencies

Audits of the Section 8 Housing Choice Voucher program were a priority during this semiannual

reporting period. PHAs were selected for audit based on risk analysis and/or hotline complaints.

While OIG's objectives varied by auditee, the majority of the reviews were to determine whether the

units met housing quality standards, whether the PHA managed the program according to HUD

requirements, and whether the eligibility of the tenants was correctly determined. The following

section illustrates the audits conducted in the Section 8 Housing Choice Voucher program area.



HUD OIG audited the Housing Authority of the City of Los Angeles in Los Angeles, CA, regarding

Section 8 housing quality standards inspections for its Section 8 Housing Choice Voucher program. Of

68 Section 8 units inspected, 43 did not meet HUD's housing quality standards, and 19 were in material

noncompliance with HUD's standards.

OIG recommended that HUD require the Authority to (1) implement adequate procedures and

controls to ensure that all units meet HUD's housing quality standards to prevent $65.6 million in

program funds from being spent on units that are in noncompliance with HUD's standards and

Chapter 2 - Public and Indian Housing Programs
26

(2) verify and certify that the owners have taken appropriate corrective actions for all applicable

housing quality standards deficiencies identified. If appropriate actions have not been taken, the

Authority should abate the rents or terminate the housing assistance payments contracts. (Audit

Report: 2009-LA-1002)



HUD OIG audited the Housing Choice Voucher program of the Indianapolis Housing Agency in

Indianapolis, IN, and found that the Agency failed to administer its program according to HUD's

requirements. Further, its administration regarding the use of available program funding, selection

and approval of project-based units, and housing conditions for its project-based units was inadequate.

The Agency's failure to meet HUD's lease-up thresholds resulted in approximately 1,569 households

not being housed in fiscal year (FY) 2008 and more than $8.7 million in program funds not being used

to provide decent, safe, and sanitary housing for eligible households.

The Agency lacked documentation to support its selection and approval of project-based voucher

program projects. As a result, it could not support that any of the 11 projects was eligible for more

than $2 million in project-based assistance and that nearly $212,000 in program administrative fees

received by the Agency was appropriate. Of the 18 project-based units inspected, 17 did not meet

minimum housing quality standards, and 11 had material violations that existed before the Agency's

previous inspections. As a result, more than $24,000 in program funds was spent on units that were

not decent, safe, and sanitary.

OIG recommended that HUD require the Agency to (1) reimburse its Housing Choice Voucher

program from nonfederal funds for the improper use of nearly $236,000 in program funds, (2) provide

documentation or reimburse its program from nonfederal funds for the unsupported payments

identified, (3) implement adequate procedures and controls to address the findings cited to prevent

nearly $9 million in program funds from not being used over the next year to house needy families, and

(4) implement a detailed comprehensive written action plan to improve its procedures and controls to

ensure that it operates its program in accordance with HUD's and its own requirements. (Audit

Report: 2009-CH-1002)



HUD OIG audited the Housing Authority of the City of Pittsburgh, PA's administration of its leased

housing under its Moving to Work Demonstration program to determine whether the Authority

ensured that its leased housing units met HUD's housing quality standards.

The Authority failed to ensure that its leased program units met HUD's housing quality standards.

Of 66 program units inspected, 62 did not meet HUD's standards, and 53 were in material

noncompliance with standards. The Authority spent more than $100,000 in program and

administrative funds for these 53 units.

OIG recommended that HUD require the Authority to ensure that housing units inspected during

the audit are repaired to meet HUD's housing quality standards, reimburse its program for the

improper use of program funds for units that materially failed to meet HUD's standards, and

implement adequate procedures and controls to ensure that program units meet housing quality

standards to prevent an estimated $9.3 million from being spent annually on units that materially fail

to meet HUD's standards. (Audit Report: 2009-PH-1003)



Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
27

Chapter 2: HUD’s Public and Indian Housing Programs

HUD OIG audited the Section 8 Housing Choice Voucher program of the Chicago Housing Authority

in Chicago, IL, under its Moving to Work Demonstration program to determine whether the Authority

administered its program in accordance with HUD's requirements and its program administrative plan

regarding the enforcement of housing quality standards.

The Authority's program administration regarding housing unit conditions and timeliness of

annual housing unit inspections was inadequate. Of the 65 housing units inspected that did not

receive a quality control inspection by CVR Associates, Incorporated, the Authority's inspections

contractor, 52 did not meet HUD's housing quality standards, and 23 had exigent health and safety

violations that existed at the time of CVR's previous inspections. Of the 39 housing units inspected

that received a quality control inspection by CVR, 33 did not meet HUD's housing quality standards,

and 12 had exigent health and safety violations that existed at the time of CVR's previous inspections.

The Authority also failed to ensure that its housing unit inspections were conducted in a timely

manner. Of the 300 household files reviewed, 62 contained inspections that were not conducted within

the required 1 year of the previous inspections. The number of days late ranged from 4 to 1,001.

OIG recommended that HUD require the Authority to reimburse its program from nonfederal funds

for the improper use of nearly $102,000 in program funds and implement adequate procedures and

controls to address the finding cited. These procedures and controls should help to ensure that more

than $3.1 million in program funds is spent on housing units that meet HUD's requirements. (Audit

Report: 2009-CH-1005)



HUD OIG audited the City of Hartford, CT's administration of its Housing Choice Voucher program

and found that the City generally administered its program in compliance with its annual

contributions contracts and HUD regulations. However, housing did not always meet minimum

standards, the City continued to pay for housing with uncorrected housing quality standards

violations, it could not support administrative fees charged, and it did not properly account for tenant

fraud recoveries. Questioned costs and opportunities for funds to be put to better use totaled more

than $2.4 million.

Of the housing units inspected, 47 percent did not meet minimum standards, and 27 percent had

serious safety hazards. In addition, rent payments were made when owners failed to correct

deficiencies within required timeframes. The City may pay more than $1.5 million over the next year

for units with material deficiencies--if it does not monitor its contract inspectors and implement

effective quality control procedures--and more than $225,000 for housing with uncorrected

deficiencies.

The City also could not support more than $623,000 in administrative fees charged to the program

and did not properly account for and monitor tenant fraud recoveries. During the audit, the

contractor implemented corrective actions, and OIG estimates that the City will now receive more

than $17,000 in additional funds from HUD in 2009.

OIG recommended that HUD require the City to (1) implement controls to ensure that housing

units meet minimum housing quality standards and abate rents when units are not repaired within

required timeframes; (2) implement a reasonable method for allocating salaries, benefits, and other

costs to its Housing Choice Voucher program and repay the program for any unsupported costs; and

(3) properly monitor, account for, and report tenant fraud recoveries to HUD. (Audit Report:

2009-BO-1004)



Chapter 2 - Public and Indian Housing Programs
28

HUD OIG audited the Delaware County Housing Authority, Woodlyn, PA, regarding the

administration of its housing quality standards inspection program for its Section 8 Housing Choice

Voucher program and found that the Authority did not adequately administer its inspection program

to ensure that its program units met housing quality standards as required. Of 61 housing units

inspected, 60 did not meet HUD's housing quality standards, and 32 had health and safety violations

that the Authority's inspectors did not report during their last inspection. The Authority spent more

than $43,000 in program and administrative funds for these 32 units. It also did not properly abate

rents when units failed its housing quality standards inspections. Of 25 program units that did not

pass the Authority's housing quality standards inspections, it failed to abate payments for 21 of the

units and inappropriately abated payments for four units, resulting in improper payments of nearly

$7,000 and nearly $2,000 in underpayments to landlords.

OIG recommended that HUD require the Authority to (1) ensure that housing units inspected

during the audit are repaired to meet HUD's housing quality standards, (2) reimburse its program from

nonfederal funds for the improper use of program and administrative funds for units that materially

failed to meet HUD's housing quality standards, (3) implement adequate procedures and controls to

ensure that program units meet housing quality standards to prevent an estimated $1.9 million from

being spent annually on units that materially fail to meet HUD's housing quality standards,

(4) reimburse its program for the 21 units for which it did not abate assistance payments, (5) pay

landlords for payments that were not abated correctly, and (6) enforce its established policies and

procedures to ensure that its abatements comply with HUD requirements, thereby preventing an

estimated $26,000 from being spent annually on units that should have had assistance payments

abated. (Audit Report: 2009-PH-1002)



HUD OIG audited the Housing Choice Voucher program of the Portage Metropolitan Housing

Authority in Ravenna, OH, under its Moving to Work Demonstration program and found that the

Authority inappropriately administered its program. It failed to properly select owners, approve

program units, execute contracts, and monitor the operations of its project-based voucher program.

As a result, it paid nearly $349,000 in improper housing and utility assistance, was unable to support

nearly $300,000 in housing and utility assistance, and received more than $65,000 in improper Section

8 administrative fees. Over the next 12 months, the Authority could spend more than $200,000 in

program funds for inappropriate housing assistance and utility allowance payments and Section 8

administrative fees.

Of the 58 program units selected for inspection, 42 did not meet minimum housing quality

standards, and 32 had material violations that existed before the Authority's previous inspections. As

a result, more than $38,000 in program funds was spent on units that were not decent, safe, and

sanitary. Over the next year, HUD could pay more than $1 million in housing assistance on units with

material housing quality standards violations.

OIG recommended that HUD require the Authority to reimburse its program from nonfederal funds

for the improper use of more than $450,000 in program funds; provide documentation or reimburse its

program from nonfederal funds for the unsupported payments identified; and implement adequate

procedures and controls to address the findings cited to prevent more than $1.2 million from being

spent on housing that is not eligible for program assistance or decent, safe, and sanitary. (Audit

Report: 2009-CH-1003)



Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
29

Chapter 2: HUD’s Public and Indian Housing Programs

HUD OIG audited the Housing Choice Voucher program of the East St. Louis Housing Authority,

East St. Louis, IL, and found that 79 percent of the Authority's Section 8 program units materially failed

to meet HUD's housing quality standards.

OIG recommended that HUD require the Authority to reimburse its program from nonfederal funds

for the improper use of more than $64,000 and implement adequate procedures to address the finding

cited. These procedures should ensure that approximately $1.7 million in program funds is spent on

housing units that meet HUD requirements. (Audit Report: 2009-KC-1005)



HUD OIG audited the Richmond Redevelopment and Housing Authority, Richmond, VA, regarding

the administration of its housing quality standards inspection program for its Section 8 Housing Choice

Voucher program and found that the Authority did not adequately administer its inspection program

to ensure that its program units met housing quality standards as required. Of 62 housing units

inspected, 42 did not meet HUD's housing quality standards, and 26 had material health and safety

violations that the Authority's inspectors neglected to report during their last inspection. As a result,

the Authority spent nearly $69,000 in program funds on units that were not decent, safe, and sanitary.

 OIG recommended that HUD require the Authority to (1) ensure that housing units are repaired to

meet HUD's housing quality standards, (2) reimburse its program from nonfederal funds for the

improper use of program funds for units that materially failed to meet HUD's standards, and

(3) implement adequate procedures and controls to ensure that program units meet housing quality

standards to prevent an estimated $1.1 million from being spent annually on units that materially fail

to meet HUD's standards. (Audit Report: 2009-PH-1001)



HUD OIG audited the Housing Choice Voucher program of the Taunton Housing Authority in Taunton,

MA, and found that the Authority generally administered the program efficiently and effectively and in

compliance with its annual contributions contract and HUD regulations. However, it could not readily

identify whether program funds were used only for the administration of the program because it did

not properly account for and report interprogram fund transactions between its Federal and State

programs, resulting in unsupported transactions being recorded in its program accounts.

OIG recommended that HUD require the Authority to (1) provide support for more than $593,000

in interprogram fund transactions that were out of balance between Federal and State programs,

(2) implement procedures for recording and reconciling interprogram transactions and correcting

imbalances, and (3) establish controls to ensure that all interprogram transactions are recorded and

reconciled monthly and inspections are properly performed and supported by adequate

documentation. (Audit Report: 2009-BO-1001)

Public Housing Program Activities

HUD OIG audited the Housing Authority of the City of Conyers, GA's administration of its

disbursements and procurement procedures to determine whether the Authority used its Federal

funds in compliance with HUD regulations and other requirements. The Authority used more than

$891,000 in Federal funds to pay ineligible and unsupported costs. Its board did not ensure that the

former executive director expended funds in accordance with Authority and HUD requirements,

adequately documented expenditures, and followed procurement policies.

Chapter 2 - Public and Indian Housing Programs
30

OIG recommended that HUD require the Authority to (1) repay nearly $186,000 to its public

housing operating and capital improvement programs for ineligible payments made to or on behalf of

the former board chairman, (2) support more than $182,000 in payments made to or on behalf of the

executive director and the former lease enforcement officer, (3) provide documentation to support

more than $523,000 in payments made for various purchases or repay its public housing program,

(4) review and implement internal controls for purchasing goods and services, and (5) ensure that its

board performs its oversight duties in a responsible manner. OIG also recommended that HUD take

appropriate administrative action against the Authority officials responsible for the improper

disbursements. (Audit Report: 2009-AT-1001)



HUD OIG audited the Area Housing Authority of the County of Ventura in Newby, CA, to determine

whether the Authority fulfilled its payment-in-lieu-of-taxes obligations for its low-rent public housing

program and if not, whether applicable funds were used in accordance with HUD requirements.

 The Authority disregarded its low-rent public housing program's payment-in-lieu-of-taxes

obligations to the County, including the Cities of Ojai, Moorpark, Camarillo, and Thousand Oaks,

contrary to its consolidated annual contributions contract and cooperation agreements. Specifically,

it discontinued the payment of its payment-in-lieu-of-taxes obligations in 2001 and instead allocated

more than $637,000 in reserves between 2001 and 2007, which it maintained in an interest-bearing

bank account. It also requested and received additional funding from HUD to make this paymentin-lieu-of-taxes obligation as part of an additional $196,000 expense incurred for calendar years 2007

and 2008.

OIG recommended that HUD require the Authority to comply with HUD's requirements regarding

the use of payment-in-lieu-of-taxes funds with the County and the Cities by settling its payment-in-lieuof-taxes obligations to the County or reimburse HUD more than $736,000. (Audit Report:

2009-LA-1003)



HUD OIG audited the Housing Authority of the City of El Paso, El Paso, TX, regarding its

procurement process and board of commissioners' activities to determine whether the Authority

properly followed procurement requirements and whether the executive director was selected in

accordance with applicable procedures.

The Authority did not follow its procurement policies or HUD's procurement requirements.

Specifically, it inappropriately paid more than $700,000 because it did not properly administer its

procurements. Also, a former board member and a former employee created conflicts of interest.

Further, the Authority did not establish written procedures for the selection of its executive director,

and its board members did not always file ethics questionnaires in a timely manner.

OIG recommended that the Authority (1) repay from nonfederal funds nearly $662,000 to its

restricted operating reserve for locally owned properties account, nearly $13,000 to HUD, and nearly

$32,000 to its capital fund account; (2) implement procedures to ensure that it complies with its

procurement policies and HUD regulations and requirements; and (3) ensure that its executive

director and its contracting department employees attend HUD-approved procurement training.

Further, OIG recommended that HUD take administrative or other actions regarding the conflicts of

interest created by a former board vice-chair and a former employee. (Audit Report: 2009-FW-1003)



Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
31

HUD OIG audited the New York City Housing Authority in New York City, NY, regarding the

administration of its capital fund program as part of the OIG strategic plan goals to improve HUD's

fiscal accountability.

There were weaknesses in the Authority's controls over the obligation and disbursement of capital

funds. Specifically, the Authority (1) lacked adequate documentation to support that all funds were

obligated within prescribed timeframes, (2) charged capital funds for routine maintenance costs that

should have been charged to the low-rent program, and (3) executed contracts with timeframes that

exceeded those authorized by its procurement policy. As a result, the Authority lacked support that

$82 million was properly obligated, improperly charged more than $590,000 in routine maintenance

expenses to the capital fund program, and executed contracts with terms that exceeded its policy

limitations.

OIG recommended that HUD instruct the Authority to (1) provide support that capital funds were

obligated within prescribed timeframes, (2) reimburse the capital fund program from the low-rent

housing program for the routine maintenance costs charged, and (3) strengthen procurement

controls to ensure compliance with its policy. (Audit Report: 2009-NY-1002)



HUD OIG audited the Fort Smith Housing Authority in Fort Smith, AR, to determine whether the

Authority and its instrumentality, North Pointe Limited Partnership, spent HUD-provided funds in

compliance with HUD's rules and regulations for costs related to North Pointe Development, including

relocation activities, and whether they complied with Federal procurement regulations.

The Authority and its instrumentality improperly encumbered Authority assets and did not

comply with Federal procurement regulations for three procurements, and the Authority

inappropriately spent HUD program funds on activities that did not benefit HUD programs.

OIG recommended that HUD require the Authority to (1) obtain the release of any encumbered

assets and ensure that it will no longer encumber assets; (2) support or repay $400,000 to its HOME

Investment Partnerships program, more than $94,000 to its Community Development Block Grant

program, more than $30,000 to its capital fund grants, and more than $9,700 to its Section 8 project

reserve or HUD as appropriate; (3) ensure that it procures goods and services as required; and

(4) implement written procedures and controls to prevent future noncompliance. (Audit Report:

2009-FW-1001)



HUD OIG audited the Section 8 funds transfer and public housing program tenant rent calculations

of the Housing Authority of the County of Marin in San Rafael, CA, to determine whether (1) the

transfer of Section 8 operating reserve funds to the public housing program in FY 2006 was made in

compliance with HUD regulations and (2) the Authority calculated public housing tenant rents in

accordance with HUD requirements.

The Authority's transfer of Section 8 operating reserve funds to the public housing program in FY

2006 was made using pre-2004 funds in compliance with HUD regulations. However, the Authority did

not calculate public housing tenant rents in accordance with HUD requirements in 35 of the 71 files

reviewed.

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
32

OIG recommended that HUD require the Authority to (1) reimburse its program residents nearly

$4,000 for overcharged tenant rents, (2) establish and implement procedures and controls to ensure

that tenant rents are calculated in accordance with HUD requirements, and (3) provide appropriate

training to Authority staff to ensure that they understand how to calculate tenant rents correctly. OIG

also recommended that HUD perform a review of the Authority's tenant files within 6 months to

ensure that tenant rents are calculated correctly. (Audit Report: 2009-LA-1001)



HUD OIG audited the Housing Authority of Douglas County in Roseburg, OR, to determine whether

the Authority procured goods and services in accordance with HUD regulations and its procurement

policy, accounted for HUD funds in accordance with HUD's administrative requirements, and managed

its Housing Choice Voucher program in accordance with HUD regulations.

The Authority had internal control weaknesses that resulted in incomplete procurement

documentation, inadequate source documentation, inaccurate housing assistance calculations and

payments, and unallowable expenditures. It spent more than $2,000 on charitable donations and

social events that were unallowable.

OIG recommended that HUD require the Authority to implement procedures and processes to

remedy the internal control weaknesses and repay the ineligible expenditures from nonfederal funds.

(Audit Report: 2009-SE-1001)



HUD OIG audited the Housing Authority of the City of Brush, CO, to determine whether the

Authority performed contracting activities in accordance with Federal procurement requirements.

The Authority did not perform contracting activities in accordance with Federal procurement

requirements. It did not follow HUD requirements regarding price quotations, price analyses, written

justification requirements, or contract determinations.

OIG recommended that HUD require the Authority to properly train its staff regarding Federal

procurement requirements. In addition, OIG recommended that HUD perform a postmonitoring

review to ensure that the Authority took the recommended actions. (Audit Report: 2009-DE-1002)



HUD OIG audited the Housing Authority of the City of Annapolis, MD's management of lead-based

paint in its public housing units to determine whether the Authority complied with HUD and State of

Maryland requirements for inspecting and abating lead-based paint hazards in its public housing units.

The Authority did not comply with HUD and State lead-based paint requirements in a timely

manner. HUD regulations required the Authority to complete lead-based paint inspections by

September 15, 2000, and risk assessments by March 15, 2002, for all of its public housing units. The

Authority did not comply with these requirements until April 2004. Further, it did not comply in a

timely manner with the terms of an agreement with the Maryland Department of the Environment

obligating it to comply with State lead paint requirements by February 2007. On December 31, 2008,

the Authority submitted documentation to the State as evidence of its compliance with the agreement

and the State's lead paint requirements.

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
33

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

OIG recommended that HUD ensure that the documentation the Authority provided to the State in

December 2008 brought the Authority into compliance with State lead paint laws and if not,

reemphasize to the Authority its obligation to comply with the State lead paint laws. OIG also

recommended that HUD direct the Authority to develop and implement a written policy and

procedures for its ongoing maintenance and reevaluation program for units with lead-based paint,

including maintaining supporting documentation. (Audit Report: 2009-PH-1006)


34

Chapter 2: HUD’s Public and Indian Housing Programs

Some investigations discussed in this report were generated from leads provided by HUD public

and Indian housing program staff or conducted jointly with Federal, State, and local law enforcement

agencies. The results of various significant investigations are described below.

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

$

recovered

Admin/civil

actions

Investigations 356 $9,110,822 407

Our

focus

Page 35

Page 40

Page 45

Page 48

Page 48

- Public housing authority theft/embezzlement

- Rental assistance fraud

- FedRent initiative

- Fugitive Felon Initiative

- Other fraud and crimes

Convictions/pleas/

pretrials

Cases

closed

Key program

results

273

Chart 2.2: Percentage of OIG public and Indian housing closed investigation

cases during this reporting period

Region 1 - 4%

Region 2 - 13%

Region 3 - 12%

Region 4 - 14%

Region 5 - 18%

Region 6 - 13%

Regions 7/8 - 10%

Regions 9/10 - 15%

Region 11 - 1%

Chapter 2 - Public and Indian Housing Programs

Investigations
35

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

Public Housing Authority Theft/Embezzlement

Lodgebuilder Inc. (Lodgebuilder), a former developer under contract with the Fort Defiance

Housing Corporation (Fort Defiance), an organization that receives HUD funding through the Navajo

Housing Authority (Navajo), and Lodgebuilder principals William Aubrey and Brenda Todd were each

found liable in an adversary proceeding held in U.S. Bankruptcy Court, Phoenix, AZ, and collectively

ordered to pay Fort Defiance more than $1.9 million for breaching their fiduciary duties. Lodgebuilder

failed to complete Chilchinbeto Estates, a Navajo housing project located in Window Rock, AZ.



Carl Payne, the former executive director for the Harrisburg Housing Authority (Harrisburg) and

president and chief executive officer for the now-defunct Greater Harrisburg Community Credit Union

(Harrisburg Credit Union), was sentenced in U.S. District Court, Harrisburg, PA, to 5 months

incarceration, 5 months home confinement, and 1 year probation and fined $10,000 for his earlier

guilty plea to making false statements. Payne and others created false documents to obstruct a grand

jury investigation involving the unauthorized diversion of $834,969 in Harrisburg housing funds to the

Harrisburg Credit Union.



Rudolph Crawford, an individual claiming to be a Tampa Housing Authority landlord, was

sentenced in U.S. District Court, Tampa, FL, to 4 months home detention and 5 years probation and

ordered to pay HUD $23,152 in restitution for his earlier guilty plea to committing theft of government

funds. Crawford and others conspired and used the Authority's computer system to fraudulently

generate and obtain $455,168 in housing assistance payments.



Cassandra Ashe, the former East Haven Housing Authority (East Haven) executive director and

New London Housing Authority (New London) Section 8 coordinator, and her husband Jonathan Ashe,

a former New London employee, each pled guilty in U.S. District Court, Hartford, CT, to committing a

conspiracy. From August 2003 through August 2005, Cassandra and Jonathan Ashe conspired and

created a fictitious landlord to obtain $204,951 in New London housing contract payments, and from

March 2007 through April 2008, they stole $192,600 in East Haven housing funds through unauthorized

bank withdrawals. HUD realized losses of $397,191.



Juanita Cruz, a former housing specialist for the Deland Housing Authority, was arrested in Deland,

FL, on probable cause for allegedly committing grand theft over $100,000. From November 2003 to

September 2008, Cruz allegedly created a fictitious Section 8 landlord and fraudulently obtained $292,446

in housing assistance payments.



Brent Wells, the former Crow Creek Housing Authority (Crow Creek) executive director; former

Crow Creek finance officer Alyce McGhee, also known as Alyce Shields; and former Crow Creek

employees Carla Big Eagle, Velsworth Hawk, and Terra Thompson, each previously sentenced in U.S.

District Court, Fort Thompson or Pierre, SD, for their guilty pleas to committing embezzlement and

theft from an Indian tribal organization, were debarred from procurement and nonprocurement
36

Chapter 2: HUD’s Public and Indian Housing Programs

transactions with HUD and throughout the Executive Branch of the Federal Government for 24 months

to 3 years. From May 2004 through December 2005, the above defendants and others submitted

fictitious receipts or invoices and embezzled $186,669 in Crow Creek funds.



Laura Morales, the former Bexar County Housing Authority (Bexar County) executive director,

was charged in U.S. District Court, San Antonio, TX, with allegedly committing theft of Federal

program funds. Morales allegedly stole more than $131,000 in Bexar County funds when she

fraudulently inflated her annual leave hours and compensated herself by creating, endorsing, and

negotiating unauthorized Bexar County checks.



Kristi and Ronnie Wilson, the former Conyers Housing Authority (Conyers) executive director and

lease enforcement officer, were each indicted in U.S. District Court, Atlanta, GA, for allegedly

committing a conspiracy, theft of government funds, mail fraud, and honest service violations. Kristi

and Ronnie Wilson allegedly used Conyers credit cards for personal expenses, and Kristi Wilson

Copyright, 2009. San Antonio Express - San Antonio, TX. Reprinted with permission.

Copyright, 2008. Rockdale Citizen - Conyers, GA. Reprinted with permission.

Chapter 2 - Public and Indian Housing Programs
37

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

allegedly approved and obtained unauthorized salary payments for herself and Ronnie Wilson. HUD

losses are estimated at $130,000.



Norman Taylor, a Housing Authority of New Orleans (New Orleans) security

manager, was indicted in U.S. District Court, New Orleans, LA, for allegedly

committing Federal program fraud. From January 2006 to March 2008, Taylor

allegedly prepared, endorsed, and negotiated $85,000 in bogus New Orleans

payroll checks.



Robert Newell, the former governor for the

Passamaquoddy Tribe Indian Township Reservation

(Passamaquoddy), a HUD-funded Indian tribal

organization, and former Passamaquoddy financial

officer James Parisi were each convicted in U.S.

District Court, Bangor, ME, of committing a conspiracy

and embezzlement and making false statements and

claims. From 2003 to 2006, Newell and Parisi diverted

and used more than $1.7 million in Passamaquoddy

funds without authorization, including $82,000 in HUD

funds.



James Pumpelly, a manager for Parkside

Management and Rental Company (Parkside), an

organization that receives housing assistance from both

the Barre and Vermont Housing Authorities, was

indicted in U.S. District Court, Rutland, VT, for

allegedly committing theft of government funds, bank

fraud, and fraud by interstate commerce. From

 October 2007 to January 2008, Pumpelly allegedly

 embezzled more than $500,000 in Parkside funds,

 including $75,000 in Section 8 subsidies.



Audrey Hall, a former housing counselor for the Lancaster Housing Agency, pled guilty in U.S.

District Court, Dallas, TX, to making a false writing or document to a Federal agency. Hall created a

fictitious tenant and corresponding documents and fraudulently obtained about $65,000 in housing

assistance payments



Rosita Colon, the former leased housing coordinator for the Everett Housing Authority and a

Metropolitan Boston Housing Partnership Section 8 tenant, was arrested and charged in U.S. District

Court, Boston, MA, with allegedly committing theft of public money and misrepresentation of a Social

Security number (SSN). From September 1996 through November 2007, Colon allegedly used several

Copyright, 2008. The

Times-Picayune - New

Orleans, LA. Reprinted

with permission.

Copyright, 2008. Bangor

Daily News - Bangor,

ME. Reprinted with

permission.
38

Chapter 2: HUD’s Public and Indian Housing Programs

fraudulent identities and SSNs, failed to report income on housing and other certifications, and

obtained $37,301 in housing assistance and $167,079 in other benefits she was not entitled to receive.



Erica Spears, the former Omaha Tribal Housing Authority (Omaha Tribal) executive director, was

sentenced in U.S. District Court, Omaha, NE, to 3 years probation and ordered to pay Omaha Tribal

$23,000 in restitution for her earlier guilty plea to misapplication and unauthorized conversion of

money from an entity receiving Federal funds. Spears embezzled approximately $30,000 from Omaha

Tribal through unauthorized salary payments, falsified travel forms, and loans she failed to repay.



LaVina McNeil, the former executive director for the Wolf Creek Community Committee (Wolf Creek),

a Navajo Housing Authority contractor, was indicted in U.S. District Court, Phoenix, AZ, for allegedly

committing embezzlement and theft from an Indian tribal organization. McNeil allegedly embezzled

Wolf Creek funds when she prepared, endorsed, and negotiated one $28,296 Wolf Creek check without

authorization.



Ronnie Faison and Sergio Gonzalez, the former Englewood Housing Authority (Englewood) deputy

director and bookkeeper, were each arrested and charged in U.S. District Court, Newark, NJ, with

allegedly committing theft of government funds. Faison and Gonzalez allegedly used $7,400 in Englewood

funds to purchase personal use items.



William Stevens, Jacqueline Washington, and Barbara Johnson, the president,

vice-president, and treasurer of the local advisory council for Crestview Apartments

(Crestview), a housing development funded by the Cuyahoga Metropolitan Housing

Authority, were each charged in Cuyahoga County Court of Common Pleas,

Cleveland, OH, with allegedly committing theft. The above defendants allegedly

diverted and personally used $4,236 in Crestview funds.



Carlos Madrid, the former board chairman for the Housing Authority of Bexar

County (Bexar County), pled guilty in U.S. District Court, San Antonio, TX, to

depravation of honest services. Madrid failed to disclose his relationship to or

employment with a developer involved in a Bexar County housing project, acted as

an advocate for the project before the Bexar County board and voted to approve the

project, and then altered the Bexar County board meeting minutes in an attempt to

corroborate his reported abstinence from the vote.



Copyright, 2008. San Antonio

Express - San Antonio, TX.

Reprinted with permission.

Chapter 2 - Public and Indian Housing Programs
39

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

Benny Ramos, the former deputy director for the City of Paterson Section 8 program, was

sentenced in U.S. District Court, Newark, NJ, to 37 months incarceration and 36 months supervised

release and fined $1,100 for his earlier guilty plea to accepting cash intending to be influenced and

rewarded. From 2004 through February 2006, Ramos solicited and accepted bribes from an unnamed

conspirator in exchange for steering Section 8 tenants to specific properties.



Teresa Meegan, the Moline Housing Authority executive director, pled guilty in U.S. District Court,

Rock Island, IL, to making false statements to HUD. Meegan falsified and altered public housing

waiting lists to assist family members and friends.



Real estate appraiser Anthony Staph was indicted in U.S. District Court, Pittsburgh, PA, for

allegedly committing bank fraud, and the Lawrence County Housing Authority (Lawrence County)

board of directors chairman Gary Felasco was charged with allegedly failing to file a Federal income

tax return. Staph allegedly prepared and provided seven fraudulent property appraisals used by

Affordable Housing of Lawrence County, Inc., a nonprofit organization created by Lawrence County to

obtain conventional mortgage loans. Felasco allegedly failed to file a 2005 Federal income tax return

or report income he received for his involvement in the above scheme.



Michael Macaruso, a former Providence, North Providence, and Cranston Housing Authorities

contractor, doing business as Ocean State Building Wrecking and Asbestos Removal, Inc., was

sentenced in U.S. District Court, Providence, RI, to 2 years incarceration and 3 years supervised

release, ordered to perform 720 hours of community service and pay his former employees $117,841

in restitution, and fined $50,000 for his earlier guilty plea to obtaining kickbacks from public works

employees and filing false Federal income tax returns. From July 2003 to December 2006, Macaruso

submitted false employee wage and benefit certifications to the above housing authorities and failed

to report income on his 2005 and 2006 Federal income tax returns.



Copyright, 2009. Providence Journal - Providence, RI.

Reprinted with permission.
40

Chapter 2: HUD’s Public and Indian Housing Programs

John Fischer, a former Buffalo Municipal Housing Authority (Buffalo) administrator, was indicted

in U.S. District Court, Buffalo, NY, for allegedly committing bribery and extortion and tampering with

a witness. Fischer allegedly pressured a Buffalo contractor to provide and install a roof at a private

residence in exchange for his support on a Buffalo project. In addition, Fischer allegedly attempted to

influence the official statements provided by others after he learned of the ongoing investigation.



Darnell Johnson, a former Cook County Housing Authority (Cook County) employee, was indicted

in Cook County Circuit Court, Chicago, IL, for allegedly committing theft, forgery, and identity theft.

Johnson allegedly obtained, forged, and attempted to negotiate Cook County checks without

authorization and allegedly used personal information belonging to other Cook County employees to

obtain credit.



Roman Villa, a former maintenance employee for the El Paso County Housing Authority (El Paso

County), was indicted in U.S. District Court, El Paso, TX, for allegedly making a false statement during

a criminal investigation. Villa allegedly performed work at a privately owned apartment complex

during his normal El Paso County work hours and denied his unauthorized activities when questioned

by Federal agents.



Dora Rodriguez, a Nassau County Department of Housing and Homeless Services (Nassau County)

Housing Choice Voucher program participant, pled guilty in Nassau County District Court, Nassau

County, NY, to committing criminal facilitation. Rodriguez solicited and obtained $6,000 from a

potential Housing Choice Voucher program participant and then contacted and paid Nassau County

employees who fraudulently provided a housing voucher.

Rental Assistance Fraud

Twenty San Bernardino County Housing Authority (San Bernardino) Section 8 tenants were

arrested in Victorville, CA, on probable cause for allegedly committing housing program fraud. San

Bernardino Section 8 tenants Frances Navarro, Laquetta

Carrington, and Sabrina Kendall were each charged with

allegedly committing perjury and obtaining aid by

misrepresentation; San Bernardino Section 8 tenant

Rochelle Hampton pled guilty to fraudulently obtaining

aid by misrepresentation; and San Bernardino

Section 8 tenant Jose Arroyo was sentenced to 13 days

incarceration for his earlier guilty plea to accessory to a

felony. The above defendants allegedly or admittedly failed

to report income, accurate household compositions, or

unauthorized residents and their criminal histories on

housing certifications and collectively obtained about

$330,000 in housing assistance they were not entitled to

receive.



Copyright, 2008. The Daily Press - Victor valley

and High Desert, CA. Reprinted with permission.

Chapter 2 - Public and Indian Housing Programs
41

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

Chicago Housing Authority (Chicago) Section 8 landlord John Farano was indicted in U.S. District

Court, Chicago, IL, for allegedly committing theft of government funds; Chicago Section 8 landlord

Jonathon Hon pled guilty to committing wire fraud; Chicago Section 8 tenants Norma Lara and Myrtis

Burkhart, also known as Myrtis Griffin, each pled guilty to committing theft of government funds; and

fictitious Chicago Section 8 landlord Charles Woods was sentenced to 18 months probation and

ordered to pay four property owners $12,000 in restitution for his earlier guilty plea to committing

theft. Farano allegedly obtained $2,610 in housing assistance payments for a subsidized property he

did not own, Hon failed to report the sale of his Section 8 subsidized properties and fraudulently

obtained more than $210,000 in housing assistance payments, Lara and Burkhart failed to report

income, and Woods illegally claimed ownership of four Chicago subsidized properties. Collectively,

the above defendants obtained $284,423 in housing assistance and $140,144 in other benefits they

were not entitled to receive.



Five former Las Vegas Housing Authority (Las Vegas) Section 8 tenants and a landlord were each

charged in Clark County Justice Court, Las Vegas, NV, with allegedly committing theft by

misrepresentation or intimidating a witness. In addition, current or former Las Vegas Section 8

tenants Margree Geter, Aran and Marquita Tolliver, and Georgina Pedregon each pled guilty to

committing theft by misrepresentation, attempted theft, or a conspiracy to commit theft; former Las

Vegas Section 8 tenant Paulette Godfrey was sentenced to 12 months incarceration (suspended) and 3

years probation and ordered to perform an unspecified number of community service hours for her

earlier guilty plea to committing an attempted theft; and previously sentenced Las Vegas Section 8

tenants Donald and Mayra Colbert were named in a joint consent judgment and ordered to pay HUD

$109,168 for their earlier guilty pleas to committing a conspiracy. From May 2002 through October

2008, the above defendants allegedly or admittedly failed to report income, assets, or accurate

household composition on housing certifications and collectively obtained $282,470 in housing

assistance they were not entitled to receive.



Abraham Aizenberg, Patricia Jackson, Tieta Wong, and Tasheka Coutrier, a New York City Housing

Authority (New York City) Section 8 landlord and housing recipients, were each arrested and charged

in U.S. District Court, Manhattan, NY, with allegedly committing theft of government funds or public

money, aggravated identity theft, or misuse of an SSN. In addition, former New York City housing

recipients Chun and Yi Li each pled guilty to committing a conspiracy to steal government funds,

Sandra Feliciano entered into a deferred prosecution and agreed to undergo 6 months supervised

release and pay New York City $12,370 in restitution, and Alfredo Solis was sentenced to 6 months

home detention and 36 months supervised release and ordered to pay New York City $8,913 in

restitution for his earlier guilty plea to committing theft of government funds. The above defendants

allegedly or admittedly failed to report income, assets, familial relationships, nonresidency in their

subsidized unit, or their concurrent receipt of other housing assistance and collectively obtained

$234,838 in housing assistance and $50,000 in other benefits they were not entitled to receive.



Juana Nunez, a former Ventura County Housing Authority (Ventura County) Housing Choice Voucher

program participant, was charged in Ventura County Superior Court, Santa Paula, CA, with allegedly

committing grand theft and welfare fraud. In addition, former Ventura County housing recipients

Corrina Arenas, Raquel Garcia, and Christina Edwardson were collectively sentenced to 105 days
42

Chapter 2: HUD’s Public and Indian Housing Programs

incarceration, 60 days home arrest, and 132 months supervised release; and Arenas was ordered to

pay Ventura County $13,854 in restitution for their earlier guilty pleas to committing grand theft or

welfare fraud. Nunez allegedly and the remaining defendants admittedly failed to report income or

unauthorized residents and their criminal histories on housing certifications and collectively obtained

$207,682 in housing assistance they were not entitled to receive.



Marion Oliver and Ronetta Ramos, West Palm Beach Housing Authority (West Palm Beach)

Housing Choice Voucher program participants, and Rene Ramos, an unauthorized West Palm Beach

tenant, were each arrested on probable cause for allegedly committing an organized scheme to

defraud, grand theft, public assistance fraud, or a conspiracy to commit fraud. In addition, West Palm

Beach housing recipients Martha Aguilar and Latoya Mills, Section 8 landlord Scott Epstein, and

unauthorized tenants Reginald Bradley and Vivian Smith were each arrested and charged in Fifteenth

Judicial Circuit Court, Wellington, FL, with allegedly committing an organized scheme to defraud, a

conspiracy to commit fraud, grand and petit theft, or public assistance fraud. The above defendants

allegedly failed to report accurate household composition or unauthorized residents and their

criminal histories and collectively obtained $165,640 in housing assistance they were not entitled to

receive.



Seven current or former Torrance Housing Authority (Torrance) Section 8 tenants, were each

charged in Los Angeles County Superior Court, Torrance, CA, with allegedly filing false or forged

instruments, obtaining money by false pretenses, defrauding another person of money, making false

statements, or committing grand theft or perjury by declaration. The above defendants allegedly

failed to report accurate household compositions or unauthorized residents and their criminal

histories on housing certifications and together obtained $126,280 in housing assistance they were

not entitled to receive. In addition, former Torrance Section 8 tenants Hannah Kyong Hui Agnola, Raja

Ashiq, and Marouf Begum were collectively sentenced to 31 days incarceration and 13 years

probation and ordered to pay Torrance $35,803 in restitution for their earlier conviction or guilty

pleas to committing perjury by declaration or a scheme to defraud another person of money;

Copyright, 2008. Ventura County Star, Ventura, CA. Reprinted with permission.

Chapter 2 - Public and Indian Housing Programs
43

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

attempting to file false and forged instruments; or obtaining money, labor, or property by false

pretenses. Agnola, Ashiq, and Begum failed to report income on housing certifications and together

obtained $35,803 in housing assistance they were not entitled to receive. Collectively, the above

defendants caused HUD losses of $162,083.



Andres Corporan, also known as Alberto Ayala, a former Boston Housing Authority (Boston)

Section 8 tenant, was arrested after his indictment in U.S. District Court, Boston, MA, for allegedly

making false statements, committing theft of public money, and misuse of an SSN. In addition, Boston

Section 8 tenants Ana Cruz, Gladys Hill, and Zina Worley were each charged with allegedly committing

larceny or making false claims to a government agency, and former Boston Section 8 tenant Suezanne

Bruce was sentenced to 36 months probation and ordered to pay Boston $20,000 in restitution for her

earlier guilty plea to committing larceny. Between October 1999 and January 2008, Andres allegedly

failed to report income or his true identity, Cruz allegedly provided altered Section 8 vouchers for

others in exchange for $1,330, and Hill and Worley allegedly and Bruce admittedly failed to report

income. Collectively, the above defendants obtained $158,423 in housing assistance they were not

entitled to receive.



Samuel Johnston, a former San Diego Housing Commission (San Diego) Section 8 tenant, was charged

in San Diego County Superior Court, San Diego, CA, with allegedly making false statements and

committing grand theft. In addition, five former San Diego housing recipients were collectively

sentenced to 184 days incarceration and 240 months probation and ordered to perform 90 days

community service and pay San Diego $106,442 in restitution for their earlier guilty pleas to

committing grand theft. Johnston allegedly and the remaining defendants admittedly failed to report

income, accurate household composition, or unauthorized residents on housing certifications and

collectively obtained $148,742 in housing assistance they were not entitled to receive.



Copyright, 2009. The Boston Globe, Boston, MA. Reprinted with permission.
44

Cook County Housing Authority (Cook County) Section 8 landlord James Branthaver and Section 8

tenant Lynnette Bridier-Grzelak were each indicted in Cook County Circuit Court, Chicago, IL, for

allegedly committing theft by deception and forgery. In addition, former Cook County Section 8 tenant

Aida Contreras was sentenced to 2 years probation and ordered to pay HUD $12,000 in restitution for

her earlier guilty plea to committing theft by deception. Branthaver and Bridier-Grzelak allegedly and

Contreras admittedly failed to report income, familial relationships, or their joint residency on

housing certifications and collectively obtained more than $146,900 in housing assistance they were

not entitled to receive.



Francis and Mary Turner, Sonya Pierce, and Debra Everett, Cuyahoga Metropolitan Housing

Authority (Cuyahoga) Section 8 landlords or tenants, were each charged in U.S. District Court or

Cuyahoga County Court of Common Pleas, Cleveland, OH, with allegedly making false statements,

committing theft of government funds, or tampering with records. The above defendants allegedly

used false identities or failed to report income, assets, an accurate marital status, or their familial

relationships and criminal histories on housing certifications. In addition, Cuyahoga Homeownership

Voucher Assistance (Homeownership) program participant Valerie Valentine was indicted for

allegedly committing grand theft. Valentine allegedly failed to remit Homeownership funds to her

lender or report an unauthorized resident and his criminal history on housing certifications and

obtained $27,082 in housing assistance she was not entitled to receive. Collectively, the above

defendants obtained $121,805 in housing assistance and $34,602 in other benefits they were not

entitled to receive.



Betty Hidalgo, Andy Hart, and Linda Perez, current or former New York City Housing Development

Corporation Section 8 tenants, were each arrested and charged in U.S. District Court, New York City,

NY, with allegedly committing theft of government funds or making false statements. The above

defendants allegedly failed to report income on housing certifications and collectively obtained about

$119,052 in housing assistance they were not entitled to receive.



Jeromeia Franklin, Rohini Singh, Bridget Collins, and Nai Saechao, current or former Sacramento

Housing and Redevelopment Agency (Sacramento) housing recipients, were each charged in

California or Sacramento County Superior Courts, Sacramento, CA, with allegedly committing grand

theft, perjury, and welfare violations or obtaining services by false pretenses. In addition, former

Sacramento housing recipient Rickisa Garner was sentenced to 90 days incarceration and 3 years

probation and ordered to pay HUD $6,193 in restitution for her earlier nolo contendere plea to

allegedly committing grand theft. The above defendants allegedly failed to report income,

unauthorized residents and their criminal histories, or their nonresidency in their subsidized units on

housing certifications and collectively obtained $102,174 in housing assistance they were not entitled

to receive.



Kisha Parks and Elaine Manor, also known as Elaine Thomas, former Rochester Housing Authority

(Rochester) Housing Choice Voucher program participants, were each charged in U.S. District Court,

Rochester, NY, with allegedly committing theft of government funds. In addition, former Rochester

housing recipient Rita Gaston pled guilty to committing theft of government funds. The above

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs
45

Chapter 2: HUD’s Public and Indian Housing Programs

defendants allegedly or admittedly failed to report income or their concurrent receipt of other

housing assistance on housing certifications and collectively obtained $101,498 in housing assistance

they were not entitled to receive



Linda Mahogany, a former Prince Georges County Department of Housing and Community

Development (Prince Georges County) Housing Choice Voucher program participant, was indicted in

Prince Georges County Circuit Court, Upper Marlboro, MD, for allegedly making false statements and

committing theft over $500. In addition, former Prince Georges County housing recipient Lenee Smith

was sentenced to 5 years probation and ordered to pay Prince Georges County $10,000 in restitution

for her earlier guilty plea to committing theft. From 2000 through 2007, Mahogany allegedly and Smith

admittedly failed to report income or an unauthorized resident and his criminal history on housing

certifications and together obtained $93,715 in housing assistance they were not entitled to receive.



Howard and Nancy Lewis, Cumberland County Housing and Redevelopment Authority (Cumberland

County) Housing Choice Voucher program participants and the president and treasurer for the New

Covenant Evangelistic Ministry (New Covenant), a Cumberland County landlord, each pled guilty in

U.S. District Court, Harrisburg, PA, to committing a conspiracy to defraud HUD. Howard and Nancy

Lewis failed to report their financial interests in their Cumberland subsidized or other New Covenant

properties and together obtained $79,500 in housing assistance they were not entitled to receive.



Sandra Singleton and Michael Elmore, a former King County Housing Authority (King County)

Section 8 tenant and unauthorized resident, were each indicted in King County Superior Court, Kent,

WA, for allegedly committing theft. From January 2002 through November 2006, Singleton allegedly

failed to report Elmore's residency or income on housing certifications and obtained $74,081 in

housing assistance she was not entitled to receive.



Sandra Wade, Christopher Shaw, Deborah Price, and Pamela Govan, former Memphis Housing

Authority Housing Choice Voucher program participants, were each indicted in U.S. District Court,

Memphis, TN, for allegedly making false statements and committing embezzlement. The above

defendants allegedly failed to report income on housing certifications and collectively obtained $71,491

in housing assistance they were not entitled to receive.



Vanessa Ruiz, Stevie Sizemore, and Tina Cross, former Westminster Office of Housing (Westminster)

Housing Choice Voucher program participants, were each sentenced in U.S. District Court, Baltimore,

MD, to 60 months probation and collectively ordered to pay Westminster $70,394 in restitution for

their earlier guilty pleas to committing theft. The above defendants failed to report accurate

household compositions on housing certifications and together obtained about $70,394 in housing

assistance they were not entitled to receive.



Chapter 2 - Public and Indian Housing Programs
46

Chapter 2: HUD’s Public and Indian Housing Programs

Tracie Wiggins, a former Baltimore County Housing Authority (Baltimore County) Section 8

tenant, was charged in Baltimore County Circuit Court, Baltimore, MD, with allegedly committing

theft by deception and fraudulently obtaining housing benefits. In addition, former Baltimore County

housing recipient Beverly Beard was convicted in U.S. District Court of making false statements and

committing Social Security Administration fraud. Wiggins allegedly and Beard failed to report income

on housing and other certifications and together obtained about $69,976 in housing assistance and

$125,024 in other benefits they were not entitled to receive.

FedRent Initiative

Constituting HUD's primary appropriated activity, housing assistance programs served more than

4.8 million households and expended more than $24 billion in FY 2003. Recent studies indicate that an

estimated 60 percent of all subsidized housing rents are miscalculated, and approximately $3.2 billion

in erroneous and $2 billion in net annual subsidy overpayments are a result of both errors in program

administration and tenants underreporting income.

In an effort to combat administrative overpayments and tenant fraud, HUD and HUD OIG

commenced "Operation FedRent," a joint effort to address rental assistance fraud involving Federal

employees. Operation FedRent compares HUD tenant data to current and retired Federal employee

information maintained by the U.S. Office of Personnel Management. After the data comparison, an

income eligibility determination is made, and the SSNs for family members 6 years of age and older are

verified. If a discrepancy exists, an investigation is opened, and appropriate administrative or legal

actions are initiated to collect any overpaid housing assistance. Results of Operation FedRent during

this semiannual reporting period are described below.



Diane Reid and Natasha Acoff, former Cook County Housing Authority (Cook County) Section 8

tenants and current U.S. Postal Service (USPS) or U.S. Department of Homeland Security (DHS)

employees, each pled guilty in U.S. District Court, Chicago, IL, to committing theft of government

funds. In addition, former Cook County Section 8 tenants and current or former USPS employees

Marsha Pate-Rollins and Latesia Foster were collectively sentenced to 3 years probation and ordered

to pay HUD $30,803 in restitution for their earlier guilty pleas to committing theft of government funds.

The above defendants failed to report income on housing certifications and collectively obtained

$80,803 in housing assistance they were not entitled to receive.



Jonathan Harrington, a former Prince Georges County Department of Housing and Community

Development Section 8 tenant and USPS employee, was indicted in Prince Georges County Circuit

Court, Upper Marlboro, MD, for allegedly committing theft over $500. From 1998 through 2006,

Harrington allegedly failed to report income on housing certifications and obtained $65,221 in housing

assistance he was not entitled to receive.



Lakeesha Jefferson, a former San Francisco Housing Authority Section 8 tenant and Federal

Emergency Management Agency (FEMA) employee, pled guilty in U.S. District, San Francisco, CA, to

committing theft of government funds. From October 2004 through October 2006, Jefferson failed to

report income or her familial relationship to her Section 8 landlord on housing certifications,

Chapter 2 - Public and Indian Housing Programs
47

Chapter 2: HUD’s Public and Indian Housing Programs

submitted fraudulent FEMA travel vouchers, and obtained about $41,029 in housing assistance and

$16,252 in travel reimbursements she was not entitled to receive.



Doris Smith and Quinchitta Jackson, former Chicago Housing Authority housing recipients and

current or former USPS employees, each pled guilty in U.S. District Court, Chicago, IL, to committing

theft of government funds. Smith and Jackson failed to report income on housing certifications and

together obtained $38,900 in housing assistance they were not entitled to receive.



Kenyada Spates and Cindy Valentine, also known as Cindy Engle, current or former Cuyahoga

Metropolitan Housing Authority (Cuyahoga) housing recipients and Internal Revenue Service (IRS)

employees, and Cuyahoga Section 8 landlord Daniel Engle were collectively sentenced in U.S. District

Court, Cleveland, OH, to 30 months incarceration and 60 months probation and ordered to pay

Cuyahoga $35,997 in restitution for their earlier guilty pleas to making false statements, committing

theft, or tampering with records. Spates failed to report income or assets, and Valentine and Engle

failed to report their familial relationship or their joint residency in and ownership of the subsidized

unit. Collectively, the above defendants obtained $35,997 in housing assistance they were not entitled

to receive.



Elizabeth Rosa, a former Orange County Housing Agency Section 8 tenant and USPS employee, was

sentenced in U.S. District Court, Tampa, FL, to 90 days home detention and 3 years probation and

ordered to pay HUD $28,931 in restitution for her earlier guilty plea to making false statements and

committing theft of government funds. From June 2001 to July 2006, Rosa failed to report income on

housing certifications and obtained $28,931 in housing assistance she was not entitled to receive.



Dora Fry, a former Kansas City Housing Authority Housing Choice Voucher program participant

and IRS employee, pled guilty in U.S. District Court, Kansas City, MO, to committing theft of

government funds. From 2000 through 2004, Fry failed to report income on housing certifications and

obtained $25,424 in housing assistance she was not entitled to receive.



Mentha Jefferson and Lekeisha McKinney, former Memphis Housing Authority Housing Choice

Voucher program participants and U.S. Department of Agriculture or IRS employees, were each charged

in U.S. District Court, Memphis, TN, with allegedly making false statements and committing

embezzlement. From 2000 to 2006, Jefferson and McKinney allegedly failed to report income on

housing certifications and together obtained $23,702 in housing assistance they were not entitled to

receive.



Lavon Wright, a San Bernardino County Housing Authority Section 8 tenant and U.S. Department of

Veterans Affairs employee, was sentenced in U.S. District Court, Los Angeles, CA, to 6 months home

detention and 24 months probation and ordered to pay HUD $14,411 in restitution for his earlier guilty

Chapter 2 - Public and Indian Housing Programs
48

Chapter 2: HUD’s Public and Indian Housing Programs

plea to making false statements. Wright failed to report income on housing certifications and

obtained $21,000 in housing assistance he was not entitled to receive.



Amy Pena, a former Ogden Housing Authority Housing Choice Voucher program participant and

IRS employee, pled guilty in U.S. District Court, Salt Lake City, UT, to making false statements. From

2004 through 2006, Pena failed to report income on housing certifications and obtained $17,125 in

housing assistance she was not entitled to receive.



Tara Maxwell, a New York City Housing Authority public housing tenant and DHS employee, was

arrested and charged in U.S. District Court, Manhattan, NY, with allegedly committing theft of

government funds. Maxwell allegedly failed to report income on housing and other certifications and

obtained $16,608 in housing assistance and $43,530 in other benefits she was not entitled to receive.



Dinorah Cancel, a former Tampa Housing Authority Section 8 tenant and USPS employee, was

sentenced in U.S. District Court, Tampa, FL, to 90 days home detention and 5 years supervised release

and ordered to pay HUD $10,601 in restitution for her earlier guilty plea to committing theft of

government funds. Cancel failed to report income on housing certifications and obtained $10,601 in

housing assistance she was not entitled to receive.



Sharlyn Thomas, a North Little Rock Housing Authority Section 8 tenant and USPS employee, was

indicted in U.S. District Court, Little Rock, AR, for allegedly making false statements. Thomas

allegedly failed to report income on housing certifications and obtained $9,024 in housing assistance

she was not entitled to receive

Fugitive Felon Initiative

Enacted into law in 1996, Section 903 of Public Law 104-193, "Elimination of Housing Assistance

with Respect to Fugitive Felons and Probation and Parole Violators," allows for the termination of

housing subsidies for public or assisted housing tenants who flee to avoid prosecution, avoid

confinement after conviction of a felony, or violate conditions of their parole or probation. The law

also authorizes Federal, State, and local law enforcement agencies to exchange information and

perform data matches.

OIG supports a Fugitive Felon Initiative (FFI) by matching HUD housing assistance information

with crime data from the National Crime Information Center, U.S. Marshals Service (Marshals), and

other participating law enforcement data banks. In addition, OIG special agents actively participate in

the Marshals' "Operation FALCON," a joint law enforcement effort to locate and apprehend fugitive

felons wanted for violent crimes. Conducted in most major cities throughout the United States and its

territories, Operation FALCON places a strong emphasis on apprehending fugitive felons involved in

gangs, homicides, sexual assaults, or crimes against the elderly and children. Since the inception of

OIG's FFI, hundreds of cases have been opened and closed, resulting in more than 8,467 arrests. OIG

strongly supports Operation FALCON in an effort to make HUD public and assisted housing safe for

families. FFI results during this semiannual reporting period are described below.



Chapter 2 - Public and Indian Housing Programs
49

Chapter 2: HUD’s Public and Indian Housing Programs

Jacquelyn McFarland was sentenced in U.S. District Court, Wichita, KS, to 1 year supervised

release for her earlier guilty plea to impeding a Federal law enforcement officer. McFarland assaulted

a HUD OIG special agent and a deputy U.S. marshal during Operation FALCON.



Johanna Gurule, Angela Cockrell, and Kirsten Jewett, Salt Lake City Housing Authority Housing

Choice Voucher program participants, were each arrested in Salt Lake City, UT, on outstanding

warrants for allegedly driving with a measurable controlled substance or committing sexual

solicitation, domestic violence, or theft.



Anthony Andrews, an unauthorized Sacramento Housing and Redevelopment Agency tenant, was

arrested in Sacramento, CA, on an outstanding parole violation for allegedly failing to report his

whereabouts.

Other Fraud and Crimes

Kim Nicholson and Edlan Jones were each indicted in U.S. District Court, St. Louis, MO, for

allegedly committing a conspiracy to manufacture counterfeit securities and submitting false claims,

and Laron Cook pled guilty to committing a conspiracy to manufacture counterfeit securities and

submitting false claims. Nicholson and Jones allegedly and Cook admittedly conspired to fraudulently

manufacture and negotiate $33,261 in St. Clair County Housing Authority, $17,292 in St. Louis Housing

Authority, and $32,639 in other counterfeit checks and provided false information used by others to

file fraudulent Federal income tax returns.



Robert Guerrero, Alison Edeleman, and Johanny Mendez, employees for Property Cash, a

Huntington Housing Authority (Huntington) Section 8 landlord, were each arrested after their

indictments in U.S. District Court, Greenlawn, NY, for allegedly committing theft of government funds.

The above defendants allegedly obtained and fraudulently negotiated $25,279 in Huntington housing

assistance payments belonging to another Huntington Section 8 landlord.



Jerry Carti, a former loan officer for U.S. Mortgage Corporation; Renford Davis, a property

manager for Renhops Management, LLC; and real estate investor Norman Barna each pled guilty in

U.S. District Court, Newark, NJ, to committing a conspiracy to commit wire fraud and money

laundering or committing a conspiracy to commit wire fraud. Carti and others inflated home values

through bogus appraisals, fabricated borrower deposit amounts, and caused the falsification of loan

documents used by Davis, Barna, and others to fraudulently obtain conventional mortgages. The

fraudulently mortgaged properties were then placed into the Paterson Housing Authority or the City

of Paterson Section 8 programs.



Sharon Forest, a former Maine State Housing Authority and Aroostook County Action Program

Section 8 tenant, was charged in U.S. District Court, Bangor, ME, with allegedly committing mail fraud.

From August 1996 through April 2007, Forest allegedly stole about $18,193 in housing assistance

Chapter 2 - Public and Indian Housing Programs
50

Chapter 2: HUD’s Public and Indian Housing Programs

Chapter 2 - Public and Indian Housing Programs

payments from her Section 8 landlord, used her landlord's identity to secure multiple credit cards, and

fraudulently obtained about $17,872 in goods and services.



Mayra Montano, a former Islip Housing Authority Section 8 tenant who previously pled guilty in

Suffolk County Superior Court, Central Islip, NY, to committing grand larceny, entered into a Program

Fraud Civil Remedies Act settlement and agreed to pay HUD $15,000. Montano failed to report her

ownership of her subsidized property on housing certifications and obtained $107,000 in housing

assistance she was not entitled to receive.



Helen Lowe, a former San Francisco Housing Authority Section 8 landlord previously sentenced in

U.S. District Court, San Francisco, CA, for her earlier guilty plea to making false statements to HUD,

was debarred from procurement and nonprocurement transactions as a participant or principal with

HUD and throughout the Executive Branch of the Federal Government for 2 years. From August 1998

to December 2006, Lowe failed to report her familial relationship to or the nonresidency of her Section

8 tenant and obtained $126,934 in housing assistance payments she was not entitled to receive.



Anthony Woskow, a former Stover Housing Authority Section 8 tenant, was sentenced in U.S.

District Court, Jefferson City, MO, to 87 months incarceration and 10 years supervised release for his

earlier guilty plea to possession and receipt of child pornography through the U.S. mail. Woskow

obtained and possessed child pornography at his subsidized housing unit.



Joseph Maddens pled guilty in Macomb County Circuit Court, St. Clair Shores, MI, to making false

pretenses. Maddens posed as a State employee, sold phony Detroit Housing Commission housing

vouchers, and fraudulently obtained about $2,000 from numerous victims.



Fawaz Najjar, a Syrian citizen and an unauthorized Jacksonville Housing Authority (Jacksonville)

public housing tenant, was arrested and charged in U.S. District Court, Jacksonville, FL, with

allegedly committing immigration violations. Najjar allegedly resided with his spouse in her

Jacksonville public housing unit without authorization and violated immigration laws when he

allegedly failed to carry immigration documentation and illegally obtained employment.


Chapter 2: HUD’s Public and Indian Housing Programs
52

In addition to multifamily housing developments with U.S. Department of Housing and Urban

Development (HUD)-held or HUD-insured mortgages, the Department owns multifamily projects

acquired through defaulted mortgages, subsidizes rents for low-income households, finances the

construction or rehabilitation of rental housing, and provides support services for the elderly and

handicapped.

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Chapter 3: HUD’s Multifamily Housing Programs

Page 53

Page 53

Page 54

* This does not include disaster relief audits. See chapter 5 for these reviews.

Key program results Questioned costs Funds put to better use

Audit 7 audits $50.2 million ---

Our

focus

- Review of HUD's monitoring of performance-based contract

 administrators

- Review of HUD's Sections 202 and 811 capital advance programs

- Owner and management agent operations

Chart 3.1: Percentage of OIG multifamily housing audit reports

during this reporting period

Region 1 - 14%

Region 2 - 14%

Region 3 - 14%

Region 4 - 0%

Region 5 - 0%

Region 6 - 29%

Regions 7/8 - 0%

Regions 9/10 - 29%

Region 11 - (N/A)*

Audit

Chapter 3 - Multifamily Housing Programs
53

Chapter 3: HUD’s Multifamily Housing Programs

Review of HUD's Monitoring of Performance-Based Contract

Administrators

The HUD Office of Inspector General (OIG) audited HUD's monitoring of its annual contributions

contract with its performance-based contract administrator, the New York State Housing Trust Fund

Corporation, New York, NY, to determine whether HUD appropriately monitored the contractor with

respect to contract performance.

HUD did not effectively assess the performance and contractual compliance of the contractor and

its subcontractor. Specifically, (1) HUD did not fulfill its monitoring responsibilities regarding appeals

of fee determinations, monthly invoice reviews, and the annual compliance review; and (2) HUD

headquarters and hub management failed to keep open lines of communication to provide clear and

concise guidance. As a result, more than $2.08 million in reduced administrative fees that were

reversed were unsupported, and the contractor's substandard performance was not adequately

addressed.

OIG recommended that HUD (1) establish policies and procedures defining the roles and

responsibilities of hub staff; (2) provide training to hub staff in monitoring the contractor's

performance; (3) examine the appeals and ensure that the appropriate supporting documentation

exists for the fees reimbursed to the contractor; and (4) develop policies and procedures for

monitoring the Section 8 contract administration initiative and reviewing challenges to HUD's fee

determination, the monthly invoice review, and the annual compliance review. (Audit Report:

2009-NY-0001)



HUD OIG audited HUD's recent invitation to submit applications for performance-based contract

administrator services for Southern California to be effective June 1, 2009, and its related annual

contributions contract to determine whether the invitation and proposed contract were consistent

with the management decisions on Audit Report 2007-SE-0001 and to advise HUD of any inconsistency.

HUD did not implement the two recommendations from Audit Report 2007-SE-0001 calling for

changes to the contract. As a result, the deficiencies reported in that report were not corrected.

Consequently, HUD could pay as much as $1.9 million or 19 percent of the contract's basic fee each

year for work not required and not performed on this contract and will not achieve its objective of

obtaining the best value for dollars spent for contract administrator services.

OIG recommended that HUD immediately rescind the invitation until it and its related contract are

revised to (1) not include tasks that are not required, (2) include a mechanism to adjust workload and

commensurate fees as program needs change, and (3) include a provision for making adjustments to

the contracts if requirements change. (Audit Report: 2009-SE-0801)

Review of HUD's Sections 202 and 811 Capital Advance Programs

HUD OIG audited HUD's processing of its Section 202 and Section 811 capital advances to

determine whether HUD's program centers under the jurisdiction of its Region 3 processed Sections

202 and 811 capital advances in accordance with HUD requirements.

Program centers did not always process Sections 202 and 811 capital advances in accordance with

applicable HUD requirements. Two of six program centers did not obtain required approval from HUD

headquarters to extend the fund reservation period past 24 months for 21 of 58 open projects with

Chapter 3 - Multifamily Housing Programs
54

capital advances valued at $46.3 million. HUD had not implemented controls to monitor compliance

with this requirement, which is intended to ensure that extending the fund reservation period is

consistent with HUD's goal of increasing affordable housing for low-income families. Additionally, of

the 60 projects that received fund reservation letters during the audit period, 50 were not approved

for construction within HUD's 18-month guideline. Capital advance funding often did not cover

housing development costs, and program centers did not consider canceling projects despite

indications that they would be significantly delayed.

OIG recommended that HUD direct responsible program centers to (1) justify and obtain approval

from headquarters to extend the fund reservation period past 24 months for two projects with capital

advances totaling $1.8 million that have not gone to initial closing or cancel them if appropriate;

(2) justify and provide current status for 19 projects with capital advances of $44.5 million that went to

initial closing, although program centers had not obtained required HUD approvals of the fund

reservation period past 24 months, and ensure that the use of the funds is consistent with HUD's goal

of increasing affordable housing for low-income families; and (3) establish and implement adequate

controls for obtaining required headquarters approvals for extension of the fund reservation period

past 24 months and for reviewing projects and making recommendations to cancel projects when

warranted. OIG also recommended that HUD reevaluate the effectiveness of its current method for

calculating capital advances to ensure that it covers the development costs for Sections 202 and 811

projects or consider providing notice in the Federal Register that additional capital advance funds will

generally be needed to cover the costs of developing the housing. (Audit Report: 2009-PH-0001)

Owner and Management Agent Operations

HUD OIG audited Ebony Lake Healthcare Center to determine whether the project's owner

(1) transferred funds from the project in violation of its regulatory agreement with HUD and HUD

directives and (2) expended property funds for only reasonable and necessary project expenses in

accordance with the regulatory agreement.

The owner violated the regulatory agreement when its managers ignored HUD directives by

making 96 transfers from the project, totaling more than $4 million, of which $497,000 had not been

repaid to the project. In addition, the managers did not follow the regulatory agreement and

instructions from HUD, which caused ineligible and unsupported costs of nearly $341,000 to be charged

to the project. Also, the managers' unauthorized transfers during June 2007 prevented more than

$167,000 from being deposited into the project's residual receipts account. Further, the owner did not

implement the required financial and accounting controls.

OIG recommended that HUD require the owner to (1) ensure that unauthorized transfers of funds

do not resume, (2) deposit more than $657,000 into the project's residual receipts account, (3) provide

support for $180,000 in accrued legal fees or make the necessary adjustments to the financial records,

(4) implement financial and accounting controls, and (5) correct and maintain accounting records in

compliance with the regulatory agreement. OIG also recommended that HUD seek civil money

penalties and administrative sanctions, as appropriate, against the responsible parties. (Audit

Report: 2009-FW-1002)



HUD OIG audited the Orchard Court project in Bath, ME, to determine whether the project owner

and/or management agents operated the project in accordance with HUD requirements.

The project owner and/or prior management agents failed to operate the project in accordance

with HUD regulations. They did not comply with HUD requirements with regard to (1) maintaining

Chapter 3 - Multifamily Housing Programs
55

vacancies at a reasonable rate; (2) making payments that were eligible, reasonable, and adequately

supported; (3) following proper procurement procedures; (4) maintaining the project in good

physical condition; and (5) ensuring that tenants qualified for subsidized rental housing. As a result,

the project had more than $265,000 in vacancy losses and incurred ineligible, unreasonable, and

unsupported costs of nearly $512,000.

In violation of the regulatory agreement, the project owner and a prior management agent

executed two interest-bearing promissory notes as well as a "letter of agreement" that may have

violated the project owner's/management agent's certification. The two notes allowed for the

inappropriate accrual of more than $56,000 in interest. Further, accounting records were incomplete,

inaccurate, or unavailable. The project's certified public accounting firm refused to prepare the project's

2007 financial statements because it considered the project's records not auditable. The project also

lacked controls over the calculation of management fees and bad debts.

OIG recommended that HUD require the project owner to (1) reimburse or require the responsible

management agents to reimburse the project more than $49,000 for ineligible fees paid to

management agents, (2) eliminate from the project's accounting records more than $151,000 in

accrued fees that were ineligible project costs, and (3) request from responsible management agents

supporting documentation for the more than $265,000 in unsupported costs charged to the project so

that the eligibility of these costs can be determined. For any amounts determined to be ineligible, the

project owner should repay or seek reimbursement from the responsible management agent to pay

the project from nonproject funds and remove the interest accrued on the notes payable from the

accounting records. In addition, HUD should consider pursuing administrative sanctions against the

project owner and three prior management agents, including recovering management fees paid and

removing payables representing unpaid management fees from the project's accounting records.

(Audit Report: 2009-BO-1002)



HUD OIG audited Stonebrook Apartments Phase I and Phase II (projects) in Baytown, TX, to

determine whether the projects' owners complied with the regulatory agreements and HUD

regulations; specifically, whether the owners (1) made unauthorized distributions of project funds

when the projects were in a non-surplus-cash position, (2) fully funded the tenant security deposit

accounts, and (3) supported disbursements with invoices or other supporting documentation.

The owners and/or their management agents did not comply with the regulatory agreements and

HUD regulations. They paid more than $187,000 in questioned costs. The questioned costs included

unauthorized distributions from the projects' operating and tenant security deposit accounts when

the projects were in a non-surplus-cash position, underfunded tenant security deposit accounts,

ineligible and unsupported disbursements, duplicate payments, excessive management fees, and

unreasonable and unnecessary bonuses. Further, the owners and/or their management agents did

not maintain accurate financial information, did not submit annual audited financial statements in a

timely manner, and transferred the management of the projects without HUD's approval.

OIG recommended that HUD require the owners to (1) repay the projects more than $81,000 for

unauthorized distributions, (2) fully fund the tenant security deposit accounts, (3) repay the projects

more than $62,000 for ineligible or unnecessary disbursements and either furnish supporting

documentation or repay the projects nearly $17,000 for unsupported expenses, and (4) correct and

maintain the projects' accounting records in compliance with the regulatory agreements. OIG also

recommended that HUD seek civil money penalties and administrative sanctions, as appropriate, against

the owners for violating the projects' regulatory agreements. (Audit Report: 2009-FW-1007)



Chapter 3 - Multifamily Housing Programs
56 Chapter 3 - Multifamily Housing Programs

HUD OIG audited Campaige Place at Jackson in Phoenix, AZ, to determine whether it used its

project funds in compliance with HUD's regulatory agreement and other federal requirements.

Campaige Place did not use its project funds in compliance with HUD's and other federal

requirements. Specifically, (1) nearly $74,000 in owner advances was repaid when the project had no

surplus cash, (2) tenant security deposit accounts were underfunded by nearly $58,000, (3) an

unexplained payable of more than $26,000 was mistakenly recorded as a liability, (4) support was

incomplete or missing for more than $8,000 in operating expenses, and (5) nearly $21,000 in

management expenses was inappropriately charged to the project.

OIG recommended that HUD require the project's owner/agent to repay or support more than

$160,000 in questioned costs, less the more than $81,000 already repaid or supported, and remove the

unsupported payable from the project's accounts. OIG also recommended that HUD require the project

to establish controls to ensure compliance with HUD's regulatory agreement and other federal

requirements. (Audit Report: 2009-LA-1008)


57

Some investigations discussed in this report were generated from leads provided by HUD

multifamily housing program staff or conducted jointly with Federal, State, and local law enforcement

agencies. The results of various significant investigations are described below.

$

recovered

Admin/civil

actions

Investigations 63 $1,009,812 144

Our

focus

Page 58

Page 58

- Theft/embezzlement

- Rental assistance fraud

Convictions/pleas/

pretrials

Cases

closed

Key program

results

24

Chart 3.2: Percentage of OIG multifamily housing closed investigation

cases during this reporting period

Investigations

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Region 1 - 8%

Region 2 - 24%

Region 3 - 11%

Region 4 - 11%

Region 5 - 11%

Region 6 - 8%

Regions 7/8 - 14%

Regions 9/10 - 11%

Region 11 - 2%

Chapter 3 - Multifamily Housing Programs
58

Chapter 3: HUD’s Multifamily Housing Programs

Theft/Embezzlement

Brenda Phillips, the former manager for Quail Ridge Apartments, a HUD-subsidized multifamily

housing development, was charged in U.S. District Court, Wichita, KS, with allegedly making false

statements. Phillips allegedly provided fraudulent tenant information on HUD certifications and

obtained $160,234 in housing assistance overpayments.



Linda Copenhaver, a former manager for Kingston House, a HUD-subsidized multifamily housing

development, was sentenced in U.S. District Court, Harrisburg, PA, to 1 year probation and ordered to

pay HUD $4,589 in restitution for her earlier guilty plea to committing embezzlement. Copenhaver

embezzled $12,000 in tenant rents.



Latonya Anderson, the office manager for Live Oak Masonic Housing, Inc. (Live Oak), a HUDsubsidized multifamily housing development, was arrested and charged in Vermillion Parish District

Court, Abbeville, LA, with allegedly committing extortion. Anderson allegedly inflated Live Oak

employee payroll checks and forced the employees to relinquish $7,000 in fabricated wages.



Nina Parker-Davis, an occupancy specialist for Pilgrim Baptist Village, a HUD-subsidized

multifamily housing development, was arrested after her indictment in U.S. District Court, Newark,

NJ, for allegedly accepting bribes. Parker-Davis allegedly accepted cash payments from prospective

tenants in exchange for immediate placement into subsidized housing units. HUD losses are not yet

determined.



Carol Aranjo, the former chief executive officer for D. Edward Wells Federal Credit Union (D.

Edward Wells), was sentenced in U.S. District Court, Springfield, MA, to 54 months incarceration and

5 years supervised release and ordered to pay the National Credit Union Association and others $1.4

million in restitution for her earlier conviction of making false entries; filing false Federal income tax

returns; and committing bank fraud, obstruction of an examination, and embezzlement. Aranjo and

previously sentenced Mary Spruell, the former treasurer for D. Edward Wells and owner of Walnut

Street Apartments, an Federal Housing Administration-insured multifamily housing development,

embezzled and misused D. Edward Wells funds, including HUD funds held in D. Edward Wells accounts.

Rental Assistance Fraud

Fay Bobb-Sampson, Olanrewaju Abudu, Grantley Bacchus, and Sherland Renaud, Section 8 tenants

at Parkhill Apartments, a HUD-subsidized multifamily housing development, were each arrested and

charged in U.S. District or Staten Island Criminal Courts, Staten Island, NY, with allegedly submitting

a false instrument for recording; falsifying business records; or committing theft of government funds,

grand larceny, or forgery. The above defendants allegedly failed to report income on housing

certifications and collectively obtained $181,158 in housing assistance they were not entitled to

receive.



Chapter 3 - Multifamily Housing Programs
59

Chapter 3: HUD’s Multifamily Housing Programs

Eight Section 8 tenants at Pemberton Manor Apartments, a HUD-subsidized multifamily housing

development, were each charged in Maryland or Wicomico County District Courts, Salisbury, MD,

with allegedly making false statements and committing theft by deception. Between April 2003 and

November 2008, the above defendants allegedly failed to report unauthorized residents or their

criminal histories on housing certifications and collectively obtained $80,563 in housing assistance

they were not entitled to receive.



Shera Menes and Leonila Milanes, Section 8 tenants at Coral Gardens Apartments (Coral Gardens),

a HUD-subsidized multifamily housing development, were each arrested in Homestead, FL, on

probable cause for allegedly committing public assistance fraud and grand theft. In addition, Coral

Gardens Section 8 tenants Marlenda Minnis, Jaime Sellers, and Trenell Peoples were collectively

sentenced to 72 months supervised release and ordered to pay HUD an undetermined amount in

restitution for their earlier guilty pleas to committing public assistance fraud and grand theft. The

above defendants allegedly or admittedly failed to report their criminal histories or unauthorized

residents and their criminal histories on housing certifications and collectively obtained $70,812 in

housing assistance they were not entitled to receive.



Eric and Adenike Ogundipe, former Section 8 tenants at Mandela Homes, a HUD-subsidized

multifamily housing development, were each sentenced in U.S. District Court, Boston, MA, to 3 years

supervised release and ordered to jointly pay HUD $68,138 in restitution for their earlier guilty pleas to

making false statements, misusing the Social Security number of another, or committing theft of public

money or identity theft. Eric Ogundipe was also sentenced to 15 months incarceration (time served).

From 1991 through August 2005, Eric and Adenike Ogundipe used false identities, failed to report

income or assets on housing certifications, and together obtained $68,138 in housing assistance they

were not entitled to receive.



Fazia Monroe, also known as Fazia Edwards, a Section 8 tenant at St. Johns Associates, a

HUD-subsidized multifamily housing development, was arrested and charged in U.S. District Court,

New York City, NY, with allegedly committing theft of government funds. From 2003 to 2008, Monroe

allegedly failed to report income on housing certifications and obtained $59,942 in housing assistance

she was not entitled to receive.



Five Section 8 tenants at Williamsport NSA Apartments, a HUD-subsidized multifamily housing

development, were each charged in U.S. District Court, Harrisburg, PA, with allegedly making false

statements. The above defendants allegedly failed to report income or their criminal histories on

housing certifications and collectively obtained about $53,500 in housing assistance they were not

entitled to receive.



Shiray Savoy, a former Housing Commission of Anne Arundel County (Anne Arundel) Section 8

tenant and housing recipient at Bay Ridge Garden Apartments (Bay Ridge), a HUD-subsidized

multifamily housing development, was sentenced in Anne Arundel County Circuit Court, Glen Burnie,

MD, to 5 years supervised probation and ordered to pay HUD $48,583 in restitution for her earlier

Chapter 3 - Multifamily Housing Programs
60

guilty plea to committing theft by deception. From 2002 through 2007, Savoy failed to report her Anne

Arundel housing assistance or an accurate household composition on Bay Ridge certifications and

obtained $48,583 in Bay Ridge housing assistance she was not entitled to receive.



Genevieve Simmons, a Section 8 tenant at Lambert Houses, a HUD-subsidized multifamily housing

development, was arrested and charged in U.S. District Court, New York City, NY, with allegedly

making false statements and committing theft of government funds. From April 2003 through March

2007, Simmons allegedly failed to report income on housing certifications and obtained more than

$40,000 in housing assistance she was not entitled to receive.



Eight Section 8 tenants at Sherman Hills Apartments, a HUD-subsidized multifamily housing

development, were each charged in U.S. District Court, Harrisburg, PA, with allegedly making false

statements. The above defendants allegedly failed to report income or their criminal histories on

housing certifications and collectively obtained about $40,000 in housing assistance they were not

entitled to receive.



Monique Ellis, a Section 8 tenant at St. Ambrose Apartments, a HUD-subsidized multifamily

housing development, pled guilty in U.S. District Court, Brooklyn, NY, to defrauding HUD. Ellis failed

to report income on housing certifications and obtained $39,968 in housing assistance she was not

entitled to receive.



Sheila, Glonita, and Michael Talton and Katrina Mitchell, Section 8 tenants at Lincoln Fields

Apartments (Lincoln), a HUD-subsidized multifamily housing development, were each arrested on

probable cause or charged in Eleventh Judicial Circuit Court, Miami, FL, with allegedly committing

public assistance fraud and grand theft. The above defendants allegedly failed to report income or

their concurrent receipt of other housing assistance on Lincoln certifications and collectively

obtained $38,859 in housing assistance they were not entitled to receive.



Migdalia Diaz, a Section 8 tenant at Maria Estella Apartments, a HUD-subsidized multifamily

housing development, was arrested after her indictment in U.S. District Court, Bronx, NY, for allegedly

committing embezzlement of public money. Diaz allegedly failed to report income on housing

certifications and obtained $36,000 in housing assistance she was not entitled to receive.



Chapter 3: HUD’s Multifamily Housing Programs

Chapter 3 - Multifamily Housing Programs
Chapter 3: HUD’s Multifamily Housing Programs
62

The Office of Community Planning and Development (CPD) seeks to develop viable communities

by promoting integrated approaches that provide decent housing, suitable living environments, and

expanded economic opportunities for low- and moderate-income persons. The primary means

toward this end is the development of partnerships among all levels of government and the private

sector. In addition to the audits and investigations described in this chapter, the U.S. Department of

Housing and Urban Development, Office of Inspector General (HUD OIG), has conducted numerous

outreach efforts (see chapter 7, page 105).

Chapter 4: HUD’s Community Planning and Development Programs

Page 63

Page 66

Page 68

Page 68

* This does not include disaster relief audits. See chapter 5 for these reviews.

Key program results Questioned costs Funds put to better use

Audit 20 audits $30.6 million $17.6 million

Our

focus

- Community Development Block Grant programs

- HOME Investment Partnerships program

- Supportive Housing Program grants

- Section 108 Loan Guarantee program

Chart 4.1: Percentage of OIG community planning and development

audit reports during this reporting period

Region 1 - 0%

Region 2 - 40%

Region 3 - 10%

Region 4 - 10%

Region 5 - 10%

Region 6 - 5%

Regions 7/8 - 5%

Regions 9/10 - 20%

Region 11 - (N/A)*

Audit

Strategic Initiative 3: Contribute to the strengthening of communities

Chapter 4 - Community Planning and Development Programs
63

Chapter 4: HUD’s Community Planning and Development Programs

The Office of Inspector General (OIG) audited the Community Development Block Grant (CDBG)

program, the HOME Investment Partnerships Program (HOME), the Supportive Housing Program grants,

and the Section 108 Loan Guarantee program. While OIG's objectives varied by auditee, the majority

of the reviews were to determine whether the grant funds were administered for eligible activities and

that the auditee met program objectives. The following section illustrates the audits conducted in the

CPD area.

Community Development Block Grant Programs

The U.S. Department of Housing Development (HUD) OIG audited the CDBG program of the City of

San Diego, San Diego, CA, and found that the City failed to properly administer its CDBG funds. It did

not (1) enter into required agreements with its redevelopment agency, (2) list the projects in its action

plan or subsequent amendments to HUD, or (3) monitor the project activities, resulting in more than

$1.8 million in ineligible and $11 million in unsupported costs. The City also failed to execute loan

agreements and repayment schedules for CDBG-funded loans issued to the agency with an overall

principal and interest balance of more than $139 million, and the agency did not make consistent good

faith efforts to repay the CDBG loans so that program income could be used for eligible CDBG activity.

OIG recommended that HUD require the City to (1) pay back ineligible costs of more than $1.8

million plus any applicable interest to HUD from nonfederal funds, (2) provide supporting

documentation or reimburse HUD more than $11 million from nonfederal funds, (3) execute written

interagency agreements and loan agreements with the agency for outstanding CDBG loans, and

(4) implement procedures and controls to ensure that the City and the agency adequately monitor

CDBG activity. (Audit Report: 2009-LA-1005)



HUD OIG audited the CDBG program administered by the Economic Development Corporation,

Newark, NJ, a subgrantee of Essex County Consortium, and found that the Corporation did not

adequately administer its CDBG program. It (1) did not properly administer economic development

loan programs, (2) did not carry out adequate technical assistance and site search services, (3) could

not support that its activities met the CDBG national objectives, and (4) lacked evidence to justify its

CDBG administrative expenses. Also, it did not always ensure that adequate financial records were

maintained for its two economic development loan programs, program income was properly accounted

for, and adequate budget and cost allocation procedures were implemented.

OIG recommended that HUD instruct the County to require the Corporation to (1) develop and

implement appropriate program plans and controls to ensure that more than $662,000 in CDBG

funds is used effectively to make economic development loans, (2) repay $100,000 for an ineligible

loan and $33,000 for a duplicate drawdown, (3) obtain and submit all supporting documentation

showing the appropriateness and eligibility of more than $1.6 million in administrative expenditures,

(4) develop and implement proper financial controls to safeguard CDBG funds, and (5) establish

adequate procedures to ensure that receipts and expenditures of program income are properly

recorded and reported. OIG also recommended that the County discontinue further funding to the

Corporation until HUD determines that it has the capacity to carry out CDBG activities in compliance

with HUD regulations. (Audit Report: 2009-NY-1004)



HUD OIG audited the CDBG program administered by the City of Durham, NC, and found that the

City did not administer its program in accordance with all of HUD's requirements. It was deficient in

(1) documenting national objectives, (2) monitoring, (3) procuring services, (4) reporting program

Chapter 4 - Community Planning and Development Programs
64

income, and (5) preparing accurate consolidated annual performance and evaluation reports. As a

result, it had no assurance that more than $1.3 million in CDBG funds met HUD requirements.

OIG recommended that HUD require the City to (1) establish and implement effective written

procedures for documenting compliance with HUD's requirements for national objectives and

monitoring, procurement, program income, and preparing performance reports; (2) record unreported

program income in HUD's Integrated Disbursements and Information System, expend the funds on

eligible CDBG activities, and repay the interest earned on unreported program income; and (3)

provide adequate supporting documentation to show that CDBG funds disbursed were awarded to the

lowest responsive and responsible bidder, met one of the three national objectives, and were properly

monitored. (Audit Report: 2009-AT-1004)



HUD OIG audited the City of Newburgh, NY's administration of its CDBG program and found that

the City did not always carry out its activities effectively, efficiently, and economically in compliance

with HUD regulations and expended CDBG funds for activities that did not meet a national objective of

the program. It (1) routinely charged certain costs to the CDBG program without adequate support or

detail, (2) could not adequately demonstrate that program funds were used for eligible activities that

achieved program objectives, (3) awarded a contract for consulting services without ensuring

compliance with Federal procurement requirements, and (4) charged costs to the CDBG program

without evidence that all of the contract services provided related to the program. As a result, the

City could not ensure that only reasonable and necessary administrative costs were charged to its

CDBG program.

OIG recommended that HUD instruct the City to (1) provide supporting documentation to justify

the eligibility of nearly $895,000 in questionable disbursements or reimburse the program from

nonfederal funds any amounts not supported, (2) establish procedures to ensure adequate

monitoring of subrecipient-administered activities, and (3) establish procedures to ensure

compliance with CDBG program requirements. (Audit Report: 2009-NY-1008)



HUD OIG audited the City of Rome, NY's administration of its CDBG program and found that the

City did not always carry out its activities effectively, efficiently, and economically in compliance with

HUD regulations and expended CDBG funds for activities that did not meet a national objective of the

program. Specifically, the City did not (1) adequately monitor a subrecipient-administered economic

development revolving loan fund activity to ensure that performance goals were achieved,

(2) establish adequate administrative and management controls to ensure that costs associated with

a public facilities subrecipient and self-administered street improvement activities were eligible and

met a national objective of the CDBG program, and (3) establish adequate controls to ensure that

performance goals for subrecipient-supported activities were achieved. Consequently, its revolving

loan fund activity expended program funds in an inefficient manner that did not effectively address

program objectives, and ineligible and unsupported costs were expended for the planned renovation

of a building previously owned by a subrecipient and for the purchase of ornamental streetlights.

In addition, no progress had been made on a subrecipient rehabilitation and preservation activity,

and a national program objective was not met, thus depriving other worthwhile activities of program

resources. As a result, the revolving loan fund activity was deprived of program income that could

have been used to make additional loans and create more jobs, and the City's ability to administer its

programs efficiently and effectively and ensure that CDBG program objectives were met was

diminished.

Chapter 4: HUD’s Community Planning and Development Programs

Chapter 4 - Community Planning and Development Programs
65

Chapter 4: HUD’s Community Planning and Development Programs

OIG recommended that HUD instruct the City to (1) reimburse the CDBG program from nonfederal

funds the nearly $141,000 paid for ineligible program expenditures, (2) provide supporting

documentation to justify the eligibility of more than $58,000 in questionable CDBG disbursements or

reimburse the program from nonfederal funds any amounts not supported, (3) establish procedures

to ensure adequate monitoring of subrecipient-administered activities, and (4) comply with CDBG

program requirements. (Audit Report: 2009-NY-1006)



HUD OIG audited the City of Augusta, GA's CDBG Façade Rehabilitation Grant program and found

that the City did not have adequate controls over its financial management of the façade program.

Payments were not recorded in the general ledgers, and HUD could not be assured that the remaining

program funds would be accurately recorded or expended in a timely manner. The City did not

adequately monitor its façade program. It did not verify the program match requirements or

complete façade grants in a timely manner. In addition, it did not ensure that program files were

complete and contained all information required by its policies and procedures.

OIG recommended that HUD require the City to (1) properly support or repay the façade program

nearly $181,000 from nonfederal funds and establish controls to ensure that all program transactions

are accurately recorded in the general ledgers and (2) establish controls to ensure that the remaining

more than $270,000 in program funds is used for its intended purpose or reprogrammed to fund other

eligible CDBG activities. OIG also recommended that HUD ensure that the City establishes controls to

ensure that staff follows written policies and procedures for administering the façade program. (Audit

Report: 2009-AT-1002)



HUD OIG audited the CDBG program administrated by the Township of South Orange Village, South

Orange Village, NJ, a subgrantee of the Essex County Consortium, and found that the Township

(1) did not always comply with HUD's rules and regulations while disbursing CDBG funds, (2) spent

more than $76,000 for activities related to fundraising, and (3) paid nearly $8,000 in legal fees related

to the Township's other general activities. It also did not execute a subgrantee agreement with a

nonprofit entity, and its contracts did not include the required Federal contract provisions.

OIG recommended that HUD instruct the County to require the Township to (1) repay nearly $84,000

related to the ineligible expenses from nonfederal funds, (2) develop and execute an adequate

subgrantee agreement, and (3) develop and implement contracts containing all mandatory provisions

when using Federal funds. (Audit Report: 2009-NY-1005)

HOME Investment Partnerships Program

HUD OIG audited the HOME funds of the HOME Investment Partnership Consortium, Alameda

County, CA, and found that the Consortium used $5.6 million in HOME funds to pay for construction

and rehabilitation cost increases on six projects resulting from unreasonable delays. It also provided

nearly $82,000 in excessive assistance to home buyers under the American Dream Downpayment

Initiative and did not comply with HUD's requirements for committing HOME funds within 24 months

from the date the funds became available.

OIG recommended that HUD require the Consortium to (1) repay its HOME trust fund from

nonfederal sources for HOME funds used to pay for the cost increases resulting from construction

delays and implement policies and procedures to ensure that foreseeable construction delays do not

Chapter 4 - Community Planning and Development Programs
66

Chapter 4: HUD’s Community Planning and Development Programs

occur; (2) repay its HOME trust fund from nonfederal sources for the ineligible use of Downpaynent

Initiative assistance and implement policies and procedures to ensure that downpayment assistance

is calculated using the purchase price; (3) review all agreements for the use of HOME funds entered

into the information system from October 1998 to the present and change the entry dates to the dates

of the agreements; and (4) repay HUD or have its future funding reduced by the amount determined

not to have been committed within the requisite 24-month period and implement policies,

procedures, and internal controls to comply with HUD's requirements. (Audit Report: 2009-LA-1004)



HUD OIG audited Adams County, CO's HOME program and found

that Adams County inappropriately spent or could not support more

than $2.1 million in HOME funds. Specifically, it (1) used nearly

$73,000 for ineligible community housing development

organization operating grants, (2) used $25,000 without entering

into a contract with the subrecipient, (3) provided $10,000 to a

subrecipient before the cost was incurred, (4) spent nearly $2

million without documentation to support that the funds benefited

eligible recipients, and (5) could not support two of the last three

matching contributions that it reported to HUD totaling more than

$1.8 million.

OIG recommended that HUD ensure that Adams County

reimburses its HOME trust fund from nonfederal funds for any

ineligible expenditures. OIG also recommended that Adams County

(1) provide supporting documentation showing that the funds

benefited eligible recipients, (2) reduce the amount of HOME

matching contributions recorded on its books that are not

supported or eligible, (3) implement an acceptable internal

control structure by preparing and implementing effective policies

and procedures, and (4) receive technical assistance from HUD to

ensure compliance. (Audit Report: 2009-DE-1001)



HUD OIG audited the City of Norfolk, VA's HOME program and found that the City generally

followed HUD requirements related to home buyer assistance, modernization rehabilitation, and funds

for community housing development organizations. However, it did not properly monitor its

subrecipient to ensure that nearly $289,000 in program income was returned to its HOME program as

required. The City has since implemented adequate procedures for monitoring its subrecipients to

ensure that this problem does not recur.

OIG recommended that HUD require the City to recover the program income that was not properly

returned to its HOME program or repay the amount to its program from nonfederal funds. (Audit

Report: 2009-PH-1007)



Copyright, 2009. The Denver Post -

Denver, CO. Reprinted with permission.

Chapter 4 - Community Planning and Development Programs
67

Chapter 4: HUD’s Community Planning and Development Programs

HUD OIG audited Cook County, IL's HOME program and found that the County did not adequately

manage its program. It incorrectly reported program contributions and the amounts of program

contributions it was required to provide in its consolidated reports to HUD, thereby inappropriately

reporting nearly $5.6 million in program contributions available for future fiscal years. It also

inappropriately disbursed program funds drawn down from its HOME trust fund treasury account and

program income from its HOME trust fund local account for multifamily projects and disbursed

program funds drawn down from its treasury account for nonadministrative activities. As a result,

HUD lost more than $59,000 in interest on nearly $7.2 million in program funds that the County did not

use for eligible program costs within 15 days of being drawn down from its treasury account, and the

County lost more than $6,000 in interest on more than $1.4 million in program income that it did not

immediately use for eligible program costs.

OIG recommended that HUD require the County to (1) implement a detailed comprehensive

written action plan to improve its procedures and controls to ensure that it operates its HOME

program in accordance with HUD's and its own requirements, (2) reimburse HUD more than $59,000

and its local account more than $6,000 from nonfederal funds, and (3) implement adequate

procedures and controls to address the findings cited. (Audit Report: 2009-CH-1004)

Supportive Housing Program Grants

HUD OIG audited its Supportive Housing Program grants to the New Phoenix Assistance Center in

Chicago, IL, and found that the Center (1) materially failed to manage its program grants, (2) did not

comply with Federal requirements regarding its use of program funds, and (3) lacked sufficient

documentation to support that it followed HUD's requirements in providing contributions for its

program grants. It (1) could not support that it used program funds for appropriate program

expenses, (2) inappropriately used program funds, and (3) could not support that it followed HUD's

requirements in providing contributions for its program grants. Further, it (1) could not support its

use of more than $574,000 in program funds for appropriate lease payments and more than $72,000 in

program funds for eligible nonlease expenses, (2) used nearly $16,000 in program funds for improper

nonlease expenses, and (3) could not support that its transfers of $25,000 in program funds among its

program grants were allowable. Due to the Center's lack of documentation, HUD could not be assured

that the Center provided more than $333,000 in eligible contributions for its program grants.

OIG recommended that HUD (1) terminate the Center's three current authorized program grants,

(2) reallocate the nearly $92,000 in remaining program funds, (3) deny the Center's three applications

for nearly $838,000 in future program funds, (4) require the Center to provide sufficient supporting

documentation or reimburse HUD from nonfederal funds for the unsupported payments and

contributions, (5) reimburse HUD from nonfederal funds for the improper use of program funds, and

(6) pursue the appropriate administrative sanctions against the Center's officers for their failure to

adequately manage its program grants. (Audit Report: 2009-CH-1001)

Section 108 Loan Guarantee Program

HUD OIG audited the City of Newburgh, NY's administration of its Section 108 Loan Guarantee

program and found that the City failed to ensure that all Section 108 Loan Guarantee funds and related

project costs pertaining to the Front Street Marina redevelopment project were proper, necessary,

and fully supported. It (1) failed to enforce loan agreement provisions and adequately pursue loan

collateral to satisfy the debt, (2) did not ensure that all funding sources were supported and

documented, (3) unnecessarily used CDBG funds to repay the loan and deprived the project of funds

that could have been used for other activities, and (4) improperly expended Economic Development

Initiative (EDI) funds.

Chapter 4 - Community Planning and Development Programs
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Chapter 4: HUD’s Community Planning and Development Programs

In addition, (1) the City did not achieve the primary objective of job creation for the industrial park

project, (2) loan proceeds remained unused in a bank account for more than 7 years, (3) possible

collateral or program income for loan repayment was not pursued, and (4) the City did not ensure that

the industrial site was feasible for commercial development and job creation. The failure of the

industrial park project negatively impacted the City's CDBG program, as CDBG funds were used to

repay the Section 108 debt and additional CDBG funds were scheduled to retire the debt, thereby

hindering the program from effectively using future CDBG funds to provide maximum benefit to

low- and moderate-income residents.

OIG recommended that HUD instruct the City to (1) enforce the loan provisions for the marina

redevelopment project within 90 days or reimburse the CDBG program from nonfederal funds the

nearly $450,000 used for debt repayment, (2) take appropriate actions against the marina developer

and ensure that nonfederal funds are used to repay the remaining $1.3 million in future loan

obligations, (3) reimburse the EDI program from nonfederal funds the more than $144,000 paid for

ineligible duplicate costs, (4) establish a plan for the industrial park site within 90 days or reimburse

the CDBG program from nonfederal funds the approximate $1.8 million used for debt repayment, and

(5) reprogram the approximate $1.7 million in CDBG funds currently scheduled to be used for future

repayment of the industrial park project loan. (Audit Report: 2009-NY-1001)



HUD OIG audited the City of Yonkers, NY's administration of its Section 108 Loan Guarantee

program and found that the City disbursed program funds for eligible activities in accordance with

HUD rules and regulations and maintained a financial management system that adequately safeguarded

funds. However, it did not (1) adequately document data on borrower compliance with job creation

and retention requirements, (2) consistently monitor and report on the use of loan proceeds,

(3) properly maintain its loan repayment account, and (4) notify HUD when loan collateral was changed

or loans defaulted. As a result, the City lacked assurance that loan job creation and retention goals

were achieved, loan disbursements were used for eligible purposes, and loan repayments would be

sufficient to meet the City's future loan repayment obligations. In addition, HUD was not made aware

of changes to loan collateral and defaulted loans, which could have affected its financial interest.

OIG recommended that HUD instruct the City to strengthen its controls to (1) monitor and verify

loan recipients' compliance with job creation and retention requirements, (2) obtain and review

borrower documentation for expenditure of loan proceeds to ensure that they are used for eligible

purposes, (3) properly maintain loan repayment records, and (4) report changes in loan collateral and

defaults to HUD. (Audit Report: 2009-NY-1009)



Chapter 4 - Community Planning and Development Programs
69

Chapter 4: HUD’s Community Planning and Development Programs

Chapter 4 - Community Planning and Development Programs

Some investigations discussed in this report were generated from leads provided by HUD CPD

program staff or conducted jointly with Federal, State, and local law enforcement agencies. The

results of various significant investigations are described below.

$

recovered

Admin/civil

actions

Investigations 80 $5,156,194 24

Our

focus

Page 70

Page 72

- Theft/embezzlement

- Other fraud/crimes

Convictions/pleas/

pretrials

Cases

closed

Key program

results

25

Chart 4.2: Percentage of OIG community planning and development

closed investigation cases during this reporting period

Strategic Initiative 3: Contribute to the strengthening of communities

Region 1 - 1%

Region 2 - 9%

Region 3 - 3%

Region 4 - 8%

Region 5 - 5%

Region 6 - 6%

Regions 7/8 - 4%

Regions 9/10 - 8%

Region 11 - 56%

Investigations
70 Chapter 4 - Community Planning and Development Programs

Theft/Embezzlement

Raymond Vella, the owner of Pavel Construction, a contractor for the Linden Neighborhood

Preservation program (Linden NP), an organization that receives HUD CDBG and HOME funds, was

convicted in U.S. District Court, Trenton, NJ, of committing mail fraud, offering and giving a corrupt

thing of value, and obtaining property by fraud. From January 1998 to December 2006, Vella paid

bribes to previously indicted and former Linden NP employee Frank Rose in exchange for more than

$652,448 in Linden NP contracts.



Barbara Alvarado, a former office manager for The Los Angeles House of Ruth (House of Ruth), a

homeless and domestic violence shelter that receives HUD Supportive Housing funds, was indicted in

U.S. District Court, Los Angeles, CA, for allegedly committing misapplication of property from an

organization that receives Federal funds. Alvarado allegedly altered House of Ruth accounting records

and victim funding requests and fraudulently obtained and personally used $238,000 in House of Ruth

funds.



Carolyn Edwards Herron, the chief financial officer for Travelers Aid of Metropolitan Atlanta

(Travelers Aid), an organization that receives HUD Emergency Shelter Grant funds, pled guilty in U.S.

District Court, Atlanta, GA, to committing embezzlement. Herron used Travelers Aid funds and credit

cards for personal expenses and created and deposited fabricated employee wages into her personal

bank account. HUD realized losses in excess of $183,000.



William Walker, the former director for the New Brunswick Neighborhood Preservation and

Housing Rehabilitation programs, organizations that receive HUD CDBG and HOME funds, was

sentenced in U.S. District Court, Newark, NJ, to 87 months incarceration and 36 months supervised

release and ordered to pay HUD $112,500 in restitution for his earlier guilty pleas to committing a

conspiracy to extort under color of law, soliciting and accepting corrupt payments, and filing a false

Federal income tax return. Walker accepted $112,500 in bribes from construction and maintenance

companies under contract with both HUD-funded programs identified above and failed to report the

kickbacks on his Federal income tax return.



Dawn Monteneri, a former bookkeeper for Support Ministries, Inc. (Support Ministries), an

organization that receives CDBG, Emergency Shelter, and other HUD funding, was arrested and charged

in Albany County Court, Albany, NY, with allegedly committing grand larceny and filing false business

documents. Monteneri allegedly diverted and personally used $56,000 in Support Ministries' funds.



Connie Kuzma, a former program manager for the Northern Cambria Community Development

Corporation (Northern Cambria), an organization that receives HUD HOME funds, was sentenced in

U.S. District Court, Johnstown, PA, to 10 months home detention and 60 months probation and

ordered to pay Northern Cambria $46,960 in restitution for her earlier guilty plea to committing
Chapter 4 - Community Planning and Development Programs 71

embezzlement. Kuzma failed to report income or her actual household composition on Northern

Cambria loan applications, fraudulently obtained two Northern Cambria HOME loans and a grant

totaling $49,450, and then removed the Northern Cambria HOME liens from the property deed without

authorization.



Marlene Woodson, the former chief executive officer for Christian Vision Center (Christian

Vision), an organization that receives HUD CDBG funds, entered into a pretrial diversion filed in U.S.

District Court, Chicago, IL, and agreed to pay HUD $46,109. Woodson admitted that she embezzled

and personally used $46,109 in Christian Vision funds.



Latricia Collins, a resident program manager and public housing tenant at Glendale Apartments, a

housing development that receives HUD Supportive Housing funds, was charged in Hennepin County

District Court, Minneapolis, MN, with allegedly committing theft by swindle over $5,000. Collins

allegedly embezzled and personally used $35,566 in HUD Supportive Housing funds.



Margare Segura, also known as Margare Lewis, a former case manager for

the Catholic Charities of the Archdioceses of New Orleans (Catholic Charities),

an organization that receives HUD Supportive Housing funds, was sentenced in

U.S. District Court, New Orleans, LA, to 20 months incarceration and ordered to

pay HUD $29,867 and the Federal Emergency Management Agency $1,596 in

restitution for her earlier guilty plea to making false statements and committing

theft of government funds and a conspiracy. In addition, fabricated Catholic

Charities landlords Deborah Knighten and Lola Davis were collectively sentenced

to 3 months home confinement and 8 years probation and ordered to pay HUD

$28,567 in restitution for their earlier guilty pleas to committing a conspiracy.

The above defendants and others conspired and created fake landlords and

nonexistent homeless families to conceal their personal use of $35,217 in

Catholic Charities funds.



Robert Chiarappa, a former purchasing agent for both the John Galt

Corporation and Safeway Environmental, organizations under contract with

LMDC, an organization that receives HUD CDBG Disaster Recovery Assistance

funds, was indicted in New York State Supreme Court, Manhattan, NY, for

allegedly committing grand larceny. In addition, AW Meyer and James Kelly, a

supply manager for AW Meyer, a company that provides demolition and

abatement supplies for others under contract with LMDC, each pled guilty to

falsifying business records. From September 2006 through October 2007,

Chiarappa allegedly instructed AW Meyer and other vendors to submit more

than $24,500 in fraudulent invoices for goods not delivered to the Deutsche Bank

building deconstruction site; approved and submitted the false invoices to

LMDC; and obtained cash, jewelry, and other personal use items in return.



Copyright, 2009. The

Times-Picayune - New

Orleans, LA. Reprinted

with permission.
72

Chapter 4: HUD’s Community Planning and Development Programs

Chapter 4 - Community Planning and Development Programs

Steven Scott, a former New Brunswick housing inspector previously sentenced in U.S. District

Court, Newark, NJ, for his earlier guilty plea to committing theft of public funds, was debarred from

procurement and nonprocurement transactions with HUD and throughout the Executive Branch of

the Federal Government for 3 years. Scott used the identification of another when he applied for and

received $19,940 in HUD housing rehabilitation grant funds.



Staci Billings, the former executive director for the Adirondack Veteran's House (Adirondack), an

organization that receives HUD CDBG and Supportive Housing funds, pled guilty in Warren County

Court, Glens Falls, NY, to committing grand larceny. Billings diverted and personally used $11,600 in

Adirondack funds.



Abdullah Aziz was sentenced in U.S. District Court, New York City, NY, to 6 months incarceration

and 36 months probation and ordered to pay Empire State Development Corporation (Empire) $3,500

in restitution for his earlier guilty plea to committing theft of government funds. Aziz submitted false

applications and fraudulently obtained $2,430 in business recovery funds from Empire, a HUD-funded

nonprofit established to provide assistance to businesses in lower Manhattan after the September 11,

2001, terrorists attacks.



Anthony Saccomanno, the director for the Cherry Hill Department of Code Enforcement and

Inspections (Cherry Hill), an organization that receives HUD CDBG funds, and Russell McLauglin, Jr.,

the president of Building Inspections Underwriters, Inc., were each arrested and charged in U.S.

District Court, Newark, NJ, for allegedly committing bribery. From July 2007 to December 2008,

Saccomanno allegedly received cash payments from McLauglin in return for $240,000 in Cherry Hill

contracts.

Other Fraud/Crimes

Michael Cenzi and Ronald Caceci, employees for Sinisgalli, Inc., a demolition contractor for the

City of Rochester, a HUD CDBG-funded municipality, were each arrested and charged in Perinton County

Court, Rochester, NY, with allegedly endangering public health and illegal dumping of hazardous waste.

Cenzi and Caceci allegedly dumped asbestos and other illegal hazardous waste.


Chapter 4: HUD’s Community Planning and Development Programs
74

Chapter 5: Hurricane Relief Oversight

Introduction and Background

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG),

Offices of Audit and Investigation, monitor HUD disaster funds, conduct audits of disaster funding,

identify program weaknesses, perform outreach to State agencies and HUD program partners,

perform outreach to Federal, State, and local law enforcement partners, identify potential civil and

criminal cases, and coordinate the efforts of HUD OIG field offices, auditors, and agents around the

country in disaster-related audits and investigations.

HUD OIG’s Office of Audit continues to be diligent in its efforts to pursue fraud, waste, and abuse

in the audits of HUD's emergency supplemental funding provided to the Gulf Coast States. HUD OIG

has expanded its disaster relief oversight to take an active role in the oversight of its audit functions

relating to all disaster funding nationwide.

The detection, deterrence, prevention, and punishment of frauds related to HUD disaster funding

are the business of HUD OIG’s Office of Investigation. HUD OIG established the Disaster Response

Oversight Division (DROD), previously known as the Hurricane Relief Oversight Division, in the wake

of Hurricane Katrina. DROD coordinates with the investigating regions regarding all HUD disaster

funding nationwide, from the World Trade Center disaster relief efforts to relief efforts related to last

year's Hurricane Ike.

Major Relief Programs

Louisiana's Road Home program, the largest single-housing recovery program in U.S. history, uses

funding provided through HUD's Community Development Block Grant (CDBG) program. Road Home

offers up to $150,000 to eligible homeowners whose primary residences were destroyed or severely

damaged following Hurricanes Katrina or Rita. In addition, Louisiana offers Road Home applicants up

to $100,000 to elevate their homes. To date, the Road Home program has paid out approximately $7.9

billion to more than 141,000 homeowners.

The State of Mississippi's Homeowner Grant Assistance Program is designed to provide financial

assistance to those homeowners outside the flood plain whose homeowners' insurance did not cover

structural flood damage. Single-family homes, owner-occupied duplexes, and manufactured housing,

including mobile homes, are eligible for grants under this program. Under the Homeowner Grant

Assistance Program, homeowners may receive grants of up to $150,000. Phase II of the program

expanded coverage to include homeowners whose homes flooded but were not eligible for the

original program. In addition, homeowners who must elevate their homes when rebuilding to reduce

the risk of damage from future storms may be eligible for grants of up to $30,000 to cover the higher

cost of construction.

The Disaster Housing Assistance Program (DHAP), funded by the Federal Emergency Management

Agency (FEMA), is administered by HUD and public housing authorities and agencies to provide

temporary housing assistance and case management services for about 45,000 families displaced by

Hurricanes Katrina and Rita. Disaster Housing Assistance Program-Ike (DHAP-Ike) provides

assistance to families displaced by Hurricane Ike.

Iowa's Jumpstart Program, funded by HUD's CDBG program and other existing State and Federal

funds, is a housing and small business program designed to help Iowans affected by last year's

devastating severe weather.

Chapter 5 - Disaster Relief Oversight
75

Chapter 5: Hurricane Relief Oversight

HUD OIG is responsible for conducting a variety of audits and other reviews in all program areas.

OIG's significant workload is generally divided into four primary categories: performance audits,

information system audits, financial audits, and advisory and assistance services. OIG has continued

to work on audits related to HUD disaster funding and HUD's Gulf Coast Region. During the reporting

period, OIG issued five audit reports on disaster-related areas: two on the Housing Authority of New

Orleans (HANO), two on the Lower Manhattan Development Corporation (LMDC) (9-11 disaster), and

one on the Texas disaster housing program. To date, HUD OIG has completed 12 audits of the

supplemental funding with questioned costs of more than $28.7 million.

Final Reports

At the request of two United States Senators, HUD OIG initiated an audit of HUD's administration of

HANO, New Orleans, LA. OIG's audit objective was to determine whether HUD's receiver provided

adequate management oversight to ensure that HANO complied with HUD's requirements. OIG found

that HUD's receiver did not provide adequate management oversight to ensure that HANO complied

with HUD's requirements when operating its voucher program and public housing operations.

Specifically, HUD's receiver did not ensure that eight of ten sample voucher program units complied

with HUD's housing quality standards and six of nine sample public housing units were in good repair.

Additionally, the receiver did not ensure that HANO used a rent reasonableness system to avoid

excessive payments to landlords, properly calculated or paid voucher program tenant rents, and

maintained a proper waiting list for its Section 8 program.

OIG recommended that HUD require the receiver to ensure that HANO (1) conducts annual

inspections of all of its voucher program units and supervisory quality control inspections, as

required by its (HANO's) administrative plan; (2) implements a process to routinely review the

performance of its public housing managers and the physical condition of its public housing units to

ensure compliance with HUD's requirements; and (3) develops and implements a method for

assessing rent reasonableness to owners, properly calculates and pays rental assistance, and

maintains a proper waiting list that complies with HUD's requirements for its Section 8 applicants.

(Audit Report: 2009-AO-0001)



HUD OIG audited HUD's administration of HANO, New Orleans, LA, to determine the effect of

HUD's receivership on HANO's performance in its contracting activities and financial functions.

Specifically, OIG wanted to determine whether HUD's receivership ensured that HANO properly

(1) accounted for its fungibility funds, (2) monitored and paid its contractors, and (3) disbursed its

accounts payable. OIG found that HUD's receiver did not ensure that HANO (1) correctly supported,

expensed, or reported its expensed fungible funds in accordance with HUD requirements, resulting in

at least $4.9 million in unsupported and $2.3 million in ineligible expenses (2) monitored and/or paid

two of its contractors in accordance with contract terms and HANO's procurement policy, resulting in

$97,193 in ineligible and $1,153 in unsupported costs; and (3) supported 10 of 20 accounts payable

disbursements in accordance with HANO's financial policy, resulting in at least $15,000 in unsupported

costs.

OIG recommended that HUD require the receiver to ensure that HANO provides support or repays

the ineligible and unsupported costs. OIG further recommended that HANO provide an accurate

Audit

Chapter 5 - Disaster Relief Oversight
76

Chapter 5: Hurricane Relief Oversight

annual progress report, including all eligible fungibility funds expensed in its 2006 annual report, and

develop and implement the appropriate controls to ensure that it (1) maintains adequate financial

records for the accounts payable disbursements and (2) properly authorizes its accounts payable

disbursements to safeguard the accounts payable funding. (Audit Report: 2009-AO-0002)



HUD OIG audited the HUD CDBG Supplemental I Disaster Recovery program, administered by

the Texas Department of Housing and Community Affairs (Department), as part of OIG's commitment

to HUD to implement oversight of the Disaster Recovery Assistance funds to prevent fraud, waste,

abuse, and duplication of benefits. OIG's objective was to determine whether the Department

administered Supplemental I Disaster Recovery funds (funds) in compliance with the supplemental

appropriation's Federal Register requirements, HUD's policies, and the State of Texas' (State) disaster

recovery action plan.

The Department administered the funds in compliance with requirements. The funds were

accounted for and were used for eligible program applicants and projects that met national program

objectives. (Audit Report: 2009-FW-1004)



The eleventh in HUD OIG's series of ongoing audits of LMDC's administration of the $2.783

billion in CDBG Disaster Recovery Assistance funds, provided to the State of New York following

the September 11, 2001, terrorist attacks on the World Trade Center in New York City, concluded that

the auditee administered the grant funds reviewed in accordance with HUD regulations and continued

to maintain a financial management system that adequately safeguarded funds and prevented misuse.

However, two concerns were raised for HUD's attention: the auditee (1) charged legal costs to the

World Trade Center Memorial and Cultural program as activity delivery costs instead of

administrative and planning costs and (2) had not corrected drawdowns inadvertently charged to the

wrong program budgets in HUD's Line of Credit Control System. As a result, the auditee has fewer

funds than would otherwise be available for the World Trade Center Memorial and Cultural Program,

and HUD's Line of Credit Control System is reporting incorrect amounts for individual budget line

items.

OIG recommended that HUD direct the auditee to (1) provide documentation for the rationale to

classify legal costs as direct program activity delivery costs instead of as administrative and planning

costs so that HUD can make an eligibility determination and (2) enhance its procedures to allow for

correction of misclassifications within HUD's Line of Credit Control System as funds are drawn down.

(Audit Report: 2009-NY-1003)



As part of the tenth of HUD OIG's ongoing audits of LMDC's administration of CDBG Disaster

Recovery Assistance funds, we reviewed the nature of costs incurred under the activity entitled "World

Trade Center Memorial and Cultural" program related to the deconstruction of the Deutsche Bank

building in New York City. The review raised concern about funding of the deconstruction activity;

specifically, that escalating costs since July 2007 have resulted in LMDC reallocating $67.5 million in

HUD funds from other previously approved activities and LMDC officials maintaining that, as of

September 30, 2007, LMDC had disbursed $27.1 million more than its share of applicable costs. In

addition, other costs which LMDC had paid may qualify for cost sharing. As a result, other programs

Chapter 5 - Disaster Relief Oversight
77

Chapter 5: Hurricane Relief Oversight

previously approved by HUD have been impacted, and more HUD funds than may have been

necessary were used to pay for deconstruction activity.

OIG recommended that HUD instruct LMDC to (1) provide an updated accounting of deconstruction

costs, both aggregate and nonaggregate, and an estimate of anticipated additional expenditures in

each of these categories so that HUD may assess the extent to which additional funds may need to be

reprogrammed for deconstruction activity; (2) periodically provide HUD a report on the status of

efforts to resolve the escrow account underfunding; and (3) provide documentation to support why

funds disbursed for the initial building characterization study and air monitoring should not be

classified as aggregate deconstruction costs. In addition, OIG recommends that HUD closely

monitor the remaining disbursement of HUD funds under this activity. (Audit Report: 2009-NY-0801)



Chapter 5 - Disaster Relief Oversight
78

Chapter 5: Hurricane Relief Oversight

Investigations

Summary of Accomplishments

Prosecution and Enforcement

During the reporting period, HUD OIG prosecuted 37 individuals in Federal, State, and local

judicial districts throughout the country for disaster-related frauds. Judicial actions include 31

individuals charged or indicted, 31 arrested, and 23 individuals or corporate entities convicted. In

addition, 16 individuals investigated by OIG regarding disaster-related crimes were sentenced during

the reporting period.

Deterrence and Returned Funds

Working with the Louisiana Recovery Authority (LRA) and the Mississippi Development Authority

(MDA), HUD OIG has taken a proactive role to prevent payments on fraudulent disaster-related claims.

As a result of OIG investigations during the reporting period, the LRA stopped payments on fraudulent

claims totaling more than $2 million.

As a result of investigations conducted by OIG and its investigative partners during the reporting

period, OIG reported financial recoveries of $729,852 in funds returned by recipients of individual

assistance programs and disaster program funds.

OIG investigations during the reporting period resulted in funds put to better use of more than

$37.7 million.

In addition, HUD suspended, debarred, and removed 47 individuals from participation in HUD and

other Federal programs. These suspensions and debarments were based on findings of OIG

investigations during the reporting period.

Continued Agency Coordination

HUD OIG has been and continues to be a dedicated partner in the National Center for Disaster

Fraud (NCDF) Task Force (previously known as the Hurricane Katrina Fraud Task Force). The Task

Force's Joint Command Center in Baton Rouge, LA, to which OIG has provided personnel support, has

proved to be a major source of support for disaster-related investigative efforts throughout the

country. OIG is making sound use of the Command Center for the receipt and referral of complaints

and timely information sharing with other relevant law enforcement agencies.

To coordinate efforts, OIG performs outreach actions with law enforcement partners, State and

local agencies, HUD personnel, HUD multifamily property owners and managers, HUD public housing

agencies and authorities, and community partners.

OIG continues to work closely with law enforcement agencies on complaints, intelligence, and

joint investigations of disaster-related fraud. Most of the investigations discussed in this report were

conducted jointly with Federal, State, and local law enforcement agencies and in coordination with the

NCDF.

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Chapter 5: Hurricane Relief Oversight

Training and Proactive Detection

HUD OIG has continued to provide HUD fraud-related training for other law enforcement agencies

including the Louisiana State Inspector General's Office, the Federal Bureau of Investigation (FBI), and

other investigative partners. OIG continues to play a significant role in proactively identifying

patterns of potentially fraudulent activities in applications for disaster benefits and to provide

outreach to community partners, such as the Texas Office of Rural Community Affairs, to continue

efforts to prevent frauds. In Iowa, OIG has established investigative contacts with the United States

Attorney's Office and local police departments in Des Moines and Cedar Rapids. OIG has also reached

out to the FBI, the Small Business Administration (SBA), and the U.S. Department of Homeland

Security (DHS) OIG in Iowa to initiate coordination of efforts.

Prosecution and Enforcement

The most tangible proof of the commitment of HUD OIG is the number of prosecutions stemming

from disaster fraud investigations. For the reporting period, OIG has charged 31 individuals in

25 separate cases with disaster-related frauds. These prosecutions span Federal judicial districts

throughout six States. State and local prosecutors' offices have also continued to bring criminal cases

involving disaster-related fraud.

As of March 31, 2009, more than 175 individuals have been arrested, more than 127 have been

indicted, and more than 87 have been convicted of disaster-related crimes as a result of OIG

investigations. In addition, since the initiation of the Disaster Relief Oversight Division, OIG has

recorded more than 106 administrative actions, two civil actions, six personnel actions, and more

than $13.3 million in investigative recoveries.

While the majority of OIG prosecutions during the reporting period still involve fraud to obtain

individual assistance benefits, OIG is pursuing more cases involving public corruption and

procurement fraud.

The following summaries of recent disaster fraud-related cases are offered as a sample of the

fraudulent schemes being successfully investigated and prosecuted.

Homeowner Grant Fraud Cases

Mississippi

Gregory Warr, the mayor of Gulfport, MS, a city directly impacted by Hurricane

Katrina, and Laura Warr, his wife, were each charged in a 16-count federal

indictment with mail fraud, wire fraud, theft of public money, false statements, false

claims and conspiracy. The case is now pending in U.S. District Court in Gulfport,

MS. According to the indictment, the Warrs fraudulently obtained disaster

assistance from HUD and FEMA and filed fraudulent insurance claims in the wake of

Hurricane Katrina. Mayor Warr and his wife applied for and received $150,000 in

HUD CDBG Disaster Recovery Assistance funds through the MDA and $9,558 in FEMA

disaster assistance for hurricane-damaged residential property, but allegedly the

damaged property was not their primary residence during Hurricane Katrina.



Copyright, 2009. Hattiesburg American -

Hattiesburg, MS. Reprinted with permission.

Chapter 5 - Disaster Relief Oversight
80

Wayne Rogers and Latanicia McMillan, also known as Latanicia McMillan-Rogers, were arrested

and indicted by a Federal grand jury. The criminal case is now pending in U.S. District Court, Jackson,

MS. Rogers and McMillan were charged with three counts of theft of government funds and one count

of false claims. They applied for and received $91,021 in CDBG Disaster Recovery Assistance funds

through the MDA, $4,358 in FEMA disaster assistance, and $152,000 in SBA disaster loan funds for

hurricane-damaged residential property, but allegedly the damaged property was not their residence

during Hurricane Katrina.



Roger and Annette Williams were sentenced in U.S. District Court, Gulfport, MS, to a combined 28

months incarceration, 4 months home confinement, and 10 years supervised release. They were

ordered to pay $116,505 in restitution and perform 200 hours of community service. The two had pled

guilty to charges making false statements, submitting false loan or credit applications, and committing

theft of government funds or Federal program fraud. Roger and Annette Williams applied for and

received FEMA, U.S. Department of Agriculture (USDA), and SBA disaster loan funds and attempted to

obtain $150,000 in CDBG Disaster Recovery Assistance funds through the MDA for hurricane-damaged

residential property. They admitted that they did not occupy the damaged property as their primary

residence during Hurricane Katrina.



Beatrice E. Moses, of Ocean Springs, MS, was

sentenced in U.S. District Court to serve 15 months

in federal prison for fraud against HUD, FEMA, the

SBA, and USDA. Moses was also ordered to make

restitution to FEMA in the amount of $24,779, to the

Mississippi Emergency Management Agency (MEMA)

in the amount of $50,929 (for a MEMA cottage), and

to USDA in the amount of $1,810. A forfeiture order

of a money judgment in the sum of $24,779 was also

entered against Moses. Moses pled guilty on

October 28, 2008, to making false statements to the

MDA for a HUD disaster home grant, making false

statements to USDA and the SBA, and stealing

government funds from FEMA. In the same case,

Leverne Moses, husband of Beatrice Moses, entered

a plea of guilty to making a false statement to the SBA

and was sentenced to 5 years probation.

Louisiana

Barbara Dowl was indicted by a federal grand jury and charged with theft of government funds,

false statements, mail fraud, and wire fraud. The case is now pending in U.S. District Court, New

Orleans, LA. Dowl's ex-husband, Nathaniel Dowl, was charged in Orleans Parish Criminal District

Court, New Orleans, LA, and pled guilty to filing false public records. According to the indictment,

before Hurricane Katrina, Nathaniel and Barbara Dowl's property was foreclosed on by the City of

New Orleans for unpaid taxes. After Hurricane Katrina, Nathaniel Dowl filed a false quit claim deed on

the property in his and Barbara Dowl's name. Barbara Dowl allegedly, using the quit claim deed,

Copyright, 2009. The Sun Herald -

Gulfport, MS. Reprinted with permission.

Chapter 5 - Disaster Relief Oversight
81

applied for and received $132,000 in CDBG Disaster Recovery Assistance

funds through the Road Home program and $75,000 in SBA disaster

assistance for hurricane-damaged residential property. Dowl is scheduled

to go to trial on June 1, 2009.



Ryant Price, a resident of Saint Rose, LA, was charged in a one-count

indictment by a Federal grand jury on charges of theft of government funds

in connection with his 2006 application for Louisiana Road Home program

funds. The case is now pending in U.S. District Court, New Orleans, LA.

According to the indictment, before and during the time of Hurricane Katrina,

Ryant Price resided in his primary residence in Saint Rose. It is alleged that

in 2006, Price applied for funds from the Louisiana Road Home program,

claiming that a second home he owned, located in New Orleans, was his

primary residence at the time of the storm. According to court documents,

as a result of his application, Price received approximately $105,000 in

Louisiana Road Home program funds to which he was not entitled.



Billy Lawrence, a resident from New Orleans, LA, was charged with one count of theft of

government funds. According to the bill of information, Lawrence applied for and received a Road

Home grant of $98,486 for a rental property he owned on Short Street in New Orleans. It is alleged that

Lawrence fraudulently represented that he was a full-time resident of the Short Street property, when

he had been renting the property to tenants and lived elsewhere at the time of the storm.



Pearl DiLeo, a New Orleans resident, was charged in a one-count indictment by a Federal grand

jury for theft of government funds in connection with her 2007 application for Louisiana Road Home

program funds. According to the indictment, before and during the time of Hurricane Katrina, DiLeo

resided in her primary residence on St. Charles Avenue in New Orleans, LA. It is alleged that in 2006,

DiLeo applied for funds from the Louisiana Road Home program, claiming that a second home she

owned, located in Mandeville, LA, was her primary residence at the time of the storm. According to

court documents, as a result of her application, she received approximately $149,925 in Louisiana

Road Home program funds to which she was not entitled.



Robert Lombardino was charged with committing theft of government funds. The case is now

pending in U.S. District Court, New Orleans, LA. Lombardino applied for and received $134,000 in

CDBG Disaster Recovery Assistance funds through the Road Home program for hurricane-damaged

property, but allegedly the damaged property was not Lombardino's primary residence, but rather a

rental property, during Hurricane Katrina.



Copyright, 2009. The Times-Picayune -

New Orleans, LA. Reprinted with permission.

Chapter 5 - Disaster Relief Oversight
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Chapter 5: Hurricane Relief Oversight

Copyright, 2009. The Times-Picayune -

New Orleans, LA. Reprinted with permission.

Copyright, 2009. The Times-Picayune -

New Orleans, LA. Reprinted with

permission.

Copyright, 2009. The Times-Picayune -

New Orleans, LA. Reprinted with

permission.

Jacqueline Foreman-Pottinger, a resident of Metairie, LA,

was charged via a bill of information with and pled guilty to

one count of theft of government funds. Pottinger applied for

and received a Road Home grant of $148, 078 for a rental

property she owned on Florida Boulevard in New Orleans.

Pottinger fraudulently represented that she was a full-time

resident of the Florida Boulevard property, when she had been

renting the property to tenants at the time of the storm.



Eva Baptiste, a New Orleans resident, pled guilty to a

one-count bill of information for theft of government funds in

connection with her 2007 application for Louisiana Road Home

program funds. According to the bill of information, before

and during the time of Hurricane Katrina, Eva Baptiste resided

in her primary residence on North Roman Street in New

Orleans, LA. In 2007, Baptiste applied for funds from the

Louisiana Road Home program, claiming that a second home she owned, located in the 1500 block of

Lesseps Street in New Orleans, LA, was her primary residence at the time of the storm. According to

court documents, as a result of her application, Baptiste received approximately $110,420 in Louisiana

Road Home program funds to which she was not entitled.



Raymond Cuccia pled guilty in U.S. District Court, New

Orleans, LA, to charges of theft of government funds. Cuccia

applied for and received $64,320 in CDBG Disaster Recovery

Assistance funds through the Road Home program for

hurricane-damaged residential property, but the damaged

property was not his primary residence during Hurricane

Katrina.



Angelica Williams and her sister Carrie Williams each pled

guilty in U.S. District Court, Baton Rouge, LA. Angelica

Williams pled guilty to charges of false statements; Carrie

Williams pled guilty to charges of false statements and aiding

and abetting. Angelica Williams was not the legal, registered

owner of the home in which she resided at the time of

Hurricane Katrina. Using a computer, Angelica Williams

created a false and fraudulent bill of sale showing that she had

purchased the property. Carrie Williams forged the signature

of the seller on the fraudulent bill of sale. Angelica Williams,

using the bogus bill of sale, applied for and received $28,967 in

CDBG Disaster Recovery Assistance funds through the Road

Home program for hurricane-damaged residential property.

Chapter 5 - Disaster Relief Oversight
83

Chapter 5: Hurricane Relief Oversight

Maryland

Months before Hurricane Katrina hit Louisiana, Schewanda Baptiste rented out her home in New

Orleans and moved to Maryland. After Katrina, Baptiste applied for and received FEMA disaster

assistance, claiming that she had evacuated Louisiana as a result of the storm. When Baptiste's

tenant, who did evacuate as a result of Katrina, applied for FEMA disaster assistance, the tenant was

denied assistance because someone had already filed a claim from the address. In addition to

receiving FEMA disaster assistance, Baptiste applied for and received $30,000 in CDBG Disaster

Recovery Assistance funds through the Road Home program. In the first Hurricane Katrina fraud case

prosecuted in the District of Maryland, Schewanda Baptiste pled guilty in U.S. District Court, Greenbelt,

MD, to charges of theft of government property.



HUD and FEMA Disaster Housing Assistance Fraud

Nevada

Zelda Richardson pled guilty in Clark County District Court, Las Vegas, NV, to reduced charges of

attempted theft. Richardson, who resided in Nevada during Hurricane Katrina, claimed that she had

resided in New Orleans and evacuated as a result of the hurricane. Richardson applied for and

received about $17,241 in HUD DHAP payments.

California

Kim Pounds, a former HUD and FEMA DHAP participant, was convicted in U.S. District Court, Los

Angeles, CA, on charges of mail fraud and aiding and abetting. From September 2005 to May 2008,

Pounds applied for and received $14,194 in HUD and $34,507 in FEMA disaster assistance after she

claimed Hurricane Katrina evacuee status, but Pounds resided in California during the storm.

Arizona

Sheila Johnson, a HUD DHAP participant, was sentenced in U.S. District Court, Phoenix, AZ, to 36

months probation and ordered to pay the Arizona Department of Housing $1,520 and FEMA $2,000 in

restitution for her earlier guilty plea to making false statements to defraud HUD. Johnson applied for

and received HUD DHAP and FEMA disaster assistance after she claimed Hurricane Katrina evacuee

status, but Johnson resided in Arizona during the storm.

Mississippi

Pamela Burdine, a HUD DHAP participant and Mississippi Regional Housing Authority VIII

(Mississippi Regional) Section 8 tenant, pled guilty in U.S. District Court, Gulfport, MS, to committing

theft of government funds. From September 2006 to February 2007, Burdine sublet her subsidized

housing unit and obtained $4,506 in Mississippi Regional and $2,345 in FEMA housing assistance she

was not entitled to receive.

Texas

Shandrika Smith and Rodney Cordova were each charged in Harris County District Court,

Houston, TX, with committing theft. According to the charges, in 2007, Shandrika Smith applied for

DHAP through the Montgomery County Housing Authority. Smith was provided a DHAP voucher that

she used to rent a property she claimed was owned by Rodney Cordova, doing business as RCC

Chapter 5 - Disaster Relief Oversight
84

Chapter 5: Hurricane Relief Oversight

Properties LLC. Smith and Cordova allegedly failed to disclose that they were married and further

that Smith and Cordova jointly owned the property. As a result of the concealment of her marriage to

Cordova and her ownership of the rented property, Smith received $8,309 in rental assistance benefits

to which she was not entitled.



Eric Gibbs, a HUD DHAP participant, was sentenced in U.S. District Court, Houston, TX, to 6 months

incarceration and 3 years supervised release and ordered to pay FEMA $15,068 in restitution for his

earlier guilty plea to making false claims. Gibbs applied for and received HUD and FEMA DHAP and

FEMA disaster assistance after he claimed residential property damage from Hurricane Katrina, but

Gibbs did not own any property in Louisiana and resided in Texas during the storm.



Phyllis Taylor, a Houston, TX, resident and a former New Orleans Housing Authority public

housing tenant, pled guilty in U.S. District Court, Houston, TX, to charges of mail fraud and aggravated

identity theft. Taylor filed numerous false claims for disaster assistance, using variations of her name

and claiming damage to various New Orleans and Texas addresses, some of which did not exist.

Taylor was the first Houston-area person charged in connection with Hurricane Ike.

FEMA and Other Fraud by HUD Tenants

Mississippi

Numerous Section 8 tenants of the Royal Oaks Apartments, a HUD-subsidized multifamily housing

development in Hattiesburg, MS, filed for HUD housing assistance and FEMA disaster assistance,

claiming Hurricane Katrina evacuee status and property damage, although Royal Oaks suffered no

storm damage and no tenants were evacuated. In U.S. District Court, Jackson, MS, Royal Oaks housing

recipients Merica Carter, Diedra Hardy, and Cheryl Lewis were collectively ordered to pay FEMA $6,850

and were each sentenced to 3 years probation and ordered to perform 40 hours of community service

for their earlier guilty pleas to committing theft of government funds. Three additional Royal Oaks

residents were indicted on charges of false statements, theft of government funds, wire fraud, and mail

fraud. Those cases are now pending in U.S. District Court, Jackson, MS.

California

Numerous San Francisco Housing Authority Section 8 tenants and public housing residents have

been investigated for claiming Hurricane Katrina evacuee status, although they resided in San

Francisco at the time of the storm. Moreshia Williams was charged in U.S. District Court, San

Francisco, CA, with committing theft of government funds; Carmen Mack pled guilty to mail fraud

charges; and Michelle Chapman and Janale King were collectively sentenced to 5 years probation and

ordered to pay FEMA $9,955 in restitution for their earlier guilty pleas to committing theft of

government funds.



Brenda Frazier, a Housing Choice Voucher program participant at both the City and County of

Fresno Housing Authorities, was sentenced in U.S. District Court, Fresno, CA, to 60 months probation

and ordered to pay FEMA $9,790 in restitution for her earlier guilty plea to filing a false claim and

making false statements. Frazier applied for and received FEMA disaster assistance after she claimed

Hurricane Katrina evacuee status, but Frazier resided in California during the storm.

Chapter 5 - Disaster Relief Oversight
85

Chapter 5: Hurricane Relief Oversight

Louisiana

Debra Jackson, an East Baton Rouge Housing Authority (East Baton Rouge) public housing tenant,

was sentenced in U.S. District Court, Baton Rouge, LA, to 3 years supervised probation and ordered to

pay FEMA $2,000 in restitution for her earlier guilty plea to committing wire fraud. Jackson applied for

and obtained FEMA disaster assistance after she claimed Hurricane Katrina evacuee status, but East

Baton Rouge suffered no hurricane damage, nor were tenants evacuated.

Other Fraud

New York

Robert Chiarappa was indicted on multiple grand larceny charges related to his work for John Galt

Corp. on the former Deutsche Bank tower, located across from the former World Trade Center site.

Manhattan, NY, prosecutors said the construction official overbilled LMDC, an organization that

receives HUD CDBG Disaster Recovery Assistance funds, more than $1 million for work on the

condemned skyscraper. Investigators described Chiarappa's massive alleged scheme as an invoicepadding racket. The district attorney stated that Chiarappa signed off on fake invoices for $1.2

million in materials that were never delivered and took kickbacks including clothes, cars, trips, and

cash. AW Meyer, a company that provides demolition and abatement supplies for others under

contract with LMDC, and James Kelly, a supply manager for AW Meyer, each pled guilty to falsifying

business records related to their roles in the Chiarappa scheme.

Louisiana

Shawnzell Venson and Willie Smith, both residents of New Orleans, were

charged in a one-count indictment by a Federal grand jury for conspiracy to

steal government funds. The case is now pending in U.S. District Court, New

Orleans, LA. The indictment charges Venson and Smith with conspiracy to

steal federal funds intended for grants to homeowners through the Louisiana

Road Home program. According to the indictment, Venson and Smith

conspired to have elderly individuals' Road Home grants deposited into their

personal bank accounts. It is alleged that Venson and Smith changed the bank

routing instructions in the recipients' closing documentation so that the grants

would be directly transferred to Venson and Smith's bank accounts. According

to the indictment, Venson and Smith would then call the bank and pose as

relatives of the grantees. Over the course of the conspiracy, it is alleged that

Venson and Smith attempted to steal more than $600,000 in government funds

intended for five different elderly Road Home recipients.



Roy Johnson, of Baton Rouge, LA, was convicted of three counts of mail

fraud in connection with a fraudulent application for expedited disaster

assistance benefits. Johnson applied for disaster assistance from FEMA, falsely

claiming to be a HANO resident during Hurricane Katrina and claiming that he

had evacuated to Denham Springs, LA. However, at the time of the storm and

for all of 2005, Johnson was in State custody in the Baton Rouge area. Before

being incarcerated, Johnson lived in Baton Rouge. Through his false and

Copyright, 2008. The TimesPicayune - New Orleans, LA.

Reprinted with permission.

Chapter 5 - Disaster Relief Oversight
86

Chapter 5: Hurricane Relief Oversight

fraudulent representations to FEMA, Johnson caused FEMA to mail him three checks for disaster

assistance totaling more than $14,000. Johnson was sentenced to 33 months imprisonment and 3

years supervised release.

Texas

Stanley Burrell pled guilty in U.S. District Court, Beaumont, TX, to making false claims. Burrell

applied for and received $12,750 in FEMA disaster assistance after he claimed to be a HANO Hurricane

Katrina evacuee, but Burrell never resided in HUD-subsidized housing.



Shannon Isadore was indicted in Harris County District Court, Houston, TX, on charges of theft of

government funds. Isadore applied for and received $5,202 in HUD DHAP and FEMA disaster

assistance after he claimed to be a Hurricane Katrina evacuee, but Isadore allegedly resided in Texas

during the storm.

Arizona

Kenneth Hart was sentenced in U.S. District Court, Tucson, AZ, to 60 months probation and

ordered to collectively pay FEMA, the Red Cross, and the Tucson Community Services $5,365 in

restitution for his earlier guilty plea to making false statements. Hart applied for and received disaster

assistance after he claimed Hurricane Katrina evacuee status, but Hart resided in Arizona during the

storm.

Deterrence and Returned Funds

- Proactive investigations conducted by HUD OIG determined that numerous individuals

approved for MDA grants were ineligible. As a result of these OIG investigations, MDA did

not pay grants totaling more than $1 million.

- Proactive investigations conducted by HUD OIG determined that numerous individuals

approved for Louisiana Road Home grants were ineligible. As a result of these OIG

investigations, Road Home grants totaling more than $1 million were not paid.

- HUD OIG reported funds put to better use totaling more than $37.7 million during the reporting

period.

- Six Section 8 tenants were removed from the Section 8 low-income Housing Choice Voucher

program after being charged with disaster-related fraud in Jackson, MS.

- A Section 8 tenant was removed from the Section 8 Housing Choice Voucher program after

being charged with disaster-related fraud in Texas; the tenant's husband was removed from

DHAP and the Housing Choice Voucher program after also being charged with disaster-related

fraud.

- During the reporting period, HUD OIG reported 47 administrative actions, including

suspensions and debarments.

Chapter 5 - Disaster Relief Oversight
87

Chapter 5: Hurricane Relief Oversight

Continued Coordination

- HUD OIG has been and continues to be a dedicated partner in the NCDF Task Force. It has

provided personnel support to the Task Force and is making sound use of the Task Force's

Joint Command Center for the receipt and referral of complaints, review and analysis of

potentially fraudulent applications for disaster-related benefits, and timely information

sharing with other relevant law enforcement agencies. During this reporting period, the NCDF

Task Force received 5,243 complaints and referred 3,317 complaints for investigation,

including 296 referred to HUD OIG.

- HUD OIG continues to work closely with law enforcement agencies, including the FBI, SBA, DHS

OIG, State Inspector General's Offices in Louisiana and Mississippi, and the City of New

Orleans, among others, on complaints, intelligence, and joint investigations of disaster-related

fraud. OIG also continues to contract with partners KPMG, the Reznick Group, and ICF

International.

- HUD OIG continues to perform outreach actions with law enforcement partners, State and

local agencies, HUD personnel, HUD multifamily property owners and managers, HUD public

housing agencies and authorities, and community partners.

Training and Proactive Detection

- Special Agent in Charge (SAC) Thomas Luke provided an overview of the HUD

Neighborhood Stabilization program, the State of Louisiana Action Plan, and action plans for

both Baton Rouge and New Orleans and described funding availability and contractual

requirements during a meeting with the Louisiana Inspector General in Baton Rouge, LA. The

Louisiana Inspector General and six staff members attended.

- SAC Thomas Luke provided an overview of the HUD Neighborhood Stabilization program and

the New Orleans Action Plan and described funding availability and contractual requirements

during a meeting held with the interim New Orleans Inspector General in New Orleans, LA.

The interim New Orleans Inspector General and five staff members attended.

- Assistant Special Agent in Charge Fernando Ramos and Assistant Regional Inspector General

for Audit Tracey Carney provided an overview of HUD OIG's mission and described funding

and oversight for HUD disaster and homeless programs at a HUD-sponsored Homeless and

Supportive Funding seminar in New Orleans, LA. Approximately 50 individuals representing

HUD and various organizations from the State of Louisiana, Calcasieu and Terrebonne

Parishes, and other nonprofit organizations attended.



Chapter 5 - Disaster Relief Oversight
Chapter 5: Hurricane Relief Oversight
Chapter 5: Hurricane Relief Oversight
90

In addition to the audits and investigations described in this chapter, the U.S. Department of

Housing and Urban Development (HUD) Office of Inspector General (OIG), has conducted numerous

outreach efforts (see chapter 7, pages 108-109).

Strategic Initiative 4: Contribute to improving HUD’s execution and

accountability of fiscal responsibilities as a relevant and problem-solving

advisor to the Department

Chapter 6: Other Significant Audits and Investigations/OIG Hotline

Key program results Questioned costs Funds put to better use

Audit 5 audits $92,000 $1.523 billion

Our

focus

Page 90

Page 91

Page 91

Page 92

- Audit of HUD's financial statements

- Federal Housing Administration financial statements

- Audit of the Government National Mortgage Association's financial

 statements

- Review of HUD's centralized HUD account management process

Audit of HUD's Financial Statements

HUD OIG provided additional details to supplement the report on HUD's fiscal years (FY) 2008 and

2007 financial statements, which is included in HUD's Fiscal Year 2008 Performance and

Accountability Report.

In our opinion, HUD's FY 2008 and 2007 financial statements were fairly presented. The report

details the following significant deficiencies in internal controls related to the need to

- Continue improvements in the oversight and monitoring of subsidy calculations and

intermediaries' program performance and promote full utilization of Housing Choice Voucher

program funds,

- Improve the processes for reviewing obligation balances,

- Comply with Federal financial management systems requirements,

- Further strengthen controls over HUD's computing environment,

- Improve personnel security practices for access to the Department's critical financial systems,

- Continue to enhance and modernize the Federal Housing Administration's (FHA) financial

information systems, and

- Strengthen the Governmant National Mortgage Association's (Ginnie Mae) monitoring and

management controls in regard to the Mortgage-Backed Securities program.

Audit

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline
91

Chapter 6: Other Significant Audits and Investigations/OIG Hotline

The report also includes the following instances of noncompliance with applicable laws and

regulations:

- HUD did not substantially comply with the Federal Financial Management Improvement Act

regarding system requirements,

- HUD did not substantially comply with the Antideficiency Act,

- FHA did not comply with the Credit Reform Act of 1990, and

- Ginnie Mae did not comply with the Federal Information Management Security Act.

The audit further identified $122.9 million in excess obligations recorded in HUD's records, and

OIG recommended that HUD seek legislative authority to implement $1.4 billion in offsets against

housing agencies' excess unusable funding held in net restricted assets accounts at the housing

agencies. These amounts represent funds that HUD could put to better use.

OIG assessed the actions taken by HUD to mitigate the deficiencies noted and recommended

corrective actions. (Audit Report: 2009-FO-0003)

FHA Financial Statements

Urbach, Kahn, and Werlin LLP (UKW) audited FHA's financial statements for the fiscal years ending

September 30, 2008 and 2007.

The financial statements presented fairly, in all material respects, FHA's financial position as of

September 30, 2008 and 2007, and its net costs, changes in net position, and combined budgetary

resources for those years in conformity with accounting principles generally accepted in the United

States of America. The report also details a significant deficiency in internal controls concerning the

need for FHA to continue its efforts to enhance and modernize its financial information systems. Two

reportable instances of noncompliance with laws, regulations, and government-wide policies were

also identified.

 UKW assessed management's responses to the report and recommended corrective actions.

(Audit Report: 2009-FO-0002)

Audit of the Government National Mortgage Association's Financial

Statements

Carmichael, Brasher, Tuvell, and Company (CBTC) audited Ginnie Mae's financial statements for

the fiscal years ending September 30, 2008 and 2007.

The financial statements presented fairly, in all material respects, Ginnie Mae's financial position

as of September 30, 2008, and September 30, 2007, and the results of its operations and its cash flows

for those years in conformity with accounting principles generally accepted in the United States of

America. One significant deficiency was identified regarding internal control and the need for Ginnie

Mae to strengthen monitoring and management controls in the Mortgage-Backed Securities program.

In addition, the audit identified one reportable instance of noncompliance with laws, regulations, and

government-wide policies concerning noncompliance with the Federal Information Management

Security Act.

CBTC assessed management's responses to the report and recommended corrective actions.

(Audit Report: 2009-FO-0001)

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline
92

Review of HUD's Centralized HUD Account Management Process

HUD OIG audited the Centralized HUD Account Management Process (CHAMP) to determine whether

HUD efficiently and effectively managed its information system user access accounts in accordance

with Federal security requirements. OIG assessed the accuracy and completeness of data in CHAMP

and verified the adequacy of HUD's user account management, including establishing, activating,

modifying, disabling, and removing of the user accounts.

OIG has determined that the contents of this report would not be appropriate for public disclosure

and has, therefore, limited its distribution to selected HUD officials. (Audit Report: 2009-DP-0003)



Chapter 6 - Other Significant Audits and Investigations/OIG Hotline
Chapter 6 - Other Significant Audits and Investigations/OIG Hotline 93

Investigations

Strategic Initiative 4: Contribute to improving HUD’s execution and

accountability of fiscal responsibilities as a relevant and problem-solving

advisor to the Department

$

recovered

Admin/civil

actions

Investigations 44 $21,727,986 5

Convictions/pleas/

pretrials

Cases

closed

Key program

results

2

The investigation discussed below was conducted jointly with other Federal law enforcement

agencies.

Sheena Wade was indicted in U.S. District Court, Nashville, TN, for allegedly committing wire fraud

and aggravated identity theft and producing counterfeit U.S. and State securities. From September

2006 through March 2007, Wade allegedly obtained or created and negotiated several HUD counterfeit

checks.


94

The HUD OIG hotline is operational 5 days a week, Monday through Friday, from 10:00 a.m. to 4:30

p.m. The hotline is staffed by 10 full-time OIG employees, who take allegations of waste, fraud, abuse,

or serious mismanagement in HUD or HUD-funded programs from HUD employees, contractors, and

the public. The hotline also coordinates reviews with internal audit and investigative units or with

HUD program offices.

During this reporting period, the hotline received and processed 8,265 complaints--84 percent

received by telephone, 8 percent by mail, and 8 percent by e-mail. Every allegation received by the

Hotline is logged into a database and tracked.

Of the complaints received, 667 were related to the mission of OIG and were addressed as hotline

cases. Hotline cases are referred to OIG's Offices of Audit and Investigation or to HUD program offices

for action and response. The following illustration shows the distribution of Hotline case referrals by

percentage.

The hotline closed 505 cases this reporting period. The closed Hotline cases included 114

substantiated allegations. The substantiated allegations resulted in 33 administrative sanctions,

including action taken against four supportive service activities that were found to be ineligible to

receive community planning and development grant funds. The Department also took 102 corrective

actions that resulted in $374,025 in recoveries of losses and more than $2.4 million in HUD funding that

could be put to better use. The recoveries included repayments of overpaid rental subsidies. Some of

the funds that could be put to better use were the result of cases in which tenants were terminated

from public housing or multifamily housing programs for improperly reporting their incomes or

family composition to qualify for rental assistance.

Chapter 6: Other Significant Audits and Investigations/OIG Hotline

OIG Hotline

Chart 6.1: Hotline cases opened by program area

Single-family housing, 3%

Public and Indian housing, 61%

Multifamily housing, 11%

Community planning and

development, 3%

OIG Audit and Investigation, 18%

Other, 4%

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline
95

Chapter 6: Other Significant Audits and Investigations/OIG Hotline

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline

Chart 6.2: Hotline dollar impact from program offices

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0

Public and Indian

housing

Multifamily

housing

Funds put to better use Recoveries



$2,024,412

$125,055

$276,316

$24,685
Chapter 6: Other Significant Audits and Investigations/OIG Hotline

98

To foster cooperative, informative, and mutually beneficial relationships with agencies and

organizations assisting the U.S. Department of Housing and Urban Development (HUD) in

accomplishing its mission, the Office of Inspector General (OIG) participates in special outreach

efforts. The outreach efforts described below complement routine coordination with Federal, State,

and local law enforcement agencies; various congressional committees or subcommittees; and other

OIGs. During outreach efforts, OIG personnel present information about HUD OIG's role and function,

provide audit and investigative results, and discuss desired goals and objectives.

Single-Family Housing Programs

Special Agent in Charge (SAC) Peter Emerzian and Assistant Special Agent in Charge (ASAC) Diane

DeChellis provided an overview of HUD OIG's mission and priorities, described HUD's role in

mortgage fraud investigations, and discussed the Housing and Economic Recovery Act and the

Economic Stimulus Act of 2008 at a Commonwealth of Massachusetts Division of Banks meeting in

Boston, MA. Approximately 25 senior bank executives attended.



SAC Barry McLaughlin, Assistant U.S. Trustee Sandra Rasnak, and Federal Bureau of Investigation

(FBI) Supervisory Special Agent (SSA) Steven Secor provided an overview of HUD OIG's mission and

role and described common fraud findings in HUD's single-family housing and Home Equity

Conversion Mortgage programs for two Illinois Mortgage Bankers Association (MBA) conference

sessions in Lombard, IL. Approximately 65 MBA members attended.



SAC Peter Emerzian, ASAC Diane DeChellis, and Special Agent (SA) Ed Redmond provided an

overview of HUD OIG's mission and priorities, described HUD OIG's role in mortgage fraud

investigations, and discussed the Housing and Economic Recovery Act and the Economic Stimulus

Act of 2008 at a New Hampshire State Banking Commission conference in Concord, NH.

Approximately 25 banking executives and Federal law enforcement personnel attended.



SAC Barry McLaughlin and the Chicago HUD Supervisory Operations Officer Judy Heaney

provided an overview of HUD's increased role in the Federal Housing Administration (FHA) insurance,

HOPE for Homeowners, Neighborhood Stabilization, and Home Equity Conversion Mortgage programs

for Illinois Mortgage Fraud Working Group members meeting in Chicago, IL. More than 20 Federal,

State, and local regulatory agency representatives attended.



SAC Peter Emerzian and ASACs Diane DeChellis and Michael Wixted provided an overview of the

Housing and Economic Recovery Act and the impact it will have on HUD programs at a meeting with

New England Mortgage Fraud Group members in Boston, MA. Approximately 60 assistant U.S.

attorneys (AUSA) and Federal, State, and local law enforcement officials and regulators attended.



Chapter 7: Outreach Efforts

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99

Chapter 7: Outreach Efforts

SAC Michael Powell, ASAC Cortez Richardson, and SA Jerome Winkle provided an overview of HUD

OIG's mission and role and described FHA program responsibilities at a mortgage fraud meeting

sponsored by the FBI in Augusta, GA. More than 40 representatives from financial institutions, the

Georgia Department of Banking and Finance, the U.S. Attorney's and District Attorney's Offices, and

other Federal law enforcement agencies attended.



SAC Barry McLaughlin described mortgage fraud trends and schemes and provided information

on the national loan officer and mortgage lender database at an Illinois Mortgage Fraud Working Group

meeting in Chicago, IL. Approximately 25 representatives from the financial and real estate

industries, along with Federal and State regulatory and law enforcement personnel, attended.



SAC Peter Emerzian, Regional Inspector General for Audit (RIGA) John Dvorak, ASAC Diane DeChellis,

Assistant Regional Inspector General for Audit (ARIGA) Michael Motulski, and SA Alex Rosania

provided an overview of fraud found in the HUD HOPE for Homeowners, Home Equity Conversion

Mortgage, and FHA-insured mortgage programs and described mortgage fraud involving Rhode Island

banking institutions at a Rhode Island Division of Banking and Securities meeting in Cranston, RI. At

the conclusion, a question and answer forum was held for 15 employees in attendance.



SAC Peter Emerzian, ASAC Diane DeChellis, ARIGA Kevin Smullen, and SA Steven Tufts provided an

overview of fraud found in the HUD HOPE for Homeowners, Home Equity Conversion Mortgage, and

FHA-insured mortgage programs and described fraud involving mortgage companies in the State of

Maine at meetings in Gardiner, ME, for staff members from both the Maine Bureaus of Consumer

Credit Protection and Financial Institutions. At the conclusion of each presentation, a question and

answer forum was held for approximately 20 employees in attendance.



SAC Peter Emerzian, ASAC Diane DeChellis, ARIGA Kevin Smullen, and SA Brian Gosselin provided

an overview of fraud found in the HUD HOPE for Homeowners, Home Equity Conversion Mortgage,

and FHA-insured mortgage programs and described fraud involving mortgage companies in the State

of Vermont at a meeting in Montpelier, VT, with Thomas Canton, the Deputy Commissioner for the

Vermont Commission on Banking, Insurance, Securities, and Health Care Administration.



SAC Peter Emerzian, RIGA John Dvorak, ASAC Diane DeChellis, ARIGA Michael Motulski, and SA

Alex Rosania provided an overview of fraud found in the HUD HOPE for Homeowners, Home

Equity Conversion Mortgage, and FHA-insured mortgage programs; described mortgage fraud

involving Rhode Island banking institutions; and discussed HUD-funded programs found in the

American Recovery and Reinvestment and the Housing and Economic Recovery Acts at a meeting

held in Providence, RI, with employees of the Rhode Island Office of the Auditor General. At the

conclusion, a question and answer forum was held for 15 staff members in attendance.



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Chapter 7: Outreach Efforts

ASAC Brad Geary provided a presentation, entitled "The Latest Trends in Mortgage and Real

Estate Fraud," and described common mortgage fraud schemes, criminal statutes, and HUD's increased

role as a result of the current economic crisis at a meeting in Chicago, IL, sponsored by the law firm of

Holland & Knight, LLP. Approximately 75 mortgage industry representatives and attorneys attended.



ASACs Jeanne Daumen and Cary Rubenstein and SA Jennifer Schofield-Lake provided an overview

of the legal aspects involving mortgage fraud at a Certified Fraud Examiners conference at the

Columbia Bank in Fairlawn, NJ. Approximately seven certified fraud examiners, auditors, and Freddie

Mac employees attended.



ASAC Wallace Merriman provided an overview of HUD OIG's mission and described predatory

lending, property flipping, equity skimming, appraisal fraud, and the potential for Home Equity

Conversion Mortgage program fraud at a HUD-sponsored Loss Mitigation training conference in

Washington, DC. Approximately 50 nonprofit and State and local government representatives

attended.



ASAC Michael Gibson provided an overview of HUD OIG mortgage fraud investigations and

described HUD OIG's response to and plan for mortgage rescue and loss modifications scams at a

Southern California congressional briefing in Los Angeles, CA. Approximately 30 congressional

representatives and HUD officials attended.



ASAC Suzanne Steigerwald provided an overview of HUD OIG's mission and authority and described

fraud detection and enforcement methods used to successfully prosecute investigations at a real

estate fraud training seminar hosted by the HUD Homeownership Center in Denver, CO. More than 50

real estate professionals attended.



ASAC Edwin Bonano, ARIGA Michael Rivera, and SAs Hector Mercado and Jose Laureano provided

an overview of HUD OIG's mission and role and described the organization structure and Offices of

Audit and Investigation functions at a meeting with MBA members in San Juan, PR. Approximately 20

financial institution representatives attended.



ASAC Brad Geary provided a presentation, entitled "Introduction to Mortgage Fraud," and described

the current trends in mortgage fraud schemes, HUD OIG's role in mortgage fraud investigations, and

the prosecutorial process at an International Association of Financial Crimes Investigators meeting in

Chicago, IL. Approximately 60 loss prevention specialists from various financial institutions and law

enforcement agencies attended.



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SA Michael Wagenhauser and AUSA Robert Krask presented an educational seminar, entitled

"Common HUD/FHA Fraud and Fraud Schemes," at the Virginia Association of Mortgage Brokers

annual convention in Virginia Beach, VA. SA Wagenhauser provided an overview of HUD OIG's

mission and authority and described common mortgage fraud schemes, and AUSA Krask provided an

overview of the U.S. Department of Justice mortgage fraud prosecutions. Approximately 500

mortgage industry representatives attended.



SA Scott Tanchak, AUSA Ellen Cohen, and FBI SSA William Stern provided a presentation, entitled

"Effectiveness of the Mortgage Fraud Task Force Approach," and described the West Palm Beach

Mortgage Fraud Task Force operations at a mortgage fraud conference sponsored by the MBA in Las

Vegas, NV. At the conclusion, a question and answer forum was held for approximately 100

individuals in attendance.



SA Heather Yannello provided a presentation, entitled "Holding on to Your Home," and described

refinancing, reverse mortgages, foreclosure initiatives, and bankruptcies at a workshop sponsored by

the Erie County Fair Housing Partnership and Predatory Lending Task Force in Amherst, NY.

Approximately 100 area lenders, legal aid and housing counselors, HUD representatives, and

individuals confronting foreclosures attended.



SA Robert Jones provided an overview of current FHA-insured and Home Equity Conversion

Mortgage program fraud trends and described fraud prevention methods and reporting procedures at

the National Association of Hispanic Real Estate Professionals conference in Dallas, TX.

Approximately 50 representatives from the mortgage and realty professions attended.



SA Heather Yannello provided an overview of HUD OIG's role in mortgage fraud at a Mortgage

Fraud Investigations training course sponsored by the New York State Division of Criminal Justice and

Department of Banking in Batavia, NY. Approximately 30 State and local government investigators

attended.



SA Eric Huhtala provided an overview of HUD OIG's mission for members of the Sacramento

Association of Realtors attending a real estate and finance forum in Sacramento, CA. More than 70

real estate and mortgage industry personnel attended.



SA Nelson Sanchez provided an overview of the FHA mortgage insurance, Home Equity

Conversion Mortgage, and HUD Section 8 programs and described financial exploitation of the elderly

at a training seminar, entitled "Investigating Elder Abuse," hosted by the Adams County District

Attorney's Office in Brighton, CO. More than 50 social workers, law enforcement personnel,

prosecutors, and others providing elderly services attended.



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Chapter 7: Outreach Efforts

SA DeChantel Bahr provided an overview of HUD OIG's mission, described the challenges involved

in Home Equity Conversion Mortgage program and foreclosure recovery fraud investigations, and

discussed recent legislation involving the FHASecure, HOPE NOW, and HOPE for Homeowners

programs at a Security Association of Financial Institutions training seminar in Springfield, VA.

Approximately 65 financial institution officials and security officers attended.



SA Joshua Stockman provided an overview of HUD OIG's history and mission and described the

investigative process and specific investigations involving HUD mortgage, rental assistance, and grant

programs at a Society of Exchange Counselors meeting in Carefree, AZ. Approximately 45 real estate

brokers and investors attended.



SA Alisha Mahabir participated as a panelist and provided an overview of HUD OIG mortgage fraud

trends at the 2008 Houston Bar Association's Real Estate Institute in Houston, TX. Approximately 60

real estate attorneys attended.



SA James Carrieres provided an overview of HUD OIG's mission and described successful Arizona

mortgage fraud investigations for students attending criminal justice courses at the Arizona State

University campus in Phoenix, AZ. About 100 students attended.



SA Nicholas Fasciglione provided an overview of HUD OIG's mission and priorities at a Central

Oklahoma Clearing House Association meeting in Oklahoma City, OK. Approximately 20 financial

institution representatives; local government officials; and Federal, State, and local law enforcement

personnel attended.

Public Housing and Rental Assistance Programs

SAC Phyllis Robinson and SAs Amy Durso,

Melissa McFadden, and Fran Novak helped to

distribute food, linens, and toys to needy

families attending the 10th annual "Christmas in

the City" event sponsored by the Kansas City

Housing Authority and other local agencies in

Kansas City, KS. All families living in Kansas City

Section 8 and public housing units were eligible

to participate, and about 400 children received

bicycles at this year's event.



Chapter 7 - Outreach Efforts

Santa's helper, also known as Special Agent Melissa

McFadden, gives a bike to a young resident of

HUD-assisted housing in Kansas City, KS
103

Chapter 7: Outreach Efforts

SAC Peter Emerzian and ASAC Diane DeChellis provided an overview of HUD OIG's mission and

priorities and described rental assistance fraud investigations for Section 8 coordinators meeting at

the Maine State Housing Authority in Augusta, ME. Approximately 60 Section 8 coordinators and

administrators attended.



SAC Rene Febles and SA Frank Aeillo provided an overview of landlord and tenant fraud and

described corruption and bid rigging at a meeting in Camden, NJ, for officials from RPM Development,

a HUD-funded multifamily housing developer and manager operating in both New York and New

Jersey. Approximately seven divisional representatives attended.



SAC Timothy Mowery and SA Malinda Antonik provided an overview of HUD OIG's mission and

described an array of investigations and methods to overcome fraud at a Hillsborough County

Affordable Housing meeting in Tampa, FL. Approximately 35 Hillsborough County Affordable

Housing staff members and representatives from the Hillsborough County Attorney's and

Administrator's Offices attended.



SAC Hershel Harvell and ASAC Michael Wilson provided an overview of HUD OIG's mission and

authority and described common tenant, landlord, and Community Development Block Grant (CDBG)

fraud schemes at a training session for Arkansas/Texas Commission members in Texarkana, AR. HUD

officials and approximately 20 Texas and Arkansas housing representatives attended.



SAC George Dobrovic described the Housing Choice Voucher program and the program's impact

on neighborhoods, discussed violent crime and gang activity in public housing, and provided an

overview of mortgage fraud and blight in depressed communities as a panelist at a Public Safety and

Security conference hosted by the Youngstown Metropolitan Housing Authority in Youngstown, OH.

Approximately 45 public housing tenants, housing authority representatives, city council members,

and local law enforcement personnel attended.



SAC Herschell Harvell provided an overview of HUD OIG's priorities and initiatives, discussed

public housing authority public corruption and the benefits of internal controls, and described

stimulus funding for the HUD Neighborhood Stabilization, FHA, and public housing programs for North

Texas Housing Agency Association members meeting in Lancaster, TX. At the conclusion, a question

and answer forum was held for approximately 60 members in attendance.



SAC Joseph Clarke, ARIGA David Kasperowicz, and ARIGA Osiko Tekpetey participated in a

meeting in Philadelphia, PA, with the Director of the Philadelphia Office of Public Housing and

representatives from 37 public housing authorities scheduled to receive capital funds under the

American Recovery and Reinvestment Act. The housing authorities participating in the meeting were

from the Commonwealth of Pennsylvania and the State of Delaware. ARIGAs Kasperowicz and Tekpetey,

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Chapter 7: Outreach Efforts

along with SAC Clarke, provided an overview of the role and responsibilities of HUD OIG in providing

critical oversight of the distribution and use of these funds.



RIGA John Buck and ARIGA Dave Kasperowicz were guest speakers at the Pennsylvania

Association of Housing and Redevelopment Agencies (PAHRA) annual conference in Harrisburg, PA.

PAHRA is an affiliation of Pennsylvania's housing authorities, redevelopment authorities, community

development agencies, and nonprofit corporations. The purposes of PAHRA are to disseminate

information relating to housing and community development; study and analyze national, State, and

local legislation affecting housing and community development; provide a channel for the frequent

exchange of ideas, experiences, and innovations within the field of housing and community

development; and increase public understanding of the methods and objectives of housing and

community development agencies. RIGA Buck and ARIGA Kasperowicz facilitated a session which

described the Office of Audit mission and functions and highlighted recent audits with particular

emphasis on Section 8 audits. Afterward, they participated in a question and answer session with

approximately 70 housing representatives in attendance.



ASAC Gene Westerlind provided an overview of HUD OIG's mission and authority and described

rental assistance fraud schemes at an Armour Boulevard Community Group meeting in Kansas City,

MO. At the conclusion, ASAC Westerlind hosted a question and answer forum for approximately 15

city officials, community leaders, multifamily property managers, and others in attendance.



ASAC Jeanne Daumen provided an overview of HUD OIG's mission, 2009 investigative priorities,

and public and Indian housing investigations involving fraud and corruption at a New Jersey Chapter

of the National Association of Housing and Redevelopment Officials (NAHRO) meeting in Newark, NJ.

At the conclusion, a question and answer forum was held for approximately 45 housing officials in

attendance.



ASAC Gene Westerlind and SA Karen Gleich provided an overview of HUD OIG's mission and

authority and described rental assistance fraud schemes and "red flag" indicators at a Kansas NAHRO

conference in Manhattan, KS. At the conclusion, a question and answer forum was held for

approximately 130 housing officials in attendance.



ARIGA Helen Sparks made a presentation to the Northern California Fair Housing Coalition in San

Francisco, CA. The presentation consisted of an overview of OIG, examples of issues that could be

referred, and information on the OIG Hotline.



SSA Daniel Ellis provided an overview of housing assistance fraud and public housing crime and

evictions strategies at a Pennsylvania-Delaware Affordable Housing Management Association

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Chapter 7: Outreach Efforts

conference in Dover, DE. At the conclusion, SSA Ellis, ASAC Cary Rubenstein, and two local attorneys

discussed the tenant eviction process for approximately 100 housing officials in attendance.



SA Brian Caldwell provided an overview of HUD OIG's mission and role involving multifamily

housing fraud and described Federal prosecutions at a Southeastern Affordable Housing Management

Association conference in Hoover, AL. Approximately 250 multifamily property managers attended.



SA Richard Salom provided an overview of HUD OIG's mission and described public housing fraud

schemes and prevention techniques at a NAHRO conference in San Francisco, CA. Approximately 20

housing officials attended.



SA Greg Williams provided an overview of HUD OIG's mission and priorities and described

methods to detect, prevent, and report fraud at a public safety meeting at the Great Brook Valley

public housing development in Worcester, MA. Approximately 40 State and local law enforcement

personnel, city officials, and community members attended.



SA Jesse Barragan provided an overview of HUD OIG's mission and described housing counseling

fraud schemes and prevention techniques at an annual Rural Community Assistance Corporation

conference in Sacramento, CA. Approximately 30 housing officials attended.



SA John Rodriguez provided an overview of rental assistance programs and tenant and landlord

fraud indicators at a meeting with the Southern California Chapter of the Family Self-Sufficiency

Network members in Norwalk, CA. Approximately 60 Southern California housing authority

representatives attended.

Community Planning and Development

SACs Rene Febles and Timothy Mowery and RIGA Jim McKay provided an overview of the

concerns and vulnerabilities in the Neighborhood Stabilization program and described the HUD OIG

zero tolerance stance and planned program monitoring at a conference held for Neighborhood

Stabilization grant administrators in Orlando, FL. Approximately 275 State and local government

representatives attended.



SAC Peter Emerzian, ASAC Michael Wixted, SA John Keaney, and the Connecticut HUD Office of

Community Planning and Development (CPD) Director Gary Reisine provided an overview of the

Neighborhood Stabilization program and described the program's vulnerabilities at a meeting with

Connecticut Department of Economic and Community Development officials in Hartford, CT.

Approximately 20 community development officials attended.



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Chapter 7: Outreach Efforts

SAC Barry McLaughlin and ARIGA Brent Bowen provided an overview of HUD CPD audits and

fraud indicators associated with the Neighborhood Stabilization program at a HUD-sponsored

conference in Chicago, IL. Approximately 60 HUD grantees attended.



SAC Peter Emerzian, ASAC Diane DeChellis, ARIGA Kevin Smullen, SA Steven Tufts, and HUD CPD

representative Lynn Morrow provided an overview of the HUD Neighborhood Stabilization program

and described the program's fraud vulnerabilities at a meeting in Augusta, ME, for employees of the

Maine Department of Economic and Community Development. At the conclusion, a question and

answer forum was held for approximately 20 staff members in attendance.



SAC Rene Febles, RIGA Edgar Moore, ARIGA Joseph Vizer, SA Damian Salvati, FBI SSA Sandra Brown,

and AUSA Brian Howe provided an overview of HUD OIG audits, investigations, and corruption

prosecutions during an outreach session for New Jersey CDBG officials in Newark, NJ. At the

conclusion, a question and answer forum was held for approximately 30 representatives in

attendance.



SAC Peter Emerzian, ASACs Diane DeChellis and Michael Wixted, and SAs Alexander Rosania and

Jessica Piecuch provided an overview of HUD OIG's mission and priorities and described the

Neighborhood Stabilization program outlined in the Housing and Economic Recovery Act of 2008 at a

meeting with Massachusetts OIG personnel in Boston, MA. Approximately 25 investigators, auditors,

and others attended.



SAC Michael Powell and ASAC Nadine Gurley provided an overview of HUD OIG's mission and role

and described responsibilities involving the HUD Neighborhood Stabilization program and previous

grantee prosecutions at a meeting with Alabama Community Planning and Development directors and

HUD CPD staff in Birmingham, AL. Approximately 20 representatives attended.



SAC Peter Emerzian, ASAC Diane DeChellis, ARIGA Kevin Smullen, and SA Brian Gosselin provided

an overview of the HUD Neighborhood Stabilization program and described the program's fraud

vulnerabilities at a meeting in Montpelier, VT, with Vermont Agency of Commerce and Community

Development employees. At the conclusion, a question and answer forum was held for approximately

24 staff members in attendance.



SAC Peter Emerzian, RIGA John Dvorak, ASAC Diane DeChellis, ARIGA Kevin Smullen, SA Edward

Redmond, and HUD CPD representative Roslyn Block provided an overview of the HUD Neighborhood

Stabilization program and described the program's fraud vulnerabilities at a meeting in Concord, NH,

with New Hampshire Community Development Finance Agency employees. At the conclusion, a

question and answer forum was held for 20 staff members in attendance.



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Chapter 7: Outreach Efforts

SAC Peter Emerzian, RIGA John Dvorak, ASAC Michael Wixted, SA Thomas Neighbors, and HUD

CPD representative Paul Connolly provided an overview of the HUD Neighborhood Stabilization

program grant awarded to the City of Brockton and described the program's fraud vulnerabilities at a

meeting in Brockton, MA, with employees of Building a Better Brockton, Inc. At the conclusion, a

question and answer forum was held for 20 staff member in attendance.



SAC Peter Emerzian, RIGA John Dvorak, ASAC Diane DeChellis, SA Alex Rosania, and HUD CPD

representative Robert Shumeyko provided an overview of the HUD Neighborhood Stabilization

program and described the program's fraud vulnerabilities at a meeting in Providence, RI, with Rhode

Island Office of Housing and Community Development and Office of Housing staff. At the conclusion,

a question and answer forum was held for approximately 20 employees in attendance.



SAC Peter Emerzian, RIGA John Dvorak, ASAC Michael Wixted, ARIGA Michael Motulski, SA Samuel

Ortiz-Diaz, and HUD CPD representative Paula Newcombe provided an overview of the HUD

Neighborhood Stabilization program and described the program's fraud vulnerabilities at a meeting in

Springfield, MA, with Springfield's Office of Community Development, Office of Housing and

Neighborhood Services, and Office of Economic Development staff and National Development Council

members. At the conclusion, a question and answer forum was held for approximately 20 employees

and members in attendance.



SAC Peter Emerzian; RIGA John Dvorak; ASAC Michael Wixted; ARIGA Kevin Smullen; SA Jessica

Piecuch; and HUD CPD representatives Robert Shumeyko, Samantha Graves, and Laura Schiffer

provided an overview of the HUD Neighborhood Stabilization program and described the program's

fraud vulnerabilities at meetings in Boston, MA, with Massachusetts Department of Housing and

Community Development and Boston Department of Neighborhood Development staff. At the

conclusion, a question and answer forum was held for approximately 45 employees in attendance.



SAC Peter Emerzian, RIGA John Dvorak, ASAC Diane DeChellis, ARIGA Kevin Smullen, SA Gregory

Williams, and HUD CPD representative Richard Patoski provided an overview of the HUD

Neighborhood Stabilization program and described the program's fraud vulnerabilities at a meeting in

Worcester, MA, with Worcester Economic and Neighborhood Development staff. At the conclusion, a

question and answer forum was held for approximately 20 employees in attendance.



SAC Joseph Clarke and RIGA John Buck met with the Director of HUD's Philadelphia, PA, Office of

Community Planning and Development and several grantees scheduled to receive funds under the

Neighborhood Stabilization program. Grantees participating in the meeting were from Allentown,

York County, and Philadelphia, PA; the Commonwealth of Pennsylvania; and the State of Delaware.

RIGA Buck and SAC Clarke provided an overview of the role and responsibilities of HUD OIG in

providing critical oversight of these funds.



Chapter 7 - Outreach Efforts
108

RIGA Heath Wolfe and SAC Joe Clark gave a presentation to the Neighborhood Stabilization

program grantees in Columbus, OH. The presentation consisted of an overview of HUD OIG's mission

and goals and the functions of the Offices of Investigation and Audit. RIGA Wolfe presented

information on the Neighborhood Stabilization program, common CPD audit findings, and the

Program Fraud Civil Remedies Act. SAC Clark presented information on CDBG fraud and potential

criminal issues/activities associated with the Neighborhood Stabilization program and provided

examples of HUD OIG criminal cases involving government funds. There were more than 300

individuals in attendance.



RIGA Gerald Kirkland, ARIGA William Nixon, and Senior Auditor Danita Wade held a discussion

with Terdema Ussery, the Dallas Housing Authority's new board chairman. The discussion took place

in Dallas, TX. RIGA Kirkland, ARIGA Nixon, and Senior Auditor Wade presented information on the

audit work performed at the Authority and background on HUD and OIG's role and responsibilities.

They answered questions from Mr. Ussery on the condition of the Authority, causes, and

recommendations to improve the Authority's operations.



RIGA Joan Hobbs and SAC Jim Todak addressed a conference of about 300 people in Los Angeles,

CA, regarding the Neighborhood Stabilization program. They explained the role of OIG and the types

of problems that would be addressed in the program.



ASAC Gene Westerlind and SA Ray Essman provided an overview of HUD OIG's mission and

authority at a Community Action Task Force meeting in East St. Louis, IL. Approximately 20

individuals, including representatives of religious and nonprofit organizations, city officials, and the

U.S. Attorney, attended.



ARIGA Tanya Schulze gave a presentation at the Housing Authority Association of Southern

California's quarterly meeting in Burbank, CA. ARIGA Schulze gave an overview of OIG's

organizational structure and responsibilities, as well as recent audit results and the audit process.

There were about 45 members in attendance from housing authorities in Southern California.



SAs John Keaney and Michaela Jackson provided an overview of the HUD Neighborhood

Stabilization program at a Connecticut Department of Economic and Community Development

Neighborhood Stabilization workshop in Hartford, CT. Approximately 75 Neighborhood Stabilization

program partners and city officials attended.

Audit Outreach

The Seattle, WA, Offices of Audit and Investigation gave a presentation to a group of recently hired

HUD staff in conjunction with the Region X "HUD's World" program, in which new HUD employees are

taken to each of the Region X HUD program offices for an overview of each program's organization and

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Chapter 7 - Outreach Efforts

functions. ARIGAs Ed Schmidt and Tracey Vargas gave an overall presentation on the mission and

organization of HUD OIG, along with a description of the work performed by the Office of Audit. SAs

Charles Grace and Dana Papesh described the functions of the Office of Investigation.



 ARIGA Kelly Anderson and Senior Auditor Zakia Haneef participated in the Loyola University Spring

2009 Career Fair at the Gentile Center on the campus of Loyola University in Chicago, IL. The career

fair provided the the opportunity to meet and inform undergraduate and graduate students about the

career and internship opportunities available with HUD OIG.



Information Systems Audits Division Director, Hanh Do, and Financial Audits Division Director,

Tom McEnanly, attended the Information Systems Audit and Control Association National Capital Area

Chapter's 1st Annual Career Night in Washington, DC. The Directors discussed HUD OIG's

organizational structure and mission as well as information systems and financial audits performed

by their respective divisions. They also discussed career opportunities with students, accounting

instructors, and audit professionals.



ARIGA Frederick Smith participated in a meeting of the Accounting Advisory Board for the

University of Northern Colorado School of Business in Greeley, CO. The board consists of

representatives from public accounting, industry, nonprofits, and State and Federal Government. ARIGA

Smith identified the attributes required of government auditors, especially entry-level auditors. He

discussed how HUD OIG accomplishes its mission; keeps the HUD Secretary, Congress, and the

American public fully and currently informed; and works collaboratively with HUD staff and program

participants to ensure the success of HUD program goals.



ARIGA Kim Randall participated in an employer panel at the University of Missouri - Kansas City,

MO. Employers conducted timed mock interviews with students, provided students with feedback on

their interviewing skills, and offered suggestions on how to improve their skills. Employers also

explained what their jobs entailed and discussed potential job openings and internships with the

students.



ARIGA Tracey Carney and Auditor Teri Smith provided an overview of HUD OIG’s mission, goals,

and audit process, during HUD's disaster recovery team's retreat in Ocean Springs, MS. Tracey and

Teri answered questions and provided clarification on a number subjects presented by the attendees.

The retreat was held for 12 members of HUD's disaster recovery team in attendance.

Law Enforcement Outreach

ASACs Lou Mancini and Kevin Chan provided an overview of HUD OIG investigations, fraud

indicators, and investigative priorities and described the Housing and Economic Recovery Act of 2008

and the FHA, Neighborhood Stabilization, and Emergency Shelter Grant programs for individuals

attending a meeting held at the Westchester County District Attorney's Office in White Plains, NY.

112

Reviewing and making recommendations on legislation, regulations, and policy issues is a critical

part of the Office of Inspector General's (OIG) responsibilities under the Inspector General Act.

During this 6-month reporting period, OIG reviewed 121 issuances. This chapter highlights some of

OIG's prior comments on notices, comments for this reporting period, and other policy directives.

Enacted Legislation Related to Single-Family Housing

Due to the collapse of the subprime mortgage market and resulting increase in foreclosures,

Congress and the President approved the Housing and Economic Recovery Act of 2008 and the

American Recovery and Reinvestment Act of 2009. This legislation contains significant new funding

and programs for the U.S. Department of Housing and Urban Development (HUD); specifically, the

Neighborhood Stabilization ($5.92 billion) and the HOPE for Homeowners programs. These programs

and their related rules create new challenges and risks to HUD and its partners. OIG plans to closely

monitor proposed guidance and regulations and work in cooperation with the Department on these

new programs. To that end, OIG has reviewed and provided comments on the draft front-end risk

assessments for these and other funded programs.

In addition, the Housing and Economic Recovery Act of 2008 contains four items that OIG believes

will reduce fraud and strengthen the Federal Housing Administration (FHA) single-family mortgage

programs. Specifically,

- Section 2129 amends Title 18, Section 1014, to include FHA loans. Therefore, it is a criminal

offense to make a false statement on an FHA loan commitment, insurance agreement, or

application for insurance or guarantee. The offender may receive up to 30 years in jail and/or

up to a $1 million fine.

- Section 2113 prohibits seller-funded downpayment assistance. Seller-funded downpayment

assistance has resulted in substantial loses to the FHA fund.

- Section 2113 increases the cash investment of the buyer. Therefore, buyers must have an

equity investment in the FHA loan.

- The Act also places a moratorium on FHA's proposed risk-based insurance premium structure,

thus allowing the equitable treatment of program participants.

Proposed Rules

OIG nonconcurred on a number of HUD-proposed rules. Working cooperatively with the

Department, we were able to reach agreement on these nonconcurrences. OIG continues to work with

HUD to resolve other outstanding nonconcurrences.



Chapter 8: Review of Policy Directives

Chapter 8 - Reviews of Policy Directives

114

In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing

and Urban Development (HUD) management agree upon the needed actions and timeframes for

resolving audit recommendations. Through this process, OIG hopes to achieve measurable

improvements in HUD programs and operations. The overall responsibility for assuring that the

agreed-upon changes are implemented rests with HUD managers. This chapter describes significant

management decisions with which OIG disagrees. It also contains a status report on HUD's

implementation of the Federal Financial Management Improvement Act of 1996 (FFMIA). In addition to

this chapter on audit resolution, see appendix 2, table B, "Significant Audit Reports Described in

Previous Semiannual Reports in Which Final Action Had Not Been Completed as of March 31, 2009."

Audit Reports Issued before Start of Period with No Management

Decision as of March 31, 2009

Office of Housing, Washington, DC

Single-Family Mortgage Insurance Claims, Issued July 11, 2006. The Inspector General referred this

issue to the Deputy Secretary on December 4, 2006, because agreement could not be reached with the

Office of Housing. The three recommendations relate to the Office of Housing's not independently

determining that mortgage loans insured under the Mutual Mortgage Insurance Fund met program

requirements after paying billions in single-family insurance claims. During the period October 1,

2003, through June 3, 2005, HUD received and paid claims on loans for which the lender did not show

that the borrower (1) was able to make the required monthly payments, (2) made the minimum

investment in the property, and (3) was creditworthy. HUD paid the claims and did not subsequently

review the loan files for compliance with the program requirements, fraud, and/or

misrepresentations. HUD relied upon lender certifications that loans were eligible and contained all

required supporting documents, a preendorsement review of the insurance applications for key

documents, and risk-based compliance testing of recently insured loans. We estimate that final HUD

costs for claims that HUD's files did not support as meeting program requirements during the period

reviewed totaled $356 million on those claims for which all revenues and expenses were finalized.

In his February 23, 2007, response, the Deputy Secretary stated support of OIG's objective and

agreed with the overall conclusions reached. The Deputy Secretary directed the Office of Housing to

immediately begin implementing procedures in conjunction with and acceptable to OIG to effect the

recommendations. However, the Office of Housing did not submit its plan to implement the Deputy

Secretary's directive until March 30, 2007. Even then, the plan was unacceptable. On June 11, 2007,

the Office of Housing submitted an additional proposal, which was also rejected by OIG. OIG met

again with Office of Housing officials on September 30, 2008, and an agreement was reached on

proposed actions by the Office of Housing that satisfied two of the three outstanding

recommendations, 1A and 1C. However, recommendation 1B remains without a management

decision. In his August 4, 2008, memorandum, the Assistant Secretary for Housing stated that the

Federal Housing Administration (FHA) will follow up and seek recovery from any lender that cannot

support the claims in the audit sample. The recommendation remains open because the Office of

Housing has not provided adequate documentation in support of claims paid on 31 of the 44 loans

from OIG's audit sample that did not meet FHA eligibility requirements. (Report No. 2006-SE-0001).

Chapter 9: Audit Resolution

Chapter 9 - Audit Resolution
115

Chapter 9: Audit Resolution

Significant Revised Management Decisions

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information

concerning the reasons for any significant revised management decisions made during the reporting

period. During the current reporting period, there were significant revised management decisions on

two audits.

Dallas Housing Authority - Dallas, TX

Issue Date: December 5, 2007. As part of our strategic plan objective to assist HUD's efforts to

reduce rental assistance overpayments, we audited the portability features of the Dallas Housing

Authority's Housing Choice Voucher program (voucher program). Our objective was to determine

whether the Authority managed and administered the portability features of its voucher program in

accordance with HUD requirements.

The Authority mismanaged its portable vouchers and failed to administer portability in

accordance with HUD requirements. It could not identify its portable families and attempted to

collect portability payments from other housing authorities based on unreliable billing information. It

did not bill other housing authorities or reconcile its accounts accurately or in a timely manner.

Further, it violated portability requirements by denying and discouraging families from porting into its

voucher program. This condition occurred because the Authority's management did not establish

and implement the controls, systems, and procedures needed to ensure accurate and responsible

operation of its program.

We recommended that HUD require the Authority to (recommendation 1A) reconcile its

portability accounts, (recommendation 1B) establish and implement adequate and effective controls

to ensure that the portability features of its voucher program operate in compliance with HUD

requirements, (recommendation 1C) repay administrative fees associated with the portable vouchers

since it did not properly administer its program in accordance with requirements, and

(recommendation 1D) support or repay more than $3.7 million that it requested from HUD.

HUD agreed with the recommendations in March 2008. After multiple discussions in August 2008,

HUD requested to revise the management decisions for recommendations 1C and 1D to allow the

funds to be repaid to the Authority instead of HUD. HUD also wanted to combine the two

recommendations. It stated that the Authority hired a certified public accountant (CPA) to perform

agreed-upon procedures regarding the Authority's portability files to support its 2005 request for the

release of more than $3.7 million. The CPA's agreed-upon procedures1

 projected more than $1 million

in errors from unexplained differences, differences in the balance requested and the balance

according to the Authority's data, and files missing the required forms. HUD reviewed the results of

the agreed-upon procedures to ensure adequacy and acceptability. It agreed that more than $1 million

should be repaid to the Authority's program reserve. HUD stated that the Authority would have to

spend these funds in accordance with HUD requirements, thus reducing future outlays by HUD. OIG

agreed to revise the management decisions on August 15, 2008. (Audit Report: 2008-FW-1003)

HDC Retirement Village. - St. Louis, Missouri

Issue Date: June 29, 2006. HUD OIG conducted an audit which disclosed that HDC Retirement

Village's owner did not use project funds in compliance with the regulatory agreement. It also violated

several other terms of the agreement.

Chapter 9 - Audit Resolution

1

 The agreed-upon procedures did not confirm balances with other housing authorities.
116

Chapter 9: Audit Resolution

Chapter 9 - Audit Resolution

We recommended that HUD require HDC to (1) obtain independent management; (2) develop and

implement procedures and controls to ensure future compliance; (3) provide documentation to

support the nearly $167,000 in unsupported distributions for payroll, office utilities, office

maintenance, and miscellaneous expenses or reimburse the project's reserve account the applicable

portion that could not be supported as necessary to the project; (4) deposit nearly $18,000 for

improper distributions into the project's reserve for replacement or a restricted capital account;

(5) resolve sewer liens; (6) properly fund the tenant security deposit account with nearly $7,000;

(7) reimburse tenants from project funds nearly $2,000 for their rent credits; and (8) pursue civil

money penalties and administrative sanctions.

On October 27, 2008, the owner of HDC sold the project. The new owner did not finance the

transaction with an FHA-insured mortgage. After paying the sewer liens and other project expenses,

all net proceeds from the sale were transferred to the new owner's reserve for replacement account in

the amount of more than $100,000. Since this amount was short of the amount that we requested be

repaid or supported, HUD requested that OIG accept a revised management decision. HUD stated that

although the owner did not provide supporting documentation, it believe that some of the questioned

expenses were legitimate project expenses. On November 10, 2008, disallowed costs of more than

$82,000 were written off, and the audit was closed. (Audit report: 2006-KC-1012)

Significant Management Decision with Which OIG Disagrees

Single Family Housing Late Endorsement Rule Changes

Issue Date: August 16, 2006. On May 17, 2005, HUD issued Mortgagee Letter 2005-23, removing the

6-month payment history requirement for loans submitted late for endorsement. HUD OIG analyzed

the impact of the policy changes and reviewed the decision process followed by HUD in approving the

rule change to determine whether the changed late endorsement submission rules were adequately

supported. Although HUD asserted that the change did not materially increase FHA's mortgage

insurance risk, it did not perform a risk analysis to support this determination. A review of the

performance of loans from seven prior OIG late endorsement audits found a three and one-half times

higher risk of claims when loans had unacceptable payment histories within the prior 6 months.

Further, since the issuance of the mortgagee letter, the default rate for loans submitted late has

increased and is significantly higher than the default rate for loans submitted in a timely manner.

Based upon the results of this review, OIG recommended that HUD rescind Mortgagee Letter

2005-23 until appropriate rule changes can be designed that are supported by an adequate risk

assessment considering newly endorsable loans. On November 9, 2006, the Office of Housing

disagreed with the OIG recommendations, and the report was referred to the Deputy Secretary for

final decision. On February 27, 2007, the Deputy Secretary instructed the Office of Housing to

implement our recommendations, including a recommendation to rescind Mortgagee Letter 2005-23

until appropriate rule changes can be designed that are supported by an adequate risk assessment

considering newly endorsable loans. A management decision to do so was accepted on March 30,

2007, with a March 30, 2008, final action target date, which was not met.

Upon further review of information from OIG and the Office of Housing, the Deputy Secretary again

instructed the Office of Housing to implement the OIG recommendations, and a notice of a proposed

rule to rescind the provisions of Mortgagee Letter 2005-23 and reinstate the 6-month payment history

rule for loans submitted late for endorsement was published in the Federal Register on June 9, 2008,

for comments. On February 18, 2009, we learned that this recommendation had been closed by the

Office of Housing. However, the final rule reinstating the 6-month payment history was never
117

Chapter 9: Audit Resolution

Chapter 9 - Audit Resolution

published, and Mortgagee Letter 2005-23 was still in effect two and one-half years after the audit

report was issued. The rationale provided by the Office of Housing did not support closure of the

recommendation.

On March 3, 2009, OIG contacted the Deputy Assistant Secretary for Single Family Housing to

determine why the audit recommendation was closed without the agreed-to action having been

completed. The Deputy Assistant Secretary informed OIG that the Office of General Counsel (OGC)

advised that his office could not proceed further on finalizing the proposed rule to rescind the

provisions of Mortgagee Letter 2005-23 and reinstate the 6-month payment history rule for loans

submitted late for endorsement. The Deputy Assistant Secretary added that the failure/inability to

issue revised standards is beyond the control of the program office and, since the Office of Single

Family Housing has taken every action within its control, the management decision should be closed

out. However, OGC advised that it was still committed to finalizing the rule.

OIG has reopened the recommendation, and it will remain open until the agreed-upon final action

has been completed. (Audit Report: 2006-SE-0002)

Federal Financial Management Improvement Act of 1996

In fiscal year 2008, HUD did not substantially comply with FFMIA. In this regard, HUD's financial

management systems did not substantially comply with Federal financial management system

requirements.

FFMIA requires that HUD implement a remediation plan that will bring financial systems into

compliance with Federal financial management system requirements within 3 years or obtain Office of

Management and Budget concurrence if more time is needed.

FFMIA requires OIG to report in its Semiannual Reports to the Congress instances and reasons

when an agency has not met the intermediate target dates established in its mediation plan required

by FFMIA. In April 1998, HUD determined that 38 of its systems were not in substantial compliance

with FFMIA. At the end of 2008, the Department reported that 2 of its 42 financial management

systems were not in substantial compliance with FFMIA. These two systems are the HUD

Procurement System and Small Purchase System.



120

1

 The memorandum format is used to communicate the results of reviews not performed in accordance with

generally accepted government audit standards, to close out assignments with no findings and recommendations,

to respond to requests for information, to report on the results of a survey, to report results, or to report the results

of civil actions or settlements.

Internal Reports

13 Audit Reports

Chief Financial Officer (1 Report)

2009-FO-0003 Additional Details to Supplement Our Report on HUD's Fiscal Years 2008 and

2007 Financial Statements, 11/14/2008. Better Use: $1,522,900,000.

Chief Information Officer (1 Report)

2009-DP-0003 Review of the Centralized HUD Account Management Process, 01/09/2009.

Government National Mortgage Association (2 Reports)

2009-DP-0002 Review of Controls over Securitized Single Family Loans, 12/03/2008.

2009-FO-0001 Audit of Ginnie Mae's Financial Statements for Fiscal Years 2008 and 2007,

11/07/2008.

Housing (4 Reports)

2009-DP-0001 Review of Single-Family Partial Claims Collection Process, 11/20/2008. Better

Use: $175,726.

2009-FO-0002 Audit of the FHA's Financial Statements for Fiscal Years 2008 and 2007,

11/07/2008.

2009-NY-0001 HUD Did Not Adequately Monitor Its Performance-Based Contract

Administrator, New York State Housing Trust Fund Corporation, 10/16/2008.

Questioned: $2,088,908; Unsupported: $2,088,908.

2009-PH-0001 HUD's Region 3 Program Centers Did Not Always Process Section 202 and

Section 811 Capital Advances in Accordance with HUD Requirements, 12/09/2008.

Questioned: $46,287,890; Unsupported: $46,287,890.

Public and Indian Housing (3 Reports)

2009-AO-0001 HUD's Receiver Did Not Provide Adequate Management Oversight to Ensure That

the Housing Authority of New Orleans Complied with HUD's Requirements When

Performing Its Housing Choice Voucher Program, Disaster Voucher Program, and

Public Housing Operations, 12/12/2008. Questioned: $3,569.

2009-AO-0002 HUD's Receivership Did Not Ensure That the Housing Authority of New Orleans

Properly Accounted for Its Fungibility Funding, Monitored and Paid Two of Its

Contractors, and Paid Its Accounts Payable Disbursements, 01/29/2009.

Questioned: $7,535,600; Unsupported: $5,068,456.

2009-SE-0002 NAHASDA Program Income from 1937 Act Properties, 02/06/2009.

Audit-Related Memorandums1

Community Planning and Development (1 Report)

2009-NY-0801 Deconstruction Activity Costs under the World Trade Center Memorial and

Cultural Program Are Impacting Other Approved Programs, 11/06/2008.

Better Use: $868,000.

Appendix 1: Audit Reports Issued

Appendix 1 - Audit Reports Issued
121

Appendix 1: Audit Reports Issued

Housing (1 Report)

2009-SE-0801 HUD's Recent Performance-Based Contract Administration Activity Was

Inconsistent with Agreed-Upon Management Decisions between HUD and HUD

OIG on Audit Report 2007-SE-0001, Dated June 7, 2007, 12/08/2008.

External Reports

68 Audit Reports

Community Planning and Development (19 Reports)

2009-AT-1002 The City of Augusta Needs to Improve Controls Over its CDBG Façade Program,

Augusta, GA, 02/10/2009. Questioned: $180,817; Unsupported: $180,817; Better

Use: $270,175.

2009-AT-1004 The City of Durham Did Not Adequately Administer Its CDBG Program, Durham,

NC, 03/31/2009. Questioned: $1,251,548; Unsupported: $1,239,865; Better

Use: $125,278.

2009-CH-1001 New Phoenix Assistance Center Substantially Failed to Manage Its Supportive

Housing Program Grant, Chicago, IL, 10/24/2008. Questioned: $1,020,323;

Unsupported: $1,004,599; Better Use: $929,519.

2009-CH-1004 Cook County Failed to Adequately Manage Its HOME Investment Partnerships

Program, Chicago, IL, 02/13/2009. Questioned: $65,544.

2009-DE-1001 The Adams County Office of Community and Development Did Not Comply with

HOME Investment Partnerships Program Regulations, Denver, CO, 02/11/2009.

Questioned: $3,974,959; Unsupported: $3,867,459.

2009-FW-1004 The Texas Department of Housing and Community Affairs Properly Administered

Supplemental I Disaster Recovery Program Funds, Austin, TX, 01/14/2009.

2009-LA-1004 Alameda County HOME Investment Partnership Consortium Did Not Use

Program Funds in Compliance with HUD Requirements, Hayward, CA, 11/26/2008.

Questioned: $5,734,863.

2009-LA-1005 The City of San Diego Did Not Administer Its CDBG Program in Accordance with

HUD Requirements When Funding the City's Redevelopment Agency Projects,

San Diego, CA, 12/30/2008. Questioned: $12,989,963; Unsupported: $11,183,193;

Better Use: $7,269,854.

2009-LA-1006 St. Vincent de Paul Village, Inc., Supportive Housing Program, San Diego, CA,

02/09/2009.

2009-LA-1007 The City of Los Angeles Housing Department Did Not Always Ensure That Its

HOME-Assisted Rehabilitation Work Was Complete and in Accordance with HOME

Requirements, Los Angeles, CA, 02/20/2009. Questioned: $22,466; Unsupported:

$22,466.

2009-NY-1001 The City of Newburgh Needs to Make Improvements in Administering Its Section

108 Loan Guarantee Program, Newburgh, NY, 11/07/2008. Questioned: $1,597,007;

Unsupported: $1,002,849; Better Use: $3,765,047.

2009-NY-1003 Lower Manhattan Development Corporation CDBG Disaster Recovery Assistance

Funds, New York, NY, 12/04/2008. Questioned: $468,649; Unsupported: $468,649;

Better Use: $3,031,351.

Appendix 1 - Audit Reports Issued
122

2009-NY-1004 The Economic Development Corporation Did Not Administer Its CDBG Program

in Accordance with HUD Requirements, Newark, NJ, 12/08/2008. Questioned:

$1,811,732; Unsupported: $1,678,732; Better Use: $662,184.

2009-NY-1005 The Township of South Orange Village Did Not Always Disburse CDBG Funds As

Per HUD Requirements, South Orange Village, NJ, 12/16/2008. Questioned: $83,757;

Better Use: $214,667.

2009-NY-1006 The City of Rome Did Not Always Administer Its CDBG Program in Accordance

with HUD Requirements, Rome, NY, 01/26/2009. Questioned: $198,559;

Unsupported: $58,036; Better Use: $431,312.

2009-NY-1008 The City of Newburgh Did Not Always Administer Its CDBG Program in

Accordance with HUD Requirements , Newburgh, NY, 02/24/2009. Questioned:

$894,783; Unsupported: $894,783; Better Use: $78,176.

2009-NY-1009 The City of Yonkers Had Weaknesses in the Administration of its Section 108

Loan Guarantee Program, Yonkers, NY, 03/06/2009.

2009-PH-1005 The City of Bethlehem Generally Administered Its CDBG Program in Accordance

with HUD Requirements, Bethlehem, PA, 02/02/2009.

2009-PH-1007 The City of Norfolk Did Not Ensure That Program Income Was Returned to Its

HOME Program as Required, Norfolk, VA, 03/20/2009. Questioned: $288,728.

Housing (11 Reports)

2009-BO-1002 Orchard Court Multifamily Project Was Not Properly Managed in Accordance

with HUD Regulations, Bath, ME, 11/06/2008. Questioned: $567,813; Unsupported:

$265,412.

2009-FW-1002 The Owner of Ebony Lake Healthcare Center Violated Its Regulatory Agreement

with HUD, Brownsville, TX, 11/25/2008. Questioned: $837,549; Unsupported:

$180,100.

2009-FW-1005 Allied Home Mortgage Capital Corporation Did Not Fully Follow HUD's Branch

Office Requirements, Houston, TX, 02/10/2009.

2009-FW-1006 Enterprise Home Ownership Partners-Dallas, Inc. Achieved Program Objectives

but Did Not Fully Comply with Certain Requirements, Dallas, TX, 02/18/2009.

2009-FW-1007 The Owners of Stonebrook Apartments Phase I and Phase II Violated Their

Regulatory Agreements with HUD, Baytown, TX, 03/25/2009. Questioned:

$187,507; Unsupported: $16,945.

2009-KC-1001 CitiMortgage Did Not Follow HUD Requirements When Underwriting 20 Loans

and Performing Its Quality Control Program, St. Louis, MO, 11/13/2008.

Questioned: $109,315; Better Use: $1,213,529.

2009-KC-1002 Clarion Mortgage Capital Did Not Fully Comply with HUD's or Its Own Quality

Control Requirements, Leawood, KS, 12/17/2008.

2009-KC-1003 CTX Mortgage Did Not Follow HUD's Requirements When Underwriting 12 FHA

Loans and Developing Its Quality Control Plan, Overland Park, KS, 12/17/2008.

Better Use: $523,717.

2009-LA-1008 Campaige Place at Jackson Did Not Use Its Project Funds in Compliance with

HUD's Regulatory Agreement and Other Federal Requirements, Phoenix, AZ,

03/18/2009. Questioned: $186,741; Unsupported: $34,669.

Appendix 1 - Audit Reports Issued
123

Appendix 1: Audit Reports Issued

2009-NY-1007 The City of Rochester's Management Controls Over the Asset Control Area

Program Needs Improvement To Comply With All Requirements, Rochester, NY,

02/12/2009. Questioned: $190,700; Unsupported: $186,000.

2009-PH-1004 The City of Camden Did Not Always Administer Its Asset Control Area Program

in Compliance with HUD Requirements, Camden, NJ, 01/30/2009. Questioned:

$453,233; Unsupported: $441,500.

Public and Indian Housing (22 Reports)

2009-AT-1001 The Housing Authority of the City of Conyers Did Not Maintain Adequate

Controls over its Federal Funds, Conyers, GA, 10/20/2008. Questioned: $891,468;

Unsupported: $705,704.

2009-AT-1003 The Puerto Rico Housing Finance Authority Generally Calculated Housing

Assistance Correctly, San Juan, PR, 02/25/2009.

2009-BO-1001 The Taunton Housing Authority Needs to Improve Accounting for its Interprogram

Funds, Taunton, MA, 10/01/2008. Questioned: $593,418; Unsupported: $593,418.

2009-BO-1003 New Hampshire Housing Finance Authority Generally Administered Its Cost

Allocation, Operating Reserves, and Technology Expenditures as Required,

Bedford, NH, 11/18/2008.

2009-BO-1004 The City of Hartford Did Not Always Comply with Its Annual Contributions

Contracts and HUD Regulations in Administering Its Housing Choice Voucher

Program, Hartford, CT, 01/05/2009. Questioned: $630,955; Unsupported: $623,229;

Better Use: $1,773,893.

2009-CH-1002 The Indianapolis Housing Agency Failed to Operate Its Housing Choice Voucher

Program According to HUD's and Its Requirements, Indianapolis, IN, 01/23/2009.

Questioned: $2,317,387; Unsupported: $2,081,512; Better Use: $8,950,914.

2009-CH-1003 The Portage Metropolitan Housing Authority Improperly Operated Its Section 8

Housing Choice Voucher Program, Ravenna, OH, 01/28/2009. Questioned:

$750,080; Unsupported: $298,178; Better Use: $1,226,156.

2009-CH-1005 The Chicago Housing Authority Did Not Always Ensure That Section 8 Units Met

HUD's Housing Quality Standards, Chicago, IL, 02/19/2009. Questioned: $101,618;

Better Use: $3,167,688.

2009-DE-1002 The Housing Authority of the City of Brush Did Not Perform Contracting

Activities in Accordance with Federal Procurement Requirements, Brush, CO,

02/25/2009.

2009-FW-1001 The Fort Smith Housing Authority Made Inappropriate Guarantees, Did Not

Follow Procurement Requirements, and Spent Program Funds on Questionable

Activities, Fort Smith, AR, 10/22/2008. Questioned: $534,686; Unsupported:

$530,246.

2009-FW-1003 Housing Authority of the City of El Paso Did Not Follow Procurement and Other

Requirements, El Paso, TX, 12/24/2008. Questioned: $705,917.

2009-KC-1004 The St. Louis Housing Authority Did Not Perform Adequate Physical

Inventories, St. Louis, MO, 02/03/2009.

2009-KC-1005 The East St. Louis Housing Authority's Section 8 Voucher Program Units Did Not

Always Meet HUD's Housing Quality Standards, East St. Louis, IL, 03/02/2009.

Questioned: $64,528; Better Use: $1,708,938.

Appendix 1 - Audit Reports Issued
124

2009-LA-1001 The Housing Authority of the County of Marin Did Not Correctly Calculate

Tenant Rents in the Public Housing Program, San Rafael, CA, 10/17/2008. Better

Use: $3,811.

2009-LA-1002 The Housing Authority of the City of Los Angeles Did Not Adequately Conduct

Housing Quality Standards Inspections, Los Angeles, CA, 11/17/2008. Better Use:

$65,565,605.

2009-LA-1003 The Area Housing Authority of the County of Ventura Did Not Comply with HUD

Requirements In Its Annual Contributions Contract, Ventura, CA, 11/25/2008.

Better Use: $736,315.

2009-NY-1002 The New York City Housing Authority Had Administration Weaknesses in Its

Capital Fund Program, New York, NY, 11/25/2008. Questioned: $590,363.

2009-PH-1001 The Richmond Redevelopment and Housing Authority Did Not Ensure That Its

Section 8 Housing Choice Voucher Program Units Met Housing Quality Standards,

Richmond, VA, 11/14/2008. Questioned: $68,506; Better Use: $1,138,025.

2009-PH-1002 The Delaware County Housing Authority Did Not Ensure That Its Section 8

Housing Choice Voucher Program Units Met Housing Quality Standards, Woodlyn,

PA, 12/03/2008. Questioned: $49,846; Better Use: $1,935,920.

2009-PH-1003 The Housing Authority of the City of Pittsburgh Did Not Ensure That Its Leased

Housing Units Met Housing Quality Standards under Its Moving to Work

Program, Pittsburgh, PA, 01/15/2009. Questioned: $100,362; Better Use: $9,304,880.

2009-PH-1006 The Housing Authority of the City of Annapolis Did Not Comply with HUD and

State of Maryland Lead-Based Paint Requirements in a Timely Manner,

Annapolis, MD, 03/06/2009.

2009-SE-1001 The Housing Authority of Douglas County Needs to Strengthen Its Internal

Controls, Roseburg, OR, 01/09/2009. Questioned: $2,197.

Audit-Related Memorandums

General Counsel (1 Report)

2009-SE-1801 Actions under Program Fraud Civil Remedies Act, Washington Mutual Bank,

Seattle, WA, 11/18/2008. Questioned: $91,978.

Public and Indian Housing (1 Report)

2009-BO-1801 Housing Authorities at Bath and Brunswick Overpaid Basic Rent and Housing

Assistance Payments for Section 8 Tenants in a Subsidized Multifamily Project

(Orchard Court), Bath, ME, 01/27/2009. Better Use: $32,299.



Appendix 1: Audit Reports Issued

Appendix 1 - Audit Reports Issued
Appendix 1: Audit Reports Issued
126

Appendix 2: Tables

Table A

Audit reports issued prior to start of period

with no management decision at March 31, 2009

* Significant audit reports described in previous semiannual reports

Report number

and title

Reason for lack of

management decision

Issue date/target

for management decision

*2006-SE-0001 Single Family

Mortgage Insurance Claims

See chapter 9, page 112 07/11/2006

Appendix 2 - Tables
127

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

Table B

Significant audit reports in which final action had not been completed

within 12 months after the date of the

Inspector General’s report

1997-AT-1003

2002-AT-1002

2002-KC-0002

2004-PH-0001

2004-DP-0002

2004-PH-1008

2004-CH-1007

2004-CH-1803

2004-PH-1012

2004-FW-1009

2005-AT-1004

Municipality of Mayaguez, CDBG and

Section 108 Loan Guarantee

Assistance Programs, Mayaguez, PR

Housing Authority of the City of

Tupelo, Housing Programs

Operations, Tupelo, MS

Nationwide Survey of HUD's Office of

Housing Section 232 Nursing Home

Program

Procedures for Filing Uniform

Commercial Code Continuation

Statements

Application Control Review of the

Tenant Rental Assistance

Certification System

Safe Haven Outreach Ministry,

Incorporated, Washington, DC

A-Pan American Mortgage Group,

Non-Supervised Loan Correspondent,

Chicago, IL

Somerset Point Nursing Home,

Multifamily Equity Skimming,

Shaker Heights, OH

Mortgage America Bankers, LLC,

Nonsupervised Loan Correspondent,

Kensington, MD

Mays Property Management,Inc.,

Multifamily Management Agent,

Little Rock, AR

Housing Authority of the City of

Durham, NC

07/01/1997

07/03/2002

07/31/2002

11/26/2003

02/25/2004

06/03/2004

08/09/2004

08/09/2004

09/10/2004

09/17/2004

11/19/2004

10/29/1997

10/31/2002

11/22/2002

04/14/2004

07/14/2004

08/31/2004

08/09/2004

08/09/2004

01/06/2005

02/23/2005

03/15/2005

06/30/2009

04/30/2010

Note 2

05/31/2009

Note 1

Note 1

Note 1

07/31/2009

05/31/2009

07/31/2009

03/15/2015

Appendix 2 - Tables
128

Report

number

Report title Issue

date

Decision

date

Final

action

2005-CH-1002

2005-CH-1003

2005-AT-1013

2005-CH-1020

2006-CH-0001

2006-AT-1004

2006-NY-1003

2006-CH-1007

2006-NY-0001

Washington Mutual Bank,

Underwriting of Federal Housing

Administration-Insured Loans,

Downers Grove, IL

Royal Oak Township Housing

Commission, Public Housing

Program, Ferndale, MI

Corporacion Para el Fomento

Economico de la Ciudad Capital

Did Not Administer Its Independent

Capital Fund in Accordance with

HUD Requirements, San Juan, PR

Housing Authority of the City of

Gary, Section 8 Housing Program,

Gary, IN

Real Estate Assessment Center's

Physical Condition Assessment

Was Compromised

The Housing Authority of the City

of Prichard Did Not Ensure Section 8

Subsidy Payments Were for Eligible

Units, Tenants, and Landlords,

Prichard, AL

The Housing Authority of the City

of Newark's Controls over Bond

Financing Activities, Obtaining

Supporting Documentation, and

Legal Settlements Require

Improvement, Newark, NJ

Huntington National Bank,

Supervised Lender, Generally

Complied with Requirements

Regarding Submission of Late

Requests for Endorsement and

Underwriting of Loans,

Columbus, OH

HUD's Controls over the Reporting,

Oversight, and Monitoring of the

Housing Counseling Assistance

Program Were Not Adequate

11/29/2004

11/29/2004

09/15/2005

09/29/2005

11/30/2005

01/13/2006

02/14/2006

03/15/2006

06/08/2006

01/28/2005

03/29/2005

01/11/2006

01/25/2006

01/10/2006

04/25/2006

08/17/2006

09/18/2006

01/08/2007

Note 1

05/31/2009

Note 1

12/31/2009

12/31/2011

06/30/2010

01/01/2015

09/30/2009

01/31/2010

Appendix 2: Tables

Appendix 2 - Tables
129

Report

number

Report title Issue

date

Decision

date

Final

action

2006-BO-1009

2006-BO-0001

2006-AT-1016

2006-CH-1014

2006-SE-0002

2006-KC-1013

2006-AT-1019

2006-DP-0802

The Rhode Island Housing and

Mortgage Finance Corporation

Incorrectly Made More Than $1.8

Million in Section 8 Subsidy Payments and Released More Than

$900,000 from Restricted Residual

Receipts Accounts, Providence, RI

HUD Incorrectly Approved $42

Million in Operating Subsidies for

Phase-Down for Demolition Add-On

Funding

The Municipality of Humacao Did

Not Administer Its CDBG in

Accordance with HUD

Requirements, Humacao, PR

National City Mortgage Company,

Nonsupervised Lender, Did Not

Comply with HUD's Requirements

Regarding Underwriting of Loans and

Quality Control Reviews,

Miamisburg, OH

The Office of Single Family Housing

Expanded Late Endorsement

Eligibility Without Studying

Associated Risks

The Columbus Housing Authority

Improperly Expended and

Encumbered Its Public Housing

Funds, Columbus, NE

The Municipality of Toa Baja Did

Not Administer Its Section 108 Loan

Guarantee Assistance Program in

Accordance with HUD Requirements,

Toa Baja, PR

Assessment of HUD's Compliance

with OMB Memorandum M-06-16,

"Protection of Sensitive Agency

Information"

07/06/2006

07/11/2006

07/28/2006

07/31/2006

08/16/2006

08/30/2006

09/06/2006

09/21/2006

10/24/2006

10/13/2006

11/17/2006

01/31/2007

03/30/2007

10/17/2006

12/11/2006

11/24/2006

11/01/2010

10/01/2013

09/30/2009

09/08/2009

Note 2

11/30/2012

06/30/2009

10/01/2009

Appendix 2: Tables

Appendix 2 - Tables
130

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-AT-1002

2007-LA-0001

2007-CH-1002

2007-DP-0003

2007-KC-0002

2007-DP-0004

2007-AT-1004

2007-DP-0005

2007-AT-1007

2007-KC-0003

2007-BO-0002

Pine State Mortgage Company Did

Not Always Comply with FHA

Underwriting and Quality Control

Requirements, Atlanta, GA

Tax Credit Project Owners Are

Allowed to Charge Higher Rents

for Tenant-Based Section 8 Voucher

Households than Non-Voucher

Households

Benton Harbor Housing Commission

Did Not Effectively Manage Its Public

Housing Program and Has Not Used

Special Purpose Grant Funds It

Received More Than Nine Years Ago,

Benton Harbor, MI

Review of HUD's Procurement

Systems

HUD Can Improve Its Use of Residual

Receipts to Reduce Housing

Assistance Payments

FY 2006 Review of Information

Systems Controls in Support of

the Financial Statements Audit

The Wilmington Housing Authority

Needs to Improve Internal Controls

Over Its Program, Wilmington, NC

Review of HUD's Information

Technology Security Program

The Municipality of Toa Baja Needs

to Improve Its CDBG Program

Administration, Toa Baja, PR

HUD Did Not Recapture Excess Funds

from Assigned Bond-Financed

Projects

HUD Did Not Process Multifamily

Accelerated Processing Applications

within Established Processing Goals

and the Multifamily Accelerated

Processing Guide Is Outdated

11/03/2006

11/08/2006

01/25/2007

01/25/2007

01/29/2007

02/22/2007

03/09/2007

04/05/2007

04/11/2007

04/30/2007

05/21/2007

03/02/2007

07/05/2007

05/25/2007

05/25/2007

01/29/2007

06/21/2007

06/25/2007

08/03/2007

07/16/2007

08/27/2007

09/07/2007

08/31/2009

10/01/2010

05/31/2009

09/30/2010

01/31/2011

Note 1

06/28/2010

04/30/2009

05/30/2009

Note 1

10/15/2009

Appendix 2 - Tables
131

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-LA-1011

2007-LA-1012

2007-SE-0001

2007-NY-1008

2007-FW-1011

2007-CH-1011

2007-LA-1014

2007-CH-1012

2007-AT-1010

Suburban Mortgage Company Did

Not Comply with HUD Requirements

in the Origination of FHA-Insured

Single-Family Mortgages, Phoenix, AZ

Central City Lutheran Mission Did

Not Properly Administer Its

Supportive Housing Program

Grants, San Bernardino, CA

HUD Did Not Ensure That Payments

to Contract Administrators Were for

Work Performed or That Interest Was

Earned on Advances and Recovered

The City of Newark Did Not Always

Administer Its CDBG Program in

Accordance with HUD Requirements,

Newark, NJ

Capmark Finance, Inc.

Misrepresented Asbury Square

Apartments' Financial and Physical

Condition When Underwriting the

$9.098 Million Loan, Tulsa, OK

The Indianapolis Housing Agency

Lacked Adequate Controls over

Expenses Charged to Its Section 8

Program, Indianapolis, IN

The Housing Authority of the

County of San Mateo Did Not

Use HUD Program Funds in

Accordance with HUD Requirements,

San Mateo, CA

The Plymouth Housing Commission

Needs to Improve Its Section 8

Housing Choice Voucher Program

Administration, Plymouth, MI

The Cathedral Foundation of

Jacksonville Used More Than

$2.65 Million in Project Funds for

Questioned Costs, Jacksonville, FL

05/29/2007

06/04/2007

06/07/2007

06/22/2007

07/02/2007

07/23/2007

07/27/2007

08/03/2007

08/14/2007

12/31/2007

09/21/2007

10/05/2007

10/17/2007

10/23/2007

11/19/2007

11/23/2007

11/23/2007

12/03/2007

Note 1

Note 1

Note 1

04/30/2009

10/31/2009

04/01/2009

11/24/2017

04/30/2009

07/01/2009

Appendix 2 - Tables
132

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-PH-0002

2007-DP-0006

2007-NY-1012

2007-AT-0001

2007-LA-1016

2007-KC-0004

2007-KC-0801

2007-AT-1011

2007-CH-1015

2007-CH-1016

2007-CH-1017

HUD's Oversight of Contractors'

Marketing of Its Real Estate-Owned

Properties

Review of HUD's Personal Identity

Verification and Privacy Program

The City of Passaic's Community

Development Department Has

Weaknesses in Its HOME Investment

Partnerships Program, Passaic, NJ

HUD Needs to Improve Controls

Over Its Contract Administration

Processes

A Community of Friends Did Not

Always Administer Its Cash Match in

Compliance with HUD Requirements,

Los Angeles, CA

More Than 80 Percent of Recently

Insured Title II Manufactured

Housing Loans Are on Homes

With Substandard Foundations

Lenders Submitted Title II

Manufactured Housing Loans for

Endorsement without the Required

Foundation Certifications

The Wilmington Housing Authority

Did Not Follow HUD Requirements

for Its Nonprofit Development

Activities, Wilmington, NC

Cook County Lacked Adequate

Controls over Its HOME Investment

Partnerships Program, Chicago, IL

The Plymouth Housing Commission

Failed to Adequately Administer Its

Section 8 Housing Choice Voucher

Program, Plymouth, MI

The City of Cincinnati Lacked

Adequate Controls over Its HOME

Investment Partnerships Program,

Cincinnati, OH

08/17/2007

08/28/2007

09/12/2007

09/19/2007

09/21/2007

09/24/2007

09/24/2007

09/26/2007

09/26/2007

09/28/2007

09/30/2007

12/12/2007

12/20/2007

12/17/2007

09/19/2007

01/18/2008

03/28/2008

03/11/2008

01/24/2008

01/24/2008

01/24/2008

01/28/2008

Note 1

04/30/2009

04/29/2009

09/30/2009

Note 1

Note 1

Note 1

01/01/2011

Note 1

07/24/2009

09/30/2011

Appendix 2 - Tables
133

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-CH-1018

2007-SE-1004

2007-DP-0001

2008-NY-0801

2008-SE-1001

2008-DP-0002

2008-LA-0001

2008-FO-0003

2008-AT-1002

2008-CH-1001

The City of Milwaukee Needs to

Improve Existing Controls over Its

HOME Program Regarding Housing

Conditions and Contracting,

Milwaukee, WI

The Tacoma Consortium Did Not

Properly Administer its HOME

Investment Partnerships Grants,

Tacoma, WA

Review of Unisys Performance and

Security Controls

CDBG Disaster Recovery Assistance

Funds Lower Manhattan

Development Corporation

Accounting for Program Income

from NAHASDA-Assisted 1937

Act Housing Projects at Warm

Springs Housing Authority,

Warm Springs, OR

Review of FHA Controls over Its

Information Technology Resources

The Los Angeles Multifamily Hub

Did Not Properly Monitor Its

Performance-Based Contract

Administrator, Los Angeles

LOMOD

Additional Details to Supplement Our

Report on HUD's FY 2007and 2006

Financial Statements

The Municipality of Canovanas

Needs to Improve Administration of

Its CDBG Program, Canovanas, PR

The Housing Authority of the City

of Michigan City Failed to Follow

Federal Requirements for Its

Nonprofit Development Activities,

Michigan City, IN

09/30/2007

09/30/2007

10/19/2007

10/23/2007

10/30/2007

10/31/2007

11/05/2007

11/14/2007

11/15/2007

11/19/2007

03/20/2008

01/25/2008

02/08/2008

04/03/2008

07/23/2008

02/26/2008

03/03/2008

05/14/2008

03/07/2008

03/10/2008

10/30/2009

Note 1

Note 1

05/29/2009

07/23/2009

10/30/2009

Note 1

Note 1

05/29/2009

04/15/2009

Appendix 2 - Tables
134

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2008-AO-0001

2008-NY-1002

2008-FW-1004

2008-LA-1003

2008-NY-0001

2008-FW-1005

2008-AT-1004

2008-AT-1005

2008-KC-0001

HUD Had a Less Than 1 Percent

Error Rate in Housing Ineligible

Participants for Katrina Disaster

Housing Assistance Program and

Disaster Voucher Program Disaster

Housing Assistance

Richard A. Hutchens and Associates,

Management Agent, Used Project

Funds for Ineligible and/or

Unsupported Costs, Buffalo, NY

Community Development

Corporation of Brownsville Did

Not Use Its Housing Counseling

Grants for the Intended Purpose,

Brownsville, TX

Home for Life Foundation Did Not

Properly Administer Its Supportive

Housing Program Grants, Los

Angeles, CA

HUD's Monitoring Controls and

Procedures Regarding the CDBG

Program Were Not Adequate

The Housing Authority of the City of

McKinney Inappropriately Advanced

Funds and Transferred Real Estate to

Its Not-for-Profit Affiliate, McKinney,

TX

The City of West Palm Beach Did

Not Properly Administer Its CDBG

Program, West Palm Beach, FL

The City of Fort Lauderdale Did

Not Properly Administer Its CDBG

Program, Fort Lauderdale, FL

HUD's Quality Assurance Division

Did Not Always Resolve Materially

Deficient or Potentially Fraudulent

Loans Consistently

12/04/2007

12/05/2007

12/18/2007

12/18/2007

12/31/2007

01/07/2008

01/09/2008

01/11/2008

01/14/2008

04/01/2008

03/05/2008

04/16/2008

02/26/2008

03/27/2008

04/24/2008

05/05/2008

05/05/2008

06/05/2008

12/31/2009

05/28/2009

04/15/2009

Note 1

06/30/2009

04/17/2009

05/01/2009

05/01/2009

05/15/2009

Appendix 2 - Tables
135

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2008-LA-1004

2008-NY-1003

2008-AO-1002

2008-LA-1006

2008-LA-1007

2008-KC-1001

2008-CH-1003

2008-SE-1002

2008-DP-0003

The City of Los Angeles Housing

Department Did Not Adequately

Monitor HOME Program-Assisted

Rehabilitation Construction, Los

Angeles, CA

The City of New York's Department

of Housing Preservation and

Development Had Administrative

Weaknesses in Its HOME Program,

New York, NY

State of Louisiana, Road Home

Program, Funded 418 Grants Coded

Ineligible or Lacking an Eligibility

Determination, Baton Rouge, LA

Phoenix Apartments Did Not Use

Project Funds in Accordance with

HUD Requirements, Concord, CA

The Housing Authority of the County

of Los Angeles Did Not Adequately

Administer Its Section 8 Voucher

Program, Los Angeles, CA

The Douglas County Housing

Authority Improperly Encumbered

and Spent Its Public Housing Funds,

Omaha, NE

The Highland Park Housing

Commission Did Not Effectively

Administer Its Public Housing and

Capital Fund Programs, Highland

Park, MI

Oneida Housing Authority Did Not

Properly Recognize and Use Program

Income from Native American

Housing Assistance and SelfDetermination Act-Assisted 1937 Act

Housing Projects, Oneida, WI

FY 2007 Review of Information

Systems Controls in Support of the

Financial Statements Audit

01/15/2008

01/23/2008

01/30/2008

02/04/2008

02/08/2008

02/11/2008

02/15/2008

02/20/2008

03/04/2008

05/14/2008

05/21/2008

05/12/2008

05/28/2008

09/24/2008

05/28/2008

03/19/2008

09/30/2008

06/26/2008

05/14/2009

05/21/2009

Note 1

05/28/2009

09/24/2009

03/31/2017

04/01/2009

04/30/2009

04/30/2009

Appendix 2 - Tables
136

Report

number

Report title Issue

date

Decision

date

Final

action

2008-AT-1006

2008-DE-1002

2008-FW-1006

2008-FW-1008

2008-KC-0002

2008-AO-0801

Fulton County Lacked Adequate

Controls Over Its HOME Program,

Atlanta, GA

The Housing Authority of the City of

Brighton Did Not Maintain Proper

Inventory Records and Improperly

Awarded Contracts, Brighton, CO

Dallas Housing Authority

Management Failed to Implement

Internal Controls over Its Housing

Choice Voucher Program, Dallas, TX

The Owner of Century Mission Oaks

Violated Its Regulatory Agreement

with HUD, San Antonio, TX

HUD Did Not Ensure That Housing

Authorities Properly Administered

the Community Service and SelfSufficiency Requirement

Review of Duplication of Participants

Benefits under HUD's Katrina

Disaster Housing Assistance Program

and Disaster Voucher Program

03/07/2008

03/18/2008

03/20/2008

03/21/2008

03/24/2008

03/28/2008

06/13/2008

03/18/2008

07/07/2008

06/26/2008

07/22/2008

08/01/2008

06/01/2009

11/30/2010

12/15/2009

07/11/2009

10/01/2011

08/01/2009

Appendix 2: Tables

Appendix 2 - Tables
137

Report

number

Report title Issue

date

Decision

date

Final

action

Significant audit reports issued within the past 12 months

that were described in previous semiannual reports in which final action had not

been completed as of March 31, 2009

2008-CH-1006

2008-PH-1006

2008-CH-1007

2008-AT-0002

2008-CH-1008

2008-PH-1008

2008-LA-1009

2008-SE-1004

The Indianapolis Housing Agency Did

Not Effectively Operate Its Section 8

Housing Choice Voucher Program,

Indianapolis, IN

The Richmond Redevelopment and

Housing Authority Did Not Effectively

Operate Its Housing Choice Voucher

Program, Richmond, VA

The Housing Authority of the City of

Fort Wayne Needs to Improve Its

Section 8 Housing Choice Voucher

Program Administration, Fort Wayne,

IN

The Miami Dade Housing Agency Did

Not Maintain Adequate Controls over

Its Capital Fund Program

The Lansing Housing Commission

Failed to Follow HUD's Requirements

for Its Nonprofit Development

Activities, Lansing, MI

The State of Maryland Did Not

Always Administer Its HOMEAssisted Single-Family OwnerOccupied Rehabilitation Program in

Accordance with Federal

Regulations, Crownsville, MD

The Housing Authority of the City of

Eloy Did Not Have Adequate Internal

Controls to Safeguard Assets and

Ensure Compliance with HUD's

Requirements, Eloy, AZ

A Plus Mortgage, Inc., Overcharged

Borrowers and Allowed Independent

Contractors and Unapproved

Branches to Originate Loans,

Tukwila, WA

04/15/2008

04/15/2008

04/18/2008

04/24/2008

04/30/2008

04/30/2008

05/05/2008

05/07/2008

08/12/2008

07/14/2008

08/16/2008

08/22/2008

07/30/2008

08/27/2008

09/26/2008

09/24/2008

08/06/2010

06/10/2009

06/30/2029

12/31/2009

07/31/2038

08/31/2009

09/26/2009

05/31/2009

Appendix 2: Tables

Appendix 2 - Tables
138

Report

number

Report title Issue

date

Decision

date

Final

action

2008-AT-0003

2008-BO-1006

2008-BO-0002

2008-NY-1006

2008-LA-1010

2008-NY-1007

2008-CH-1009

2008-AT-1009

2008-CH-1010

HUD Lacked Adequate Controls over

the Physical Condition of Section 8

Voucher Program Housing Stock

Woonsocket Housing Authority

Housing Choice Voucher Program

and Public Housing Program

Deficiencies Resulted in Cost

Exceptions Totaling $904,494,

Woonsocket, RI

Maintenance of Effort Requirements

Are Needed to Ensure Intended Use

of CDBG Program Funds

The City of Troy Did Not Always

Administer Its CDBG Program in

Accordance with HUD Requirements,

Troy, NY

The Housing Authority of the City of

San Buenaventura Did Not Manage

HUD Program Funds in Accordance

with HUD Requirements, San

Buenaventura, CA

The County of Essex Did Not Always

Administer Its CDBG Program in

Accordance with HUD Requirements,

Verona, NJ

Cook County Lacked Adequate

Controls over Its HOME Investment

Partnerships Program Income and

Administrative Costs, Chicago, IL

The City of Augusta Controls Over Its

HOME Program Were Inadequate,

Augusta, GA

The City of Cincinnati Lacked

Adequate Controls over Its

System Reporting and Rental

Rehabilitation Projects for Its

HOME Investment Partnerships

Program, Cincinnati, OH

05/14/2008

05/14/2008

05/21/2008

05/21/2008

05/28/2008

05/29/2008

06/07/2008

06/09/2008

06/11/2008

09/10/2008

07/10/2008

10/02/2008

10/30/2008

09/10/2008

09/16/2008

10/03/2008

08/04/2008

10/09/2008

10/01/2011

04/30/2009

Note 1

04/30/2009

06/01/2009

06/01/2009

10/03/2009

07/01/2009

10/08/2009

Appendix 2: Tables

Appendix 2 - Tables
139

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2008-DP-0004

2008-CH-1011

2008-LA-1012

2008-LA-1013

2008-PH-1009

2008-FW-0001

2008-FW-1011

2008-LA-1014

2008-FW-1012

Review of Selected FHA Major

Applications' Information Security

Controls

The Portage Metropolitan Housing

Authority Needs to Improve Its

Section 8 Housing Choice

Voucher Program Administration,

Ravenna, OH

The Housing Authority of the City

of Calexico Did Not Comply with

Public Housing Program Rules

and Regulations, Calexico, CA

First Magnus Financial Corporation

Violated the Real Estate Settlement

Procedures Act When Paying

Incentives to Brokers for Generating

FHA Mortgages, Tucson, AZ

The Housing Authority of the City of

Allentown Did Not Ensure That Its

Section 8 Housing Choice Voucher

Program Units Met Housing Quality

Standards, Allentown, PA

HUD's CDBG Set-Aside for Colonias

Was Not Used for Its Intended

Purposes

The Dallas Housing Authority

Mismanaged Its Housing Choice

Voucher Program, Dallas, TX

First Magnus Financial Corporation

Violated the Real Estate Settlement

Procedures Act When Paying

Builders and Real Estate Companies

Marketing Fees and Non-Competition

Fees in Exchange for FHA Mortgage

Business, Tucson, AZ

The City of Tulsa Allowed Its Largest

Subrecipient to Expend $1.5 Million

in Unsupported CDBG Funding,

Tulsa, OK

06/12/2008

06/30/2008

07/01/2008

07/14/2008

07/14/2008

07/29/2008

07/31/2008

08/01/2008

08/04/2008

10/08/2008

10/28/2008

10/14/2008

11/07/2008

09/29/2008

11/24/2008

10/28/2008

11/17/2008

11/24/2008

12/31/2009

05/16/2009

07/15/2009

09/21/2009

06/30/2009

11/27/2009

02/27/2010

11/16/2009

11/30/2009

Appendix 2 - Tables
140

Report

number

Report title Issue

date

Decision

date

Final

action

2008-AO-1005

2008-NY-1010

2008-BO-1008

2008-LA-0003

2008-AT-1012

2008-KC-1006

2008-AT-0004

2008-LA-1016

State of Louisiana, Road Home

Program, Did Not Ensure That All

Additional Compensation Grant

Applicants Were Eligible, Baton

Rouge, LA

Wells Fargo Bank NA, Rochester, NY,

Branch Office, Did Not Always

Comply with HUD/FHA Loan

Origination Requirements

The State of Connecticut Department

of Social Services Significantly

Underleased Its Housing Choice

Voucher Program and Did Not

Always Comply with Its Annual

Contributions Contracts and HUD

Regulations, Hartford, CT

Implementation Weaknesses Existed

in All Major Phases of the FHA

Appraiser Review Process

The City of Jacksonville Lacked

Adequate Controls over Its HOME

Program, Jacksonville, FL

Heartland Funding Corporation

Violated the Real Estate Settlement

Procedures Act and Did Not Fully

Comply with HUD's Underwriting,

Quality Control, or Employee

Compensation Requirements,

Springfield, MO

The Miami-Dade Housing Agency Did

Not Maintain Adequate Controls over

Capital Fund Program Drawdowns,

Miami, FL

The City of Los Angeles Housing

Department Did Not Comply with

HOME Affordability Monitoring and

Inspection Requirements for Its

HOME-Assisted Rental Housing, Los

Angeles, CA

08/07/2008

08/26/2008

09/04/2008

09/04/2008

09/05/2008

09/08/2008

09/17/2008

09/18/2008

01/13/2009

01/28/2009

12/01/2008

12/19/2008

12/08/2008

01/22/2009

09/17/2008

12/02/2008

Note 1

08/31/2009

04/30/2009

08/31/2009

09/30/2009

09/30/2009

12/31/2009

09/18/2009

Appendix 2: Tables

Appendix 2 - Tables
141

Report

number

Report title Issue

date

Decision

date

Final

action

2008-PH-1013

2008-CH-1012

2008-DE-1003

2008-CH-1014

2008-CH-1015

2008-CH-1016

2008-KC-0007

The Housing Authority of Baltimore

City Did Not Ensure That Its Program

Units Met Housing Quality Standards

under Its MTW Program, Baltimore,

MD

The City of Cincinnati Lacked

Adequate Controls over Its System

Reporting and Rental Rehabilitation

Projects for Its HOME Investment

Partnerships Program, Cincinnati,

OH

The State of Colorado Did Not

Comply with CDBG Program

Requirements, Denver, CO

The City of Cincinnati Did Not

Adequately Manage Its HOME

Investment Partnerships Program,

Cincinnati, OH

The City of Dayton Lacked Adequate

Controls Regarding Staff Salaries Paid

From Its CDBG Program, Dayton, OH

The Springfield Housing Authority

Did Not Always Ensure That Section

8 Units Met HUD's Housing Quality

Standards, Springfield, IL

HUD Inappropriately Authorized the

Use of Residual Receipts in Lieu of

Reserve for Replacement or

Operating Funds

09/19/2008

09/23/2008

09/23/2008

09/26/2008

09/26/2008

09/29/2008

09/29/2008

01/13/2009

01/22/2009

01/14/2009

01/22/2009

01/23/2009

01/23/2009

09/29/2008

07/31/2009

09/15/2009

09/30/2011

02/23/2010

09/26/2009

07/31/2009

08/31/2009

Appendix 2: Tables



Audits excluded

50 audits under repayment plans

33 audits under debt claims collection

processing, formal judicial review,

investigation, or legislative solution

Notes

1 Management did not meet the

target date. Target date is over

1 year old.

2 Management did not meet the

target date. Target date is under

1 year old.

Appendix 2 - Tables
142

Table C

Inspector General-issued reports with questioned and

unsupported costs at March 31, 2009

(thousands)

Audit reports Number of

audit reports

Unsupported

costs

For which no management decision had been

made by the commencement of the reporting

period

For which litigation, legislation, or investigation

was pending at the commencement of the

reporting period

For which additional costs were added to reports in beginning inventory

For which costs were added to noncost reports

Which were issued during the reporting period

Which were reopened during the reporting

period

Subtotals (A+B)

80,678

11,524

4,480

0

81,004

0

177,686

Questioned

costs

96,231

14,317

14,360

0

96,526

0

221,434

40

6

-

0

41

0

87

A1

A2

A3

A4

B1

B2

For which a management decision was made

during the reporting period

(1) Dollar value of disallowed costs:

- Due HUD

- Due program participants

(2) Dollar value of costs not disallowed

For which management decision had been made

not to determine costs until completion of

litigation, legislation, or investigation

For which no management decision had been

made by the end of the reporting period

137,763

88,335

47,295

2,133

11,956

27,967

<16,784>4

166,200

90,589

73,337

2,274

14,749

40,485

<28,711>4

551

152

44

83

7

25

<59>4

C

D

E

1

 32 audit reports also contain recommendations with funds be put to better use.

2

 6 audit reports also contain recommendations with funds due program participants.

3

 6 audit reports also contain recommendations with funds agreed to by management.

4

 The figures in brackets represent data at the recommendation level as compared to the report level.

 See explanations of tables C and D.

Appendix 2: Tables

Appendix 2 - Tables
143

Table D

Inspector General-issued reports with recommendations

that funds be put to better use at March 31, 2009

(thousands)

Audit reports Number of

audit reports

Dollar

value

For which no management decision had been made by

the commencement of the reporting period

For which litigation, legislation, or investigation was

pending at the commencement of the reporting period

For which additional costs were added to reports in

beginning inventory

For which costs were added to noncost reports

Which were issued during the reporting period

Which were reopened during the reporting period

Subtotals (A+B)

251,163

15,863

498

0

1,638,003

0

1,905,527

28

4

-

0

27

0

59

A1

A2

A3

A4

B1

B2

For which a management decision was made during

the reporting period

(1) Dollar value of disallowed costs:

- Due HUD

- Due program participants

(2) Dollar value of costs not disallowed

For which management decision had been made not to

determine costs until completion of litigation, legislation, or investigation

For which no management decision had been made by

the end of the reporting period

1,646,279

941,358

44,821

660,100

6,517

252,731

<31,460>3

421

9

31

82

2

15

<22>3

C

D

E

1

 32 audit reports also contain recommendations with questioned costs.

2

 6 audit reports also contain recommendations with funds agreed to by management.

3

 The figures in brackets represent data at the recommendation level as compared to the report level.

 See explanations of tables C and D.

Appendix 2: Tables

Appendix 2 - Tables
144

Explanations of Tables C and D

Appendix 2: Tables

The Inspector General Act Amendments of 1988 require Inspectors General and agency heads to

report cost data on management decisions and final actions on audit reports. The current method of

reporting at the "report" level rather than at the individual audit "recommendation" level results in

misleading reporting of cost data. Under the Act, an audit "report" does not have a management

decision or final action until all questioned cost items or other recommendations have a management

decision or final action. Under these circumstances, the use of the "report" based rather than the

"recommendation" based method of reporting distorts the actual agency efforts to resolve and

complete action on audit recommendations. For example, certain cost items or recommendations

could have a management decision and repayment (final action) in a short period of time. Other cost

items or nonmonetary recommendation issues in the same audit report may be more complex,

requiring a longer period of time for management's decision or final action. Although management

may have taken timely action on all but one of many recommendations in an audit report, the current

"all or nothing" reporting format does not take recognition of their efforts.

The closing inventory for items with no management decision on tables C and D (line E) reflects

figures at the report level as well as the recommendation level.



Appendix 2 - Tables

146

State Page numbers

Alabama 105, 106

Arkansas 31, 48, 103

Arizona 35, 38, 56, 83, 86, 102

California 16, 18, 25, 30, 31, 40, 41, 42, 43, 44, 46, 47, 49, 50, 63, 65, 70, 83, 84,

100, 101, 104, 105, 108

Colorado 14, 15, 16, 17, 18, 21, 32, 66, 100, 101, 109

Connecticut 27, 35, 105, 108

District of Columbia 22, 100, 109, 114

Delaware 105

Florida 14, 15, 35, 42, 47, 48, 50, 59, 60, 103, 105

Georgia 19, 29, 36, 65, 70, 99

Illinois 15, 18, 19, 21, 22, 26, 28, 39, 40, 41, 44, 46, 47, 67, 71, 98, 99, 100, 106,

108, 109

Indiana 25

Kansas 9, 10, 49, 58, 102, 104

Louisiana 20, 37, 58, 71, 75, 78, 80, 81, 82, 85, 87

Maine 37, 49, 54, 99, 103, 106

Maryland 32, 45, 46, 59, 83

Massachusetts 29, 37, 43, 58, 59, 98, 105, 106, 107

Michigan 20, 50

Minneapolis 71

Mississippi 79, 80, 83, 84

Missouri 9, 16, 21, 22, 32, 47, 49, 50, 104, 109

Nebraska 20, 38

Nevada 41, 83, 101

New Hampshire 17, 98, 106

New Jersey 10, 16, 18, 19, 38, 39, 49, 58, 63, 65, 70, 72, 100, 103, 104, 106

New York 10, 19, 20, 30, 40, 41, 44, 48, 49, 50, 53, 58, 59, 60, 64, 67, 68, 70, 71, 72,

76, 85, 101, 109

North Carolina 63

Ohio 28, 38, 44, 47, 103, 108

Oklahoma 102

Appendix 3: Index

Appendix 3 - Index
147

State Page numbers

Appendix 3: Index

Oregon 31

Pennsylvania 14, 17, 26, 27, 35, 39, 45, 58, 59, 60, 70, 103, 107

Puerto Rico 100

Rhode Island 39, 99, 107

South Dakota 35

Tennessee 45, 47, 93

Texas 9, 11, 14, 17, 18, 30, 36, 37, 38, 40, 55, 83, 84, 86, 101, 102, 103, 108, 115

Utah 48, 49

Vermont 37, 99, 106

Virginia 21, 28, 66, 101, 102

Washington 12, 45, 108



Appendix 3 - Index

150

Office of Audit

Headquarters Office of Audit, Washington, DC 202-708-0364

Region 1 Boston, MA 617-994-8380

Hartford, CT 860-240-4800

Region2 New York, NY 212-264-4174

Albany, NY 518-464-4200

Buffalo, NY 716-551-5755

Newark, NJ 973-622-7900

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-2520

Pittsburgh, PA 412-644-6372

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3369

Miami, FL 305-536-5387

Greensboro, NC 336-547-4001

Jacksonville, FL 904-232-1226

Knoxville, TN 865-545-4369

San Juan, PR 787-766-5202

Region 5 Chicago, IL 312-353-7832

Columbus, OH 614-469-5745

Detroit, MI 313-226-6190

Region 6 Fort Worth, TX 817-978-9309

Houston, TX 713-718-3199

Oklahoma City, OK 405-609-8606

San Antonio, TX 210-475-6898

Regions 7/8 Kansas City, KS 913-551-5870

St. Louis, MO 314-539-6339

Denver, CO 303-672-5452

Regions 9/10 Los Angeles, CA 213-894-8016

Phoenix, AZ 602-379-7250

San Francisco, CA 415-489-6400

Seattle, WA 206-220-5360

Gulf Coast Region New Orleans, LA 504-671-3715

Jackson, MS 601-965-4700

HUD OIG Operations Telephone Listing

HUD OIG Operations Telephone Listing
151

HUD OIG Operations Telephone Listing

Office of Investigation

Headquarters Office of Investigation, Washington, DC 202-708-0390

Region 1 Boston, MA 617-994-8450

Hartford, CT 860-240-4800

Manchester, NH 603-666-7988

Region 2 New York, NY 212-264-8062

Buffalo, NY 716-551-5755

Newark, NJ 973-776-7347

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-4502

Pittsburgh, PA 412-644-6598

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3359

Miami, FL 305-536-3087

Greensboro, NC 336-547-4000

Jacksonville, FL 904-208-6126

Knoxville, TN 865-545-4000

San Juan, PR 787-766-5868

Tampa, FL 813-228-2026

Region 5 Chicago, IL 312-353-4196

Cleveland, OH 216-522-4421

Columbus, OH 614-469-6677

Detroit, MI 313-226-6280

Indianapolis, IN 317-226-5427

Minneapolis-St. Paul, MN 612-370-3130

Region 6 Arlington, TX 817-978-5440

Houston, TX 713-718-3196

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6819

Region 7/8 Kansas City, KS 913-551-5866

St. Louis, MO 314-539-6559

Denver, CO 303-672-5350

Billings, MT 406-247-4080

Salt Lake City, UT 801-524-6090

Region 9/10 Los Angeles, CA 213-894-0219

San Francisco, CA 415-489-6683

Phoenix, AZ 602-379-7255

Sacramento, CA 916-930-5691

Las Vegas, NV 702-366-2144

Seattle, WA 206-220-5380

Gulf Coast Region New Orleans, LA 504-671-3701

Arlington, TX 817-978-5440

Baton Rouge, LA 225-334-4913

Hattiesburg, MS 601-299-4279

Houston, TX 713-718-3196

Jackson, MS 601-965-5772

HUD OIG Operations Telephone Listing
HUD OIG Operations Telephone Listing
Report fraud, waste, and mismanagement in HUD

programs and operations by

Calling the OIG Hotline: 1-800-347-3735

Faxing the OIG Hotline: 202-708-4829

Sending written information to:

Department of Housing and Urban Development

Inspector General Hotline (GFI)

451 7th Street, SW

Washington, DC 20410

E-mailing the OIG Hotline: hotline@hudoig.gov

Internet:http://www.hud.gov/complaints/

fraud_waste.cfm

All information is confidential,

and you may remain anonymous.
Semiannual Report to Congress

October 1, 2008, through March 31, 2009

www.hud.gov/offices/oig

No. 61 HUD-2009-11-OIG